EN ECB-PUBLIC 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 13 November 2014 
on book-entry securities 
(CON/2014/81) 
 
Introduction and legal basis 
On 29 September 2014, the European Central Bank (ECB) received a request from the Slovenian 
Ministry of Finance for an opinion on a draft law on book-entry securities1 (hereinafter the ‘draft law’). 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the fifth inde nt of Article 2(1) of Council Decision 98/415/EC2, 
as the draft law relates to paymen t and settlement systems. In accordance with the first sentence of 
Article 17.5 of the Rules of Procedure of the Euro pean Central Bank, the Governing Council has adopted 
this opinion. 
 
1.  Purpose of the draft law 
1.1 The draft law is a recast of the current Law on book-entry securities3 and makes certain 
amendments thereto. It regulates book-entry se curities, encumbrances on book-entry securities, 
transfer of book-entry securities, fulfilment of the obligations arising in respect of book-entry 
securities, the central register of  book-entry securities and access to the data maintained therein4.  
1.2 The draft law has several objectives including the facilitation of a legal framework that will enable 
the use of TARGET2-Securities (T2S) in Slovenia . The explanatory memorandum outlines that the 
amendments introduced by the draft law are pr oposed in the light of the TARGET2-Securities 
corporate action standards on flows, i.e. pending se ttlement transactions (hereinafter referred to as 
the ‘T2S corporate actions standards’)5 and the Corporate Actions Joint Working Group6 standards 
for corporate actions on stock, i.e.  corporate actions on settled balanc es (hereinafter referred to as 
                                                 
1  Predlog Zakona o nematerializiranih vrednostnih papirjih (ZNVP-1) . 
2  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
3  Zakon o nematerializiranih vrednostnih papirjih (ZNVP)  (Official Journal of the Republic of Slovenia, No. 2/07 – official 
consolidated text, 67/07 - ZTFI, 58/09 and 78/11). 
4  See Article 1 of the draft law. 
5  The T2S corporate actions standards were approved by the T2S Advisory Group. The standards are available on the 
ECB’s website at www.ecb.europa.eu. 
6  The CAJWG was set up in summer 2008 as one of the work streams of the ‘CESAME 2’ Group. The CESAME 2 Group 
followed up on the work of the ‘CESAME Group’ (the Eu ropean Commission’s Clearing and Settlement Advisory and 
Monitoring Expert Group) and aimed to achieve the goal  of a barrier-free single Europ ean market for clearing and 
settlement of securities transactions. The CAJWG is composed of representatives of the main stakeholders, i.e. issuers, 
market infrastructures, and intermediaries.  
ECB-PUBLIC  
2 the ‘CAJWG standards’)7. The explanatory memorandum outlines that the Law on book-entry 
securities currently: (a) governs th e execution of a smaller number of corporate actions than are 
governed by the above standards; (b) does not govern the manner in which obligations arising from 
a corporate action are fulf illed, as envisaged by the standards;  and (c) allows the execution of 
corporate actions which the standards require to be processed through a central securities 
depository (CSD), in a manner not laid down by th e standards. The draft law aims to address these 
issues in Articles 38 and 39, as further described below.  
1.3 A further objective of the draft law is to adapt the Slovenian legal framework to the provisions of 
Regulation (EU) No 909/2014 of the European Parliament and of the Council8 (hereinafter the 
‘CSDR’). The draft law states that its provisions shall apply to the central register managed by a 
CSD that has a registered office in Slovenia and to  a branch of a CSD of a Member State that is 
registered in the Slovenian business register. Furthermore, the draft law permits book-entry 
securities to be ente red in the central register where the issu er’s obligations are governed by foreign 
law. 
 
2. General observations 
The ECB welcomes the draft law as it contributes to facilitating the Slovenian market’s adaptation to T2S 
and the wider harmonisation of standards in post-trade services. 
 
3. Specific observations 3.1 Corporate actions  
Pursuant to the draft law, a corporate action on a book -entry security is defined as the fulfilment of 
the obligations arising from that security
9. Article 39(1) of the draft law requires corporate actions 
to be processed through the CSD10 and through the CSD members that manage book-entry 
securities holders’ accounts  (hereinafter the ‘CSD members’).  Article 39(2) defines particular 
requirements regarding the fulfilment of the ob ligations arising from book-entry securities and 
requires the CSD to further specify and implement the requirements in its rules. Such requirements 
cover, inter alia, the informati on flow between the issuer and th e CSD, and between the CSD and 
the CSD members, the key dates relating to a corp orate action event, e.g. record date, ex-date, 
payment date, and other deadlines associated with  managing corporate action events. As stated in 
the explanatory memorandum to the draft law, in defining the requirements in Article 39(2), the 
draft law takes into account the main principles of the T2S corporate actions standards and the 
                                                 
7  As regards the CAJWG standards for corporate actions on stock, see ‘Market Standards for Corporate Actions 
Processing’ (Revised version 2012). The report is  available on the ECB’s we bsite at www.ecb.europa.eu. 
8  Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities 
settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1). 
9  See Article 38 of the draft law.  
10  The Slovenian CSD is ‘KDD - Centralna klirinško depotna družba’. 
ECB-PUBLIC  
3 CAJWG standards11. Moreover, Article 39(2) provides that further specification and 
implementation by the CSD in its rules of the requ irements in Article 39(2), shall be ‘in accordance 
with internationally accepted standards for proce ssing corporate actions on book-entry securities’. 
The ECB welcomes the above provisions of the dr aft law, which will facilitate the implementation 
of the T2S corporate actions standards and the CAJWG standards in Slovenia, as the explanatory memorandum to the draft law proposes
12. 
3.2 Termination of registry accounts in the central register 
 A registry account is defined in the CSD’s rules of operation as a provisional account that is not 
managed by any member13. Historically, the registry accounts he ld in the central register of book-
entry securities were established for the purpose of privatisation. They allowed the distribution of 
book-entry securities to the shareholders of priva tised companies without requiring them to enter 
into a legal relationship with a member of the CSD. The CSD only maintains the book-entry 
securities on the registry accounts and does not perform associated services14. According to the 
explanatory memorandum to the draft law, this re nders registry accounts incompatible with the 
CAJWG standards and the T2S corporate action standards. To address this issue, the holders of the 
book-entry securities on registry accounts will ha ve to enter into an appropriate contractual 
relationship with a member of the CSD. The secu rities held on registry accounts that are not 
transferred to other accounts by the deadline laid down in Article 19(2) of the draft law will be transferred in accordance with the CSD’s rules to an account held by a competent court and will be 
subject to the law governing court deposits. The dr aft law requires the CSD to lay down in its rules 
a detailed method for terminating registry accounts. 
 It follows from the above that the accounts of  securities holders who enter into contractual 
relationships with CSD members to manage their a ccounts before the deadline are intended to be 
compatible with the CAJWG standa rds and the T2S corporate action st andards. However, it is not 
entirely clear how the arrangement regarding the holding of any remaining securities on courts’ 
accounts will interact with T2S. In particular, it is  unclear whether these remaining securities on the 
courts’ accounts will be tradeable and therefore freely negotiable. An arrangement whereby the 
courts are holders of book-entry securities accounts in the central register and where such accounts 
are managed by CSD members as investment service providers suggests, in the light of T2S requirements, that the securities on the courts’ accounts may be considered tradeable. The ECB 
invites the Slovenian authorities to clarify this arrangement. 
                                                 
11  See Article 39 of the draft law. 
12  See, further, the ʻT2S Corporate Actions Standards - 2014 Gap Analysis Report ʼ, which identified that Slovenian law 
does not recognise the role of the CSD in processing the settlement of corporate actions in accordance with the CAJWG standards and the T2S corporate actions standards. The repor t is available on the ECB’s website at www.ecb.europa.eu. 
13  Article 26(4) of the KDD Operatio ns Rules. 
14  See the explanatory memorandum to the draft law. 
ECB-PUBLIC  
4 3.3 Settlement finality 
3.3.1 Article 17 of the draft law provides that the CS D shall define in its rules the moments of entry and 
of irrevocability of a transfer order.  
 Article 39 of the CSDR requires that the rules of each securities settleme nt system that the CSD 
operates must define those moments in line with  Articles 3 and 5 of Directive 98/26/EC of the 
European parliament and of the Council15, as amended (hereinafter the ‘SFD Directive’). 
Furthermore, Article 48(8) of the CSDR requires  that interoperable securities settlement systems 
and CSDs, which use a common sett lement infrastructure shall establish identical moments of: 
(a) entry of transfer orders into the settlement system and (b) irrevocability of transfer orders.  
3.3.2 Furthermore, the ECB notes that the T2S Advisory Group has undertaken work towards agreement 
on a common definition of the moment of entry of a transfer order into the settlement system and of 
the moment at which the transfer order is protect ed against insolvency in accordance with the SFD 
Directive (Settlement Finality I), as well as th e moment of irrevocabilit y of transfer orders 
(Settlement Finality II). As part of the intended legal harmonisation of CSD rules within T2S, the 
CSD rules should also ensure that it is not possib le to unilaterally cancel the order after matching 
has taken place within T2S (Settlement Finality II ). Common definitions will need to be applied 
before migration to T2S in order to ensure compliance with the CSDR and T2S harmonised standards.  
3.4 Foreign law  
 The ECB understands that, whilst Slovenian law app lies to book-entry securities, to the rights of 
holders arising from such securities and to the encumbrances on such securities, the draft law 
permits book-entry securities to be entered in the central register where the issuer’s obligations are 
governed by a foreign law
16. In situations where the issuer’s obligations are governed by a foreign  
                                                 
15  Directive 98/26/EC of the European Parliament and of the Co uncil of 19 May 1998 on settle ment finality in payment and 
securities settlement systems (OJ L 166, 11.6.1998, p. 45). 
16  See Article 11 in conjunction with  Article 13(2) of the draft law. 
ECB-PUBLIC  
5 law, the Slovenian law applicable to book-entry securities would apply in other respects, e.g. as 
regards the rights of holders arising from the securities17. 
 
This opinion will be published on the ECB’s website.  
  
Done at Frankfurt am Main, 13 November 2014. 
 
[signed]  
 
The President of the ECB 
Mario DRAGHI 
                                                 
17  Article 13(1) of the draft law.