I ASSENT Financial Services (Investment and Fiduciary Services) FINANCIAL MARKETS AND INSOLVENCY (SETTLEMENT
FINALITY) REGULATIONS 2011

© Government of Gibraltar (www.gibraltarlaws.gov.gi)
1989-47
Subsidiary
2011/216
Subsidiary Legislation made under s. 53.


FINANCIAL MARKETS AND INSOLVENCY
(SETTLEMENT FINALITY) REGULATIONS 2011

(LN. 2011/216)
Commencement 27.10.2011
Amending
enactments
Relevant current
provisions
Commencement
date

Act. 2014-14 r. 2(5) 1.11.2014

EU Legislation/International Agreements involved:
Directive 98/26/EC

_______________________

ARRANGEMENT OF REGULATIONS.


Regulation
1. Title, commencement and application.
2. Interpretation.
3. References to commencement of insolvency proceedings.
4. Designation of designated systems, etc.
5. Competent authority may decide that person should be treated as
participant in designated system.
6. Transfer order and netting to be binding despite insolvency
proceedings.
7. Requirements for rules of designated systems and interoperable
systems.
8. Certain matters to be notified to the competent authority.
9. Gibraltar law relating to insolvency or insolvency proceedings not to
affect certain rights and obligations.
10. Certain questions to be determined in accordance with foreign law.
11. Insolvency proceedings not to affect certain rights.
12. Operators to notify competent authority of participation in system.
13. Institutions to provide information to certain persons about designated
systems.
Financial Services (Investment and Fiduciary Services) FINANCIAL MARKETS AND INSOLVENCY (SETTLEMENT
FINALITY) REGULATIONS 2011

© Government of Gibraltar (www.gibraltarlaws.gov.gi)
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Subsidiary
2011/216 14. Commencement of insolvency proceedings against participant not to
prevent certain funds, etc., from being used to fulfil obligations.
15. Revocation of Financial Markets and Insolvency (Settlement Finality)
Regulations 2002.
16. Transitional arrangements.
17. Duty to cooperate with ESMA.


Financial Services (Investment and Fiduciary Services) FINANCIAL MARKETS AND INSOLVENCY (SETTLEMENT
FINALITY) REGULATIONS 2011

© Government of Gibraltar (www.gibraltarlaws.gov.gi)
1989-47
Subsidiary
2011/216 In exercise of the powers conferred on me by section 53 of the Financial
Services (Investment and Fiduciary Services) Act and in order to transpose
into the law of Gibraltar Directive 98/26/EC of the European Parliament
and of the Council of 19 May 1998 on settlement finality in payment and
securities settlement systems, I hereby make the following Regulations–

Title, commencement and application.

1.(1) These Regulations may be cited as the Financial Markets and
Insolvency (Settlement Finality) Regulations 2011 and come into operation
on the day of publication.

(2) These Regulations apply to–

(a) a designated system that is subject to the law of Gibraltar,
regardless of the currency or currencies in which such a system
operates;

(b) a participant in a system referred to in paragraph (a); and

(c) collateral security provided in connection with participation in
such a system, or operations of a central bank in the context of
its function as a central bank.

Interpretation.

2.(1) In these Regulations and unless the context otherwise requires–

“business day” for a designated system has the meaning given to it in the
rules of that system and, for the avoidance of doubt, covers both
day and night-time settlements in that system and includes all
events happening during a business cycle of that system;

“central bank” means the European Central Bank or a central bank within
the EEA;

“central counterparty” means an entity which is interposed between the
institutions in a system and which acts as the exclusive
counterparty of these institutions with regard to their transfer
orders;

“clearing house” means a body responsible for the calculation of the net
positions of institutions, a possible central counterparty and/or a
possible settlement agent;

Financial Services (Investment and Fiduciary Services) FINANCIAL MARKETS AND INSOLVENCY (SETTLEMENT
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2011/216 “collateral security” means a realisable asset of any kind including,
without limitation, financial collateral referred to in Article 1(4)(a)
of Directive 2002/47/EC of the European Parliament and of the
Council of 6 June 2002 on financial collateral arrangements
provided under a pledge, a repurchase or similar agreement, or
otherwise, for the purpose of securing rights and obligations that
may arise in connection with a designated system, or provided to a
central bank, and includes money provided under a pledge for that
purpose;

“commencement of proceedings” has the meaning given by regulation 3;

“competent authority” means the Financial Services Commission;

“Court” means the Supreme Court;

“credit institution” means a credit institution within the meaning of
Article 4(1) of Directive 2006/48/EC of the European Parliament
and of the Council of 14 June 2006 relating to the taking up and
pursuit of the business of credit institutions, and includes the
institutions listed in Article 2 of that Directive;

“designated system” means a system that has been designated by the
Minister, and notified to the European Commission, under
regulation 4, and includes a system referred to in regulation 16, but
does not include an arrangement entered into between interoperable
systems;

“EEA” and “EEA State” shall be interpreted in accordance with the
European Communities Act;

“ESMA” means the European Securities and Markets Authority
established by Regulation (EU) 1095/2010 of the European
Parliament and of the Council and of 24 November 2010
establishing a European Supervisory Body (European Securities
and Markets Authority) amending Decision 716/2009/EC and
repealing Commission Decision 2009/77/EC;

“indirect participant” means an institution, a central counterparty, a
settlement agent, a clearing house or a system operator with a
contractual relationship with a participant in a designated system
which executes transfer orders that enable the indirect participant to
pass transfer orders through the designated system, provided that
the indirect participant is known to the system operator;

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2011/216 “insolvency proceedings”–

(a) if under the law of Gibraltar and in relation to a body corporate,
means–

(i) proceedings for the appointment of an examiner in
respect of the body; or

(ii) proceedings for the compulsory winding up of the body;
or

(iii) a voluntary winding up (either creditors’ or members’) of
the body; or

(iv) proceedings for the appointment of an administrator in
respect of the body; or

(b) if under the law of Gibraltar and in relation to a natural person,
means–

(i) proceedings under which the person is or may be
adjudicated bankrupt; or

(ii) if the person has died insolvent, proceedings for the
administration in bankruptcy of the person’s estate; or

(iii) proceedings with the objective of the protection by a
court of the person and the person’s property from any
action or other process; or

(c) if under the law of an EEA State, or a third country, means any
collective measure provided for in the law of that EEA State or
third country to wind up or reorganise a person if the measure
involves suspending or imposing limitations on relevant
transfers or payments;

“institution” means a–

(a) credit institution;

(b) investment firm;

(c) public authority or publicly guaranteed undertaking; or

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FINALITY) REGULATIONS 2011

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2011/216 (d) an undertaking whose head office is not within the EEA and
whose functions correspond to the functions of a credit
institution or investment firm as defined in European Union
law,
which participates in a system and which is responsible for
discharging the financial obligations arising from transfer orders
within that system;

“interoperable systems” means two or more systems whose system
operators have entered into an arrangement with one another that
involves cross-system execution of transfer orders;

“investment firm” means an investment firm as defined in Article 4(1)(1)
of Directive 2004/39/EC of the European Parliament and of the
Council of 21 April 2004 on markets in financial instruments, but
does not include the institutions set out in Article 2(1) of that
Directive;

“Minister” means the Minister with responsibility for financial services;

“netting” means the conversion into one net claim or one net obligation
of claims and obligations resulting from transfer orders which a
participant or participants either issue to or receive from, one or
more other participants with the result that only a net claim can be
demanded or a net obligation be owed;

“participant” means–

(a) an institution, a central counterparty, a settlement agent, a
clearing house, or a system operator that is a participant in a
designated system; or

(b) a person that is treated in accordance with regulation 5(1) as a
participant in a designated system;

“securities” means instruments of the kinds listed in section C of Annex I
to Directive 2004/39/EC of the European Parliament and of the
Council of 21 April 2004 on markets in financial instruments and
amending or repealing certain directives as amended from time to
time;

“settlement agent”, means a person who provides to institutions and/or to
a central counterparty participating in a designated system
settlement accounts through which transfer orders within such a
Financial Services (Investment and Fiduciary Services) FINANCIAL MARKETS AND INSOLVENCY (SETTLEMENT
FINALITY) REGULATIONS 2011

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2011/216 system are settled (whether or not the person extends credit to those
participants for settlement purposes);

“settlement account” means an account at a central bank, a settlement
agent or a central counterparty used to hold funds or securities and
to settle transactions between participants in a designated system;

“Settlement Finality Directive” means Directive 98/26/EC of the
European Parliament and of the Council of 19 May 1998 on
settlement finality in payment and securities settlement systems, as
amended from time to time;

“system” means a formal arrangement–

(a) between three or more participants (other than the operator of
the system, any settlement agent, any central counterparty, any
clearing house or any indirect participant);

(b) with common rules and standardised arrangements for the
clearing (whether or not through a central counterparty) or
execution of transfer orders between the participants;

(c) governed by the law of either Gibraltar or an EEA State chosen
by the participants (being a jurisdiction in which at least one of
those participants has its head office),

that has been designated and notified to the European Commission for
the purposes of the Settlement Finality Directive;

“system operator” means the entity or entities legally responsible for the
operation of a system;

“third country” means a country or territory that is not within the EEA ;

“transfer order” means–

(a) an instruction by a participant to place an amount of money at
the disposal of a recipient by means of a book entry on the
accounts of a credit institution, a central bank, a central
counterparty or a settlement agent;

(b) an instruction that results in the assumption or discharge of a
payment obligation as defined by the rules of a designated
system; or

Financial Services (Investment and Fiduciary Services) FINANCIAL MARKETS AND INSOLVENCY (SETTLEMENT
FINALITY) REGULATIONS 2011

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2011/216 (c) an instruction by a participant to transfer the title to, or an
interest in, a security or securities by means of a book entry on
a register or by any other means.

(2) A word or expression used in these Regulations and also used in the
Settlement Finality Directive has, unless the contrary intention appears in
these Regulations, the same meaning in these Regulations as it has in that
Directive.

(3) Nothing in these Regulations prevents a participant from acting as,
or carrying out the functions of, a central counterparty, a settlement agent or
a clearing house.

(4) Nothing in these Regulations prevents a system operator from acting
as a settlement agent, central counterparty or clearing house.

(5) In these Regulations–

(a) a reference to the compulsory winding up of a body includes
the appointment by the Court of a liquidator under section 160
of the Insolvency Act 2011; and
(b) a reference to a creditors’ voluntary winding up of a body
includes the appointment of a liquidator by the members of a
company under section 146 of the Insolvency Act 2011.

References to commencement of insolvency proceedings.

3.(1) For the purposes of these Regulations references to the
commencement of insolvency proceedings shall be construed in accordance
with this regulation.

(2) Commencement of insolvency proceedings under the law of
Gibraltar in relation to a body corporate means–

(a) the making by the Court of an order for the appointment of an
examiner in respect of the body; or

(b) the making by the Court of an order for the winding up of the
body; or

(c) the passing by the members of the body of a resolution for the
voluntary winding up (whether creditors’ or members’) of the
body.

Financial Services (Investment and Fiduciary Services) FINANCIAL MARKETS AND INSOLVENCY (SETTLEMENT
FINALITY) REGULATIONS 2011

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Subsidiary
2011/216 (3) Commencement of insolvency proceedings under the law of
Gibraltar in relation to a natural person means–

(a) the making of an order of the Court adjudicating the person
bankrupt; or

(b) if the person dies insolvent, the making by the Court of an
order for the administration in bankruptcy of the person’s
estate; or

(c) the making by the Court of an order providing for the
protection of the person and the person’s property under an
arrangement controlled by the Court.

(4) Commencement of insolvency proceedings, namely whether under
the law of an EEA State or a third country and whether in relation to a body
corporate or a natural person, means the opening, within the meaning of
Article 6 of the Settlement Finality Directive, of insolvency proceedings
against the body or person.

(5) When insolvency proceedings are commenced, the competent
authority shall ensure that the following bodies are notified of the fact–

(a) the European Systemic Risks Board;

(b) the EEA States;

(c) ESMA.

Designation of designated systems, etc.

4.(1) The competent authority may designate a system as a designated
system if–

(a) it is satisfied that the rules of the system comply with
regulation 7; and

(b) the system is governed by the law of Gibraltar.

(2) If the competent authority designates a system pursuant to these
Regulations, the Minister shall ensure that that ESMA is notified of both the
designated system and that system’s system operator.

(3) The Minister shall ensure that that ESMA is notified of the
competent authority designated for the purposes of these Regulations.
Financial Services (Investment and Fiduciary Services) FINANCIAL MARKETS AND INSOLVENCY (SETTLEMENT
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2011/216
Competent authority may decide that person should be treated as
participant in designated system.

5.(1) An indirect participant shall be taken to be a participant in a
designated system only if so doing is justified on the grounds of systemic
risk.

(2) Where an indirect participant is taken to be a participant in a
designated system pursuant to sub-regulation (4), this shall not limit the
responsibility of the participant through which the indirect participant passes
transfer orders to the designated system.

(3) According to the rules of a system, a participant may act as central
counterparty, settlement agent, clearing house or carry out part or all of these
tasks.

Transfer order and netting to be binding despite insolvency
proceedings.

6.(1) A transfer order that has entered a designated system is legally
enforceable and binding on participants and third parties even if insolvency
proceedings against a participant are commenced provided that the transfer
order entered the system before the commencement of the proceedings.

(2) Netting is legally enforceable and binding on participants and third
parties even if insolvency proceedings against a participant are commenced
provided that the transfer order to which the netting relates entered the
system before the commencement of the proceedings.

(3) Sub-regulations (1) and (2) have effect even in the case of
insolvency proceedings against a participant in an interoperable system or
against the system operator of an interoperable system which is not a
participant.

(4) If–

(a) a transfer order entered a designated system after the
commencement of insolvency proceedings against a participant
in the system; and

(b) the order is executed on the business day, as defined by the
rules of the designated system, on which those insolvency
proceedings commenced,

Financial Services (Investment and Fiduciary Services) FINANCIAL MARKETS AND INSOLVENCY (SETTLEMENT
FINALITY) REGULATIONS 2011

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2011/216 the order is legally enforceable and binding on third parties only if the
system operator can prove that, at the time that the transfer order became
irrevocable, it did not know, and had no reason to know, that those
proceedings had commenced.

(5) No law, regulation, rule or practice on the setting aside of contracts
and transactions entered into before the commencement of insolvency
proceedings against a participant in a designated system has the effect of
unwinding a netting.

Requirements for rules of designated systems and interoperable
systems.

7.(1) The rules of a designated system shall–

(a) specify the moment at which a transfer order is to be
considered to have been entered into the system;

(b) specify the moment after which a transfer order may not be
revoked by a participant or any third party; and

(c) prohibit the revocation by a participant or any third party of a
transfer order from the moment specified in accordance with
paragraph (b).

(2) In the case of interoperable systems, the rules of each system shall
specify the moment of entry into that system in such a way as to ensure, as
far as possible, that the rules of all the interoperable systems are coordinated
in this regard. Unless expressly provided for by the rules of all the
interoperable systems concerned, each system’s rules on the moment of
entry are not affected by the rules of any other system with which it is
interoperable.

(3) In the case of interoperable systems, the rules of each system shall
specify the moment of irrevocability from that system in such a way as to
ensure, so far as possible, that the rules of all the interoperable systems are
coordinated in this regard. Unless expressly provided for by the rules of all
the interoperable systems concerned, each system’s rules on the moment of
irrevocability shall not be affected by the rules of any other system with
which it is interoperable.

Certain matters to be notified to the competent authority.

8.(1) The competent authority is the appropriate authority in Gibraltar for
the purposes of Article 6 (2) of the Directive.
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(2) Where a participant in a designated system is a body corporate, the
Court shall notify the competent authority immediately after making an
order for–

(a) the appointment of any liquidator or administrator in respect of
the participant; or

(b) the compulsory winding-up of the participant.

(3) Where a participant in a designated system is not a body corporate,
the Court shall notify the competent authority immediately after making an
order–

(a) adjudicating the participant bankrupt;

(b) if the participant has died insolvent, for the administration in
bankruptcy of the participant’s estate; or

(c) for an arrangement under the control of the Court that involves
the protection, by court order, of the participant’s person and
property from any action or other process.

(4) Where a participant in a designated system is a body corporate, if the
participant becomes subject to a creditors’ or members’ voluntary winding-
up, the participant shall notify the competent authority immediately after the
members have passed a resolution for that winding up.

(5) Immediately after receiving a notification under any of sub-
regulations (1) to (4), the competent authority shall ensure that the following
bodies are notified of the fact–

(a) the European Systemic Risks Board;

(b) the EEA States;

(c) ESMA.

Gibraltar law relating to insolvency or insolvency proceedings not to
affect certain rights and obligations.

9.(1) Insolvency proceedings shall not have retroactive effect on the rights
and obligations of a participant arising from, or in connection with, its
participation in a system before the commencement of such proceedings.

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2011/216 (2) Sub-regulation (2) also applies as regards the rights and obligations
of a participant in an interoperable system, or of a system operator of an
interoperable system which is not a participant.

Certain questions to be determined in accordance with foreign law.

10.(1) Subject to regulation 9, if insolvency proceedings are commenced
against a participant, or a person who has been a participant, in a designated
system, any question that–

(a) relates to the rights and obligations arising from, or in
connection with, that participation; and

(b) falls to be determined by a court in Gibraltar,

is to be decided in accordance with the law governing the system.

(2) If an equivalent overseas order is subject to the insolvency law of
Gibraltar, these Regulations apply to and in relation to that order in the same
way as they apply to and in relation to a transfer order.

(3) If an equivalent overseas security is subject to the insolvency law of
Gibraltar, these Regulations apply to and in relation to that security in the
same way as they apply to and in relation to a collateral security connected
with a designated system.

(4) In this regulation–

“equivalent overseas order” means an order that has the equivalent effect
as a transfer order made through a system designated by an EEA
State for the purposes of the Settlement Finality Directive;

“equivalent overseas security” means any realisable asset (including
money) that is provided under a pledge, repurchase or similar
agreement for the purpose of securing rights and obligations
potentially arising in connection with a system through which
equivalent overseas orders are made.

Insolvency proceedings not to affect certain rights.

11.(1) Notwithstanding the provisions of any other enactment, the rights
of–

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2011/216 (a) a system operator or a participant to collateral security provided
to them in connection with a system or any interoperable
system; and

(b) a central bank to collateral security provided to it,

to realise those rights are not affected by insolvency proceedings against–

(i) the participant (whether in the system concerned or in an
interoperable system);

(ii) the system operator of an interoperable system which is not a
participant;

(iii) the counterparty to a central bank; or

(iv) any third party which provided the collateral security.

(2) Collateral security referred to in sub-regulation (1) may be realised
for the satisfaction of rights referred to in that sub-regulation.

(3) If–

(a) securities are provided as collateral security to any one or more
of a participant, a system operator or a central bank; and

(b) the right of the participant, system operator or central bank
with respect to the securities is legally recorded in a register,
account or centralised deposit system located in Gibraltar or in
an EEA State,

the law of Gibraltar or that EEA State shall govern the determination of the
rights of the participant, system operator or central bank as a holder of
collateral security in relation to those securities.

(4) Without prejudice to the generality of sub-regulations (1) and (3) and
for the avoidance of doubt, a claim of a participant, system operator or a
central bank to collateral security referred to in this regulation has, and shall
be taken always to have had, priority over any claim of any other person to
that collateral security including, without limitation, in an insolvency
proceeding, unless, in respect of any such claim of another person, the terms
on which the collateral security was provided expressly provide that that
claim is to have priority to the claim of the participant, system operator or
the central bank, as the case may be.

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2011/216 (5) In this regulation–

“central bank” includes a nominee, agent or third party acting on behalf
of a central bank;

“participant” includes a nominee, agent or third party acting on behalf of
a participant;

“system operator” includes a nominee, agent or third party acting on
behalf of a system operator;
“securities” includes rights in securities.

Operators to notify competent authority of participation in system.

12. The system operator of a designated system shall, on designation of
the system, notify the competent authority of the participants in the system,
including any possible indirect participants, and shall immediately notify it
of any change of participants or indirect participants in the system.

(2) In addition to the requirement to notify set out in sub-regulation (1),
the competent authority may impose supervision or authorisation
requirements on designated systems.

Institutions to provide information to certain persons about designated
systems.

13. An institution shall, on being requested to do so by a person who
claims to have a legitimate interest in the designated systems in which the
institution is a participant, provide the person with information about the
main rules governing the functioning of that system.

Commencement of insolvency proceedings against participant not to
prevent certain funds, etc., from being used to fulfil obligations.

14.(1) The commencement of insolvency proceedings against a participant
or a system operator of an interoperable system shall not prevent funds or
securities available on the settlement account of that participant from being
used to fulfil that participant’s obligations in the system or in an
interoperable system on the business day of the opening of the insolvency
proceedings.

(2) In the case referred to in sub-regulation (1), the participant’s credit
facility connected to the system may be used against available, existing
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2011/216 collateral security to fulfil the participant’s obligations in the system or in an
interoperable system.

Revocation of Financial Markets and Insolvency (Settlement Finality)
Regulations 2002.

15. The Financial Markets and Insolvency (Settlement Finality)
Regulations 2002 are revoked.

Transitional arrangements.

16.(1) A system shall be taken to be a designated system for the purposes of
these Regulations if–

(a) the competent authority designated under the Financial Markets
and Insolvency (Settlement Finality) Regulations 2002 had,
before the commencement of these Regulations, designated the
system as a relevant system within the meaning of those
Regulations; and

(b) that designation had not been revoked before the
commencement of these Regulations.

(2) A transfer order which entered a system referred to in sub-regulation
(1) before the date of commencement of these Regulations but is settled
after that date shall be taken to be a transfer order for the purposes of these
Regulations.

Duty to cooperate with ESMA.

17. The competent authority–

(a) shall cooperate with ESMA for the purposes of these
Regulations, in accordance with Regulation (EU)
No.1095/2010;

(b) shall, without delay, ensure that ESMA is provided with all the
information necessary to enable ESMA to carry out its duties,
in accordance with Article 35 of Regulation (EU)
No.1095/2010.