EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 15 June 2004 
at the request of the French Ministry of Economic Affairs, Finance and Industry 
on certain provisions of a draft order reforming transferable securities issued 
by joint-stock companies  
(CON/2004/22) 
 1. On 1 April 2004 the European Central Bank (ECB) r eceived a request from the French Ministry of 
Economic Affairs, Finance and Industry for an opinion on certain provisions of a draft order 
(ordonnance ) reforming transferable securities issued by joint-stock companies (hereinafter the 
‘provisions of the draft order’). 
2. The ECB’s competence to deliver an opinion is based on the fifth and sixth indents of Article 2(1) 
of Council Decision 98/415/EC of 29 June 1998 on th e consultation of the European Central Bank 
by national authorities regarding draft legislative provisions
1, as the provisions of the draft order 
relate to payment and settlement systems and rules applicable to financial institutions insofar as 
they materially influence the stability of financia l institutions and markets.  In accordance with the 
first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the 
Governing Council has adopted this opinion. 
3. As a whole the draft order aims to simplify and m odernise the regime applicable to transferable 
securities ( valeurs mobilières ) issued by joint-stock companies. The ECB notes that this reform is 
principally intended to facilitate the issuance of transferable securities while maintaining legal 
certainty as regards the applicable regime. The ECB understands that the final Order will amend 
the relevant provisions of the French Commercial Code. However, this consultation only concerns 
the two provisions of the draft order clarifying Articles L.431-2 and L.431-3 of the Monetary and 
Financial Code (hereinafter the ‘Code’). These two Articles of the Code concern rules on the transfer of ownership of financial instruments. 
4. The ECB understands that the French Financial Ma rkets Authority (the ‘AMF’) will complement 
these amendments to the Code by adopting de tailed implementing measures in its General 
Regulation ( Règlement Général ) (hereinafter the ‘AMF’s General Regulation’). In this respect, the 
ECB notes that the French authorities intend to c onsult the ECB on the relevant provisions of the 
AMF’s General Regulation prior to their adoption. It should, therefore, be stressed that the ECB 
                                                     
 
1  OJ L 189, 3.7.1998, p. 42. 
2 may review its position as stated in this opinion at a later date once it has comprehensively assessed 
the implementing measures contained in the AMF’s General Regulation, taken in conjunction with 
the relevant provisions of the Code (as amended). 
5. Article L.431-2 of the Code provides for different rules depending on whether financial instruments 
are transferred on or outside a regulated market. Under the current regime, in the case of a transaction on a regulated market, the transfer of ownership of financial instruments results from 
their being credited to the buyer’s account on the date and under the conditions laid down by marketplace rules. For operations outside a regulat ed market, the Code provides that transfer of 
ownership results in the irrevocable settlement  of the transaction as laid down by the rules 
governing the functioning of the settlement system. Under the proposed new re gime, the transfer of 
ownership of financial instruments (whether lis ted or unlisted) would result from their being 
credited to the buyer’s account, with the date a nd the conditions being laid down by the AMF’s 
General Regulation. The ECB understands that the pr ovisions of the draft order would simplify this 
dual regime and replace it with a single regime. Furthermore, the ECB notes that the concept of ‘regulated market’/‘outside a regulated market’ would disappear from Article L.431-2 of the Code. 
6. The ECB welcomes the French authorities’ aim of  simplifying the existing transfer of ownership 
regimes for financial instruments and trusts that the provisions of the draft order will further the 
continuing integration of clearing and settlement arrangements in the European Union (EU). In the 
ECB’s view, the effectiveness of transfers and the finality of transfers as a result of book-entry 
debits and credits made within systems are crucial to reduce uncertainty and systemic risk. The ECB assumes that future implementation measures to be included in the AMF’s General Regulation, will take full account of these matters , in particular to ensure the finality and 
irrevocability of transfers of ownership in financia l instruments within a system. As mentioned in 
paragraph 5, Article L.431-2 of the Code makes it cl ear that the transfer of ownership of financial 
instruments is effected when th e buyer’s account is credited; however, the date and the conditions 
of the transfer will be defined in the AMF’s General Regulation. In this respect it would be 
advisable to ensure specifically that the rules relating to the poi nt in time when securities are 
credited on an account and the value date for such tr ansfer should not give rise to legal uncertainty 
that could undermine the smoot h operation of securities settlement systems, raising potential 
systemic concerns. 
7. By way of exception from the general rule regardin g transfer of ownership, Article L.431-2 of the 
Code provides that the AMF’s General Regulation may, under certain conditions, lay down specific 
conditions for the transfer of ownership of fi nancial instruments. The ECB understands this 
provision as meaning that when irrevocable settlement occurs on a real-time basis within a settlement system for financial instruments, a speci fic regime for the transfer of ownership may be 
laid down in the AMF’s General Regulation. The ECB notes in this respect that this specific 
regime, as mentioned above, will be subject to ECB consultation and should further clarify the 
scope of the exception provided for in the fourth  paragraph of Article L.431-2 of the Code. The 
3 ECB also notes that the ownership rights of intermediaries where a purchaser of financial 
instruments has not paid the transaction price are not  affected by the proposed amendments of the 
Code. 
8. The ECB understands that the provisions of th e draft order concern the following financial 
instruments: shares, debt instruments, UCITS units  and any equivalent financial instruments issued 
under foreign laws, when they are admitted to the operations of a central securities depository or 
delivered within a settlement system for financial instruments. In addition, the first paragraph of 
Article L.431-2 of the Code refers  to the settlement systems for fi nancial instruments ‘mentioned in 
Article L.330-1’ of the Code. For the sake of clarity, the ECB would propose replacing the words 
‘mentioned in Article L.330-1’ with the word s ‘as defined in Article L.330-1’. The ECB 
understands in this respect that the definition prov ided for in Article L.330-1 of the Code covers 
both systems operating under French law and syst ems operating under the law of a Member State 
of the European Economic Area. 
9. More generally, the ECB would like to emphasise that it is fundamental to the functioning and 
creation of a safe, efficient and integrated EU cl earing and settlement infrastructure to have clear 
rules regarding transfer of ownership in the c ontext of securities clearing and settlement systems, 
applicable to financial instruments held with centr al securities depositories. The ECB is of the view 
that this objective, as highlighted in th e Second Report on EU Clearing and Settlement 
Arrangements published by the Giovannini Group in April 20032, and, more recently, in the 
Commission’s Communication to the Council and the European Parliament regarding clearing and settlement in the EU
3, should be considered when elaborating any new domestic legislation in this 
area. 
10. The ECB confirms that it has no objection to the competent national authorities making this 
opinion publicly available at their discretion. This opinion will be published on the ECB’s website 
six months after the date of its adoption. 
  Done at Frankfurt am Main, 15 June 2004. 
 
[signed] 
The President of the ECB 
Jean-Claude TRICHET 
                                                     
 
2  Published on the Commission’s website  at http://europa.eu.int/comm/intern al_market/en/finances/mobil/clearing/ 
index.htm. 
3  ‘Clearing and Settlement in the European Union – Th e Way Forward’ COM/2004/0312/final, 28 April 2004, published 
on the Commission’s website at http://europa.eu.int/comm /internal_market/en/finances/ mobil/clearing/index.htm.