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Questions and Answers on securities’ registration of issuers that are in liquidation or insolvency


This document outlines some of the main points on the implementation of the provisions of Article 64-A of the Securities Code, concerning the compulsory process of changing the mode of individual securities registration of issuers in liquidation or insolvency, taking into consideration the frequent requests for information and clarification addressed to the CMVM, namely from holders of securities of BES - Banco Espírito Santo, S.A. or Banif - Banco Internacional do Funchal, S.A.

The following explanations use non-technical language and are intended for retail investors, regardless of their knowledge level in investment or legal matters. It is not a technical document, and it is not intended to be thorough regarding all the procedures to be adopted by issuers within the scope of the referred amendment process.

Should any questions remain after a careful and comprehensive reading of these explanations, the CMVM's Investor Helpline is available at 800 205 339 (toll free).

 

 

Date of publication: 12.08.2022


TABLE OF CONTENTS

  1. What is the provision of Article 64-A of the Portuguese Securities Code?
  2. What interests does Article 64-A of the Portuguese Securities Code aim to safeguard?
  3. As from when is Article 64-A of the Portuguese Securities Code applicable?
  4. What happens when an issuer of listed securities goes into liquidation or insolvency proceedings?
  5. What happens for issuers of listed securities who were already under liquidation or insolvency proceedings at the date of entry into force of Article 64-A of the Portuguese Securities Code?
  6. What happens to the registration of these securities with the financial intermediary where the investor has an account?
  7. With the change in the individualised registration mode, does the investor cease to be the holder of the securities?
  8. Does the change in the individualised securities registration mode have any associated costs?
  9. If the investor only holds these securities, will the investor have to pay custody fees to the financial intermediary after the change in the individualized registration mode with the issuer? 
  10. Do security holders have to make any request to the issuer to change the individualised registration mode?
  11. Does the financial intermediary have a duty to inform security holders of this mandatory change to individualised registration?
  12. How can information on these securities be obtained after registration with the issuer (or the financial intermediary chosen by the issuer)?


1.         What is the provision of Article 64-A of the Portuguese Securities Code?

Article 64-A of the Portuguese Securities Code, introduced by Law no. 99-A/2021 of 31 December, states that the book-entry securities of issuers of listed securities, which are under liquidation or insolvency, must be registered with the issuer or a financial intermediary representing the issuer.

 

2.         What interests does the provision of article 64-A of the Portuguese Securities Code aim to safeguard?

This rule aims to safeguard the interests of retail investors, since there were retail investors who did not hold other securities registered in an account with the financial intermediary and were paying commissions arising from the registration of securities of issuers in insolvency proceedings, namely credit institutions subject to bank resolution measures (such as BES - Banco Espírito Santo, S.A. or Banif - Banco Internacional do Funchal, S.A.), and who continued to have to bear such costs with the intermediaries.

 

3.         As from when is Article 64-A of the Portuguese Securities Code applicable?

This rule has been applicable since 30 January 2022.

 

4.         What happens when an issuer of listed securities goes into liquidation or insolvency proceedings?

The issuer is obliged to change the type of registration of the securities within 6 months.

 

5.         What happens for issuers of listed securities who were already under liquidation or insolvency proceedings at the date of entry into force of Article 64-A of the Portuguese Securities Code?

Issuers of listed securities who were already under liquidation or insolvency proceedings on 30 January 2022 had a period of 6 months to change the individualised securities registration mode, i.e., until 30 July 2022.

 

6.         What happens to the registration of these securities with the financial intermediary where the investor has an account?

The registration of those securities with the financial intermediary where the investor has an account is cancelled, which consequently implies that they will no longer be visible when the investor consults the information of the respective account with the financial intermediary.

 

7.         With the change in the individualised registration mode, does the investor cease to be the holder of the securities?

No. The securities are no longer only registered with the financial intermediary where the investor has an open account, but they will be registered with the issuer or with the financial intermediary chosen by the issuer, maintaining the legal position regarding their quality of title unchanged.

 

8.         Does the change in the individualised securities registration mode have any associated costs?

No. This change is exempt from any fee, emolument or commission and therefore does not involve any cost for the holder of the securities.

 

9.         If the investor only holds these securities, will the investor have to pay custody fees to the financial intermediary after the change in the individualized registration mode with the issuer?

If the procedure for changing the individualised registration of securities is carried out until the deadline, the investor may have to bear custody costs:

- If the financial intermediary charges the fees on a monthly basis, in the month in which such securities have been transferred to the individualised registration account with the issuer or the financial intermediary chosen by the issuer (e.g., in early August in respect of July).

- If the financial intermediary charges the fees on a quarterly basis, in the current quarter in which those securities are transferred to the individual registry account with the issuer or the financial intermediary chosen by the issuer (e.g., the beginning of October for the 3rd quarter starting in July).

 

10.       Do security holders have to make any request to the issuer to change the individualised registration mode?

No. The transfer of securities from the financial intermediary to the issuer (or to the financial intermediary chosen by the latter) do not rely on any acts to be carried out by the respective holders.  

 

11.       Does the financial intermediary have a duty to inform security holders of this mandatory change to individualised registration?

Yes, the financial intermediary must inform its clients who are holders of the securities, namely through the periodic information sent to them.

 

12.       How can information on these securities be obtained after the registration with the issuer (or the financial intermediary chosen by the issuer)?

The issuer (or the financial intermediary chosen by the issuer) sends information to each retail investor holding the registered securities by means of a statement on a quarterly basis, at least.

Security holders may also contact the issuer (or the financial intermediary chosen by the issuer) directly.