Transparency in securities transactions and custody chains
In the post Global Financial Crisis environment, participants in global capital markets take it for granted that their securities transactions will be supported by operational systems that offer a robust clearing and settlement process. Global custodians and the systems that they use operate in an electronic, intermediated and cross-border environment whereby physical assets have been replaced by electronic records. However, the securities settlement industry is facing intensive regulatory pressure to establish with greater certainty transparency in securities transactions and custody chains. The requirements of KYC, AML and sanctions screening place greater importance on the need for custodian banks to have a clearer understanding of who lies behind cash payments, securities transactions and assets in custody. The omnibus account which is seen as a primary source of operational efficiency has regulators concerned because it can be difficult to identify who the ultimate beneficiaries might be. Those concerns, however, may not be justified. New research commissioned by ISSA found that omnibus and segregated account systems, as well as hybrid systems that bridged the two, offer benefits to their respective users as well as disadvantages. In this talk Professor Stuart Weinstein will discuss those benefits and disadvantages, and suggest the way forward for both the industry and regulators to achieve closer alignment.