Commission Delegated Regulation (EU) 2017/392 of 11 November 2016 supplementing Regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on authorisation, supervisory and operational requirements for central securities depositories (Text with EEA relevance. )

10.3.2017	EN	Official Journal of the European Union	L 65/48

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to 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 [^ntr1-L_2017065EN.01004801-E0001], and in particular Article 12(3), Article 17(9), Article 22(10), Article 25(12), Article 55(7), Article 18(4), Article 26(8), Article 29(3), Article 37(4), Article 45(7), Article 46(6), Article 33(5), Article 48(10), Article 49(5), Article 52(3), and Article 53(4) thereof,

Whereas:

• (1) The provisions in this Regulation are closely linked, since they all deal with the supervisory requirements applicable to central securities depositories (CSDs). To ensure coherence between these provisions, which should enter into force at the same time, and to facilitate a comprehensive view and easy access by persons that are subject to these provisions, it is desirable to include all the regulatory technical standards concerning the supervisory requirements under Regulation (EU) No 909/2014 in a single Regulation.

• (2) In view of the global nature of financial markets and given the commitments undertaken by the Union in this field, due regard should be had to the Principles for Financial Market Infrastructures issued by the Committee on Payment and Settlement Systems and the International Organisation of Securities Commissions (CPSS-IOSCO Principles) in April 2012.

• (3) In order to ensure consistent application of rules concerning improving securities settlement in the Union, certain technical terms should be clearly defined.

• (4) It is important to ensure appropriate authorisation and supervision of a CSD. As such, a list of the relevant authorities issuing the most relevant Union currencies in which settlement takes place to be involved in the process of authorisation and supervision of a CSD should be defined. This should be based on the share of the currencies that those authorities issue in the total value of settlement instructions against payment settled annually by a CSD and on the share of settlement instructions against payment settled by a CSD in a Union currency compared to the total value of settlement instructions against payment settled in that currency across all CSDs in the Union.

• (5) In order to allow competent authorities to perform a thorough assessment, a CSD applying for authorisation should provide information on the structure of its internal controls and the independence of its governing bodies to enable the competent authority to assess whether the corporate governance structure ensures the independence of the CSD and whether that structure and its reporting lines, as well as the mechanisms adopted for managing possible conflicts of interest are adequate.

• (6) To enable the competent authority to assess the good reputation and the experience and skills of the CSD's senior management and members of the management body, an applicant CSD should provide all relevant information to perform that assessment.

• (7) Information on a CSD's branches and subsidiaries is necessary to enable the competent authority to clearly understand the CSD's organisational structure and evaluate any potential risk to the CSD due to the activity of those branches and subsidiaries.

• (8) A CSD applying for authorisation should provide the competent authority with the relevant information to demonstrate that it has the necessary financial resources at its disposal and adequate business continuity arrangements for the performance of its functions on an ongoing basis.

• (9) In addition to receiving information on the core activities, it is important for the competent authority to receive information on the ancillary services that the CSD applying for authorisation intends to offer to enable the competent authority to have a complete overview of the applicant CSD's services.

• (10) In order for the competent authority to assess the continuity and orderly functioning of technological systems of an applicant CSD, that CSD should provide the competent authority with descriptions of the relevant technological systems and how they are managed, including if they are outsourced.

• (11) Information concerning the fees associated with the core services provided by CSDs is important and should form part of the application for authorisation of a CSD in order to enable the competent authorities to verify whether those fees are proportionate, non-discriminatory and not bundled with the costs of other services.

• (12) In order to ensure that the investors' rights are protected, and that conflict of laws issues are adequately managed, when assessing the measures that a CSD intends to take to allow its users to comply with the national laws referred to in Article 49(1) of Regulation (EU) No 909/2014, the CSD should take into account both issuers and participants, as appropriate, in accordance with the respective national laws.

• (13) In order to secure fair and non-discriminatory access to the notary, central maintenance and securities settlement services within the financial market, issuers, other CSDs and other market infrastructures have been granted access to a CSD in accordance with Regulation (EU) No 909/2014. An applicant CSD should, therefore, provide the competent authority with information about its access policies and procedures.

• (14) In order to carry out its authorisation duties effectively, the competent authority should receive all information from CSDs applying for authorisation and related third parties, including third parties to whom applicant CSDs have outsourced operational functions and activities.

• (15) To ensure general transparency of governance rules of a CSD applying for authorisation, the competent authority should be provided with documents confirming that the applicant CSD has adopted the necessary arrangements for a non-discriminatory establishment of an independent user committee for each securities settlement system that it operates.

• (16) To secure the orderly functioning of core infrastructure services within the financial market, a CSD applying for authorisation should provide the competent authority with all necessary information to demonstrate that it has adequate policies and procedures for ensuring reliable record-keeping systems as well as effective mechanisms for CSD services, including in particular the measures for preventing and addressing settlements fails, and the rules concerning the integrity of the issue, the protection of securities of participants and those of their clients, settlement finality, participant default and transfer of participants and clients' assets in case of a withdrawal of authorisation.

• (17) The risk-management models associated with the services provided by an applicant CSD are a necessary item in its application for authorisation so as to enable the competent authority to evaluate the reliability and integrity of the adopted procedures and help market participants make an informed choice.

• (18) In order to verify the safety of the link arrangements of the CSD applying for authorisation, to assess the rules applied in the linked systems and evaluate the risks stemming from those links, the competent authority should receive from an applicant CSD any relevant information for the analysis, together with the CSD assessment of the link arrangements.

• (19) When granting the approval of a CSD's participation in the capital of another entity, the competent authority of the CSD should take into consideration the criteria that ensure that the participation does not increase significantly the CSD's risk profile. In order to ensure its safety and continuity of its services, a CSD should not assume unlimited financial liabilities as a result of its participation in the capital of legal persons other than those providing the services set out in Regulation (EU) No 909/2014. A CSD should fully capitalise the risks resulting from any participation in the capital of another entity.

• (20) In order for a CSD not to be dependent on other shareholders of the entities in which it holds a participation, including with regard to the risk-management policies, it should have full control of those entities. This requirement should also facilitate the exercise of supervisory and oversight functions by competent authorities and relevant authorities by allowing easy access to relevant information.

• (21) A CSD should have a clear strategic rationale for the participation beyond mere profit making, taking into account the interests of the issuers of securities issued with the CSD; its participants and its clients.

• (22) In order to properly quantify and outline the risks stemming from its participation in the capital of another legal person, a CSD should provide independent risk analyses, approved by an internal or external auditor, for the financial risks and liabilities of the CSD resulting from that participation.

• (23) Following the experience of the financial crisis, authorities should focus on ongoing rather than ex post supervision. It is, therefore, necessary to ensure that for each review and evaluation under Regulation (EU) No 909/2014, the competent authority has sufficient access to information on a continuous basis. In order to determine the scope of information to be delivered for each review and evaluation, the provisions of this Regulation should follow the requirements for authorisation with which a CSD has to comply under Regulation (EU) No 909/2014. This includes substantive changes to elements already submitted during the process of authorisation, information relating to periodic events and statistical data.

• (24) To promote an effective bilateral and multilateral exchange of information between competent authorities, the results of the review and evaluation by one authority of the activities of a CSD should be shared with other competent authorities where this information is likely to facilitate their tasks, without prejudice to confidentiality and data protection requirements and in addition to any cooperation arrangements provided in Regulation (EU) No 909/2014. An additional exchange of information among competent authorities and relevant authorities or authorities in charge of markets in financial instruments should be organised allowing for a sharing of the findings of the competent authority in the course of the process of review and evaluation.

• (25) Taking into account the possible burden of gathering and processing a vast amount of information related to the operation of a CSD, and in order to avoid duplications, only relevant modified documents should be provided in the context of the review and evaluation. Those documents should be delivered in a manner that enables the competent authority to identify all the relevant changes made to the arrangements, strategies, processes and mechanisms implemented by the CSD since authorisation or since the completion of the last review and evaluation.

• (26) Another category of information that is useful for the competent authority to have in order to be able to perform the review and evaluation refers to events that by nature occur on a periodic basis and which are related to the operation of the CSD and the provision of its services.

• (27) To carry out a comprehensive risk evaluation of a CSD, the competent authority will need to request statistical data on the scope of the CSD's business activities in order to evaluate the risks related to CSDs operation and to the smooth operation of securities markets. In addition, statistical data enable the competent authority to monitor the size and importance of securities transactions and settlements within the financial markets as well as to assess the ongoing and potential impact of a given CSD on the securities market as a whole.

• (28) For the competent authority to monitor and evaluate the risks to which the CSD is or may be exposed to and which may arise for the smooth functioning of securities markets, it should be able to request additional information on the risks and activities of a CSD. The competent authority should therefore be able to define and request on its own initiative, or following a request submitted to it by another authority, any additional information which it considers necessary for each review and evaluation of the activities of a CSD.

• (29) It is important to ensure that third-country CSDs that intend to provide the services pursuant to Regulation (EU) No 909/2014 do not disrupt the orderly functioning of Union markets.

• (30) The ongoing assessment of the full compliance of a third-country CSD with the prudential requirements of a third country is the duty of the third country competent authority. The information to be provided to the European Securities and Markets Authority (ESMA) by an applicant CSD should not have the objective of replicating the assessment of the third country competent authority, but ensuring that the applicant is subject to effective supervision and enforcement in that third country, thus guaranteeing a high degree of investor protection.

• (31) To allow ESMA to perform a complete assessment of the application for recognition, the information provided by the applicant should be complemented by the necessary information to assess the effectiveness of the ongoing supervision, enforcement powers and actions taken by the third country competent authority. That information should be provided under a cooperation arrangement established in accordance with Regulation (EU) No 909/2014. The cooperation arrangement should ensure that ESMA is informed in a timely manner of any supervisory or enforcement action against the third-country CSD applying for recognition and any change of the conditions under which authorisation was granted to the relevant CSD and on any relevant update of the information originally provided by the CSD under the recognition process.

• (32) In order to ensure that investors' rights are protected, and that conflict of laws issues are adequately managed, when assessing the measures that a third-country CSD intends to take to allow its users to comply with the national laws referred to in Article 49(1) of Regulation (EU) No 909/2014, that third-country CSD should take into account both issuers and participants, as appropriate, in accordance with the respective national laws referred to in Article 49(1) of that Regulation.

• (33) To establish a sound risk-management framework, a CSD should take an integrated and comprehensive view of all relevant risks. This should include the risks that the CSD bears from any other entities and the risks that it poses to third parties, including its users and to the extent practicable their clients, as well as linked CSDs, central counterparties, trading venues, payment systems, settlement banks, liquidity providers and investors.

• (34) To ensure that CSDs operate with the necessary level of human resources to meet all of their obligations and to ensure that competent authorities have the relevant contact points within the CSDs that they supervise, CSDs should have key dedicated staff that should be accountable for the CSD and their own individual performance, particularly at the level of senior management and management body.

• (35) To ensure an adequate control of the activities performed by CSDs, independent audits covering the operations of the CSD, risk-management processes, compliance and internal control mechanisms should be put in place and performed regularly. The independence of audits should not necessarily require the involvement of an external auditor, provided that the CSD demonstrates to the competent authority that the independence of its internal auditor is properly ensured. In order to ensure the independence of its internal audit function, the CSD should also establish an audit committee.

• (36) A CSD should set up a risk committee in order to ensure that the management body of the CSD is advised at the highest technical level on its overall current and future risk tolerance and strategy. To ensure its independence from the CSD's executive management and a high degree of competence, the risk committee should be composed of a majority of non-executive members and it should be chaired by a person with an appropriate experience on risk management.

• (37) When assessing potential conflicts of interest, a CSD should not only examine the members of the management body, senior management or staff of the CSD but also any person directly or indirectly linked to those individuals or to the CSD, whether it is a natural or legal person.

• (38) A CSD should have a chief risk officer, a chief compliance officer, a chief technology officer, as well as a risk-management function, a technology function, a compliance and internal control function, and internal audit function. A CSD should in any case be able to organise the internal structure of those functions according to its needs. Different persons should fulfil the roles of chief risk officer, chief compliance officer and chief technology officer given that those functions are usually fulfilled by persons with different academic and professional profiles. In this respect, the provisions set out in this Regulation closely follow the system established by Regulation (EU) No 648/2012 of the European Parliament and the Council [^ntr2-L_2017065EN.01004801-E0002] for other market infrastructures.

• (39) Records kept by a CSD should be structured and allow for easy access to the data stored by the competent authorities involved in the supervision of CSDs. A CSD should ensure that the data records it keeps, including the complete accounting of the securities it maintains, are accurate and up-to-date in order to serve as a reliable data source for supervision purposes.

• (40) To facilitate the reporting and recording of a consistent set of information under different requirements, records kept by CSDs should cover each individual service provided by the CSD in accordance with Regulation (EU) No 909/2014, and should include at least all the details to be reported under the rules on settlement discipline provided in that Regulation.

• (41) The preservation of the rights of issuers and investors is essential for the orderly functioning of a securities market. A CSD should therefore employ appropriate rules, procedures and controls to prevent the unauthorised creation or deletion of securities. It should also conduct at least daily reconciliation of the securities accounts that it maintains.

• (42) A CSD should maintain robust accounting practices and perform audits to verify that its records of securities are accurate and that its measures ensuring the integrity of securities issues are adequate.

• (43) In order to effectively ensure the integrity of the issue, the reconciliation measures provided in Regulation (EU) No 909/2014 should apply to all CSDs regardless of whether or not they provide the notary service or central maintenance service referred to in that Regulation in relation to a securities issue.

• (44) With regard to other entities involved in the reconciliation process, several scenarios should be distinguished depending on the role of those entities. The reconciliation measures should reflect the specific roles of those entities. According to the registrar model, the registrar maintains records of securities which are also recorded in a CSD. According to the transfer agent model, the fund manager or transfer agent is responsible for an account that maintains a part of a securities issue recorded in a CSD. According to the common depository model, the common depository is used by CSDs that establish an interoperable link and the common depository should be responsible for the overall integrity of the securities issues initially recorded or centrally maintained by the CSDs that have established an interoperable link.

• (45) In order to mitigate operational risks, which comprise the risks caused by deficiencies in information systems, internal processes, and personnel performance or disruptions caused by external events which result in the reduction, deterioration or breakdown of services provided by a CSD, CSDs should identify all risks and monitor their evolution, irrespective of their origin that may include, for instance, their users, providers of services to CSDs and other market infrastructures, including other CSDs. Operational risks should be managed in accordance to a well-documented and robust framework with clearly assigned roles and responsibilities. That framework should include operational targets, tracing features, assessment mechanisms and it should be integrated in the risk-management system of the CSD. In this context, a CSD chief risk officer should be responsible for the operational risk-management framework. CSDs should manage their risk internally. Where internal controls are insufficient or where eliminating certain risks is not a reasonably feasible option, a CSD should be able to take a financial coverage of those risks through insurance.

• (46) CSDs should not enter into investments that may affect their risk profile. CSDs should only enter into derivatives contracts if they are required to hedge a risk that they cannot reduce otherwise. The hedging should be subject to certain strict conditions that ensure that the derivatives are not used for purposes other than for covering risks and are not used for a realisation of profits.

• (47) The assets of CSDs should be held safely, be easily accessible and able to be liquidated promptly. A CSD should therefore ensure that its policies and procedures concerning prompt access to its own assets are based at least on the nature, size, quality, maturity and location of the assets. A CSD should also ensure that prompt access to its assets is not negatively affected by the outsourcing of custody or investment functions to a third party entity.

• (48) To manage its liquidity needs, a CSD should be able to access its cash assets immediately and also be able to access any securities that it holds under its own name on the same business day when a decision to liquidate the assets is taken.

• (49) To ensure a greater degree of protection of the assets of a CSD from the default of the intermediary, a CSD that accesses another CSD through a CSD link should maintain those assets in a segregated account at the linked CSD. This level of segregation should ensure that the assets of a CSD are segregated from those of other entities and protected appropriately. It is however necessary to allow the establishment of links with third-country CSDs even where individually segregated accounts are not available at the third-country CSD provided that assets of the requesting CSD are in any case adequately protected and competent authorities are informed of the risks resulting from the unavailability of individually segregated accounts and the adequate mitigation of such risks.

• (50) In order to ensure that a CSD invests its financial resources in highly liquid instruments with minimal market and credit risks and for these investments to be liquidated rapidly with minimal price effect, it should diversify its portfolio and establish appropriate concentration limits with respect to the issuers of the instruments in which it invests its resources.

• (51) In order to ensure the safety and efficiency of the link arrangement of a CSD with another CSD, a CSD should identify, monitor, and manage all potential sources of risk arising from the link arrangement. A CSD link should have a well-founded legal basis, in all relevant jurisdictions, that supports its design and provides adequate protection to the CSDs involved in the link. Linked CSDs should measure, monitor, and manage the credit and liquidity risks arising from each other.

• (52) A requesting CSD that uses an indirect CSD link or an intermediary to operate a CSD link with a receiving CSD should measure, monitor, and manage the additional risks, including custody, credit, legal, and operational risks, arising from the use of the intermediary in order to ensure the safety and the efficiency of the link arrangement.

• (53) In order to ensure the integrity of the issue, where securities are maintained in several CSDs through CSD links, CSDs should apply specific reconciliation measures and coordinate their actions.

• (54) CSDs should provide fair and open access to their services with due regard to the risks to financial stability and the orderliness of the market. They should control the risks arising from their participants and other users by setting risk-related criteria for the provision of their services. CSDs should ensure that their users, such as participants, any other CSDs, central counterparties (CCPs), trading venues or issuers that are granted access to their services meet the criteria and have the required operational capacity, financial resources, legal powers, and risk-management expertise in order to prevent the occurrence of risks for CSDs and other users.

• (55) In order to ensure the safety and efficiency of its securities settlement system, a CSD should monitor compliance with its access requirements on an ongoing basis and have clearly defined and publicly disclosed procedures for facilitating the suspension and orderly exit of a requesting party that breaches, or no longer meets, the access requirements.

• (56) For the purpose of the authorisation to provide banking-type ancillary services, a CSD should submit an application to the competent authority including all necessary elements to ensure that the provision of the banking-type ancillary services do not affect the smooth provision of core services of a CSD. Entities already authorised as CSDs should not be required to submit again any elements that were already submitted in the course of the process of application for being authorised as a CSD under Regulation (EU) No 909/2014.

• (57) With a view to ensuring legal certainty and a consistent application of the law, certain requirements provided for in this Regulation concerning settlement discipline measures should start to apply from the date of entry into force of those measures.

• (58) This Regulation is based on the draft regulatory technical standards submitted by ESMA to the Commission.

• (59) In drawing up the technical standards contained in this Regulation, ESMA has worked in close cooperation with the members of the European System of Central Banks and the European Banking Authority.

• (60) ESMA has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the opinion of the Securities and Markets Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council [^ntr3-L_2017065EN.01004801-E0003],

HAS ADOPTED THIS REGULATION:

CHAPTER I GENERAL PROVISIONS

Article 1

Definitions

For the purposes of this Regulation, the following definitions apply:

• (a) ‘review period’ means the period under review beginning on the day following the end of the previous review and evaluation period;

• (b) ‘settlement instruction’ means a transfer order as defined in point (i) of Article 2 of Directive 98/26/EC of the European Parliament and of the Council [^ntr4-L_2017065EN.01004801-E0004];

• (c) ‘settlement restriction’ means the blocking, reservation or earmarking of securities that make them unavailable for settlement, or the blocking or reservation of cash that make it unavailable for settlement;

• (d) ‘exchange-traded fund’ (ETF) means a fund as defined in point (46) of Article 4(1) of Directive 2014/65/EU of the European Parliament and of the Council [^ntr5-L_2017065EN.01004801-E0005];

• (e) ‘issuer CSD’ means a CSD which provides the core service referred to in point 1 or 2 of Section A of the Annex to Regulation (EU) No 909/2014 in relation to a securities issue;

• (f) ‘investor CSD’ means a CSD that either is a participant in the securities settlement system operated by another CSD or that uses a third party or an intermediary that is a participant in the securities settlement system operated by another CSD in relation to a securities issue;

• (g) ‘durable medium’ means any instrument which enables the storage of information in a way that is accessible for future reference for a period of time adequate for the purposes of the information, and allows the unchanged reproduction of the information stored.

CHAPTER II DETERMINATION OF THE MOST RELEVANT CURRENCIES AND PRACTICAL ARRANGEMENTS FOR THE CONSULTATION OF THE RELEVANT COMPETENT AUTHORITIES (Article 12(1)(b) and (c) of Regulation (EU) No 909/2014)

Article 2

Determination of most relevant currencies

• (a) the relative share of each Union currency in the total value of the settlement by a CSD of settlement instructions against payment, calculated over a period of one year, provided that each individual share exceeds 1 %;

• (b) the relative share of settlement instructions against payment settled by a CSD in a Union currency compared to the total value of settlement instructions against payment settled in that currency across all CSDs in the Union, calculated over a period of one year, provided that each individual share exceeds 10 %.

Article 3

Practical arrangements for the consultation of the relevant authorities referred to in Article 12(1)(b) and (c) of Regulation (EU) No 909/2014

CHAPTER III AUTHORISATION OF CSDs (Article 17 of Regulation (EU) No 909/2014)

SECTION 1 General information on applicant CSDs

Article 4

Identification and legal status of applicant CSDs

• (a) contact details of the person responsible for the application;

• (b) contact details of the person or persons in charge of the applicant CSD's compliance and internal control function;

• (c) the corporate name of the applicant CSD, its Legal Entity Identifier (LEI) and registered address in the Union;

• (d) the memorandum and articles of association or other constitutional and statutory documentation of the applicant CSD;

• (e) an excerpt from the relevant commercial or court register, or other forms of certified evidence of the registered address and business activity of the applicant CSD that is valid at the date of the application;

• (f) the identification of the securities settlement systems that the applicant CSD operates or intends to operate;

• (g) a copy of the decision of the management body regarding the application and the minutes of the meeting in which the management body approved the application file and its submission;

• (h) a chart showing the ownership links between the parent undertaking, subsidiaries and any other associated entities or branches, wherein the entities shown in the chart are identified by their full corporate name, legal status, registered address, and tax numbers or company registration numbers;

• (i) a description of the business activities of the applicant CSD's subsidiaries and other legal persons in which the applicant CSD holds a participation, including information on the level of participation;

• (j) a list including:

• (i) the name of each person or entity who, directly or indirectly, holds 5 % or more of the applicant CSD's capital or voting rights;

• (ii) the name of each person or entity that could exercise a significant influence over the applicant CSD's management due to its holding in the applicant CSD's capital;

• (k) a list including:

• (i) the name of each entity in which the applicant CSD holds 5 % or more of the entity's capital and voting rights;

• (ii) the name of each entity over whose management the applicant CSD exercises significant influence;

• (l) a list of core services listed in Section A of the Annex to Regulation (EU) No 909/2014 that the applicant CSD is providing or intends to provide;

• (m) a list of ancillary services explicitly specified in Section B of the Annex to Regulation (EU) No 909/2014 that the applicant CSD is providing or intends to provide;

• (n) a list of any other ancillary services permitted under, but not explicitly specified under Section B of the Annex to Regulation (EU) No 909/2014 that the applicant CSD is providing or intends to provide;

• (o) a list of the investment services subject to Directive 2014/65/EU referred to in point (n);

• (p) a list of services and activities that the applicant CSD outsources or intends to outsource to a third party in accordance with Article 30 of Regulation (EU) No 909/2014;

• (q) the currency or currencies that the applicant CSD processes, or intends to process in connection with services that the applicant CSD provides, irrespective of whether cash is settled on a central bank account, a CSD account, or an account at a designated credit institution;

• (r) information on any pending and final judicial, administrative, arbitration or any other legal proceedings to which the applicant CSD is a party and which may cause it financial or other costs.

• (a) the Member State or Member States in which the applicant CSD intends to operate;

• (b) a programme of operations stating in particular the services which the applicant CSD provides or intends to provide in the host Member State;

• (c) the currency or currencies that the applicant CSD processes or intends to process in the host Member State;

• (d) where the services are provided or intended to be provided through a branch, the organisational structure of the branch and the names of the persons responsible for its management;

• (e) where relevant, an assessment of the measures that the applicant CSD intends to take to allow its users to comply with the national laws referred to in Article 49(1) of Regulation (EU) No 909/2014.

Article 5

General information concerning policies and procedures

• (a) the job titles of the persons responsible for the approval and implementation of the policies and procedures;

• (b) a description of the measures implementing and monitoring the compliance with the policies and procedures.

Article 6

Information concerning services and activities of the CSD

The applicant CSD shall include the following in the application for authorisation:

• (a) a detailed description of the services referred to in points (l) to (p) of Article 4(2);

• (b) the procedures to be applied in the provision of the services referred to in point (a).

Article 7

Information concerning groups

• (a) the policies and procedures referred to in Article 26(7) of Regulation (EU) No 909/2014;

• (b) information on the composition of the senior management, the management body, and the shareholders structure of the parent undertaking and of the other undertakings in the group;

• (c) the services and key individuals other than senior management that the applicant CSD shares with other undertakings in the group.

• (a) the registered address of the parent undertaking of the applicant CSD;

• (b) where the parent undertaking is an entity authorised or registered and subject to supervision under Union or third country legislation, any relevant authorisation or registration number and the name of the authority or authorities competent for the supervision of the parent undertaking.

SECTION 2 Financial resources for the provision of services by the applicant CSD

Article 8

Financial reports, business plan, and recovery plan

• (a) financial reports including a complete set of financial statements for the preceding three years, and the statutory audit report on the annual and consolidated financial statements within the meaning of Directive 2006/43/EC of the European Parliament and of the Council [^ntr6-L_2017065EN.01004801-E0006], for the preceding three years;

• (b) where the applicant CSD is audited by an external auditor, the name and the national registration number of the external auditor;

• (c) a business plan, including a financial plan and an estimated budget that foresees various business scenarios for the services provided by the applicant CSD, over a reference period of at least three years;

• (d) any plan for the establishment of subsidiaries and branches and their location;

• (e) a description of the business activities that the applicant CSD plans to carry out, including the business activities of any subsidiaries or branches of the applicant CSD.

• (a) evidence that demonstrates sufficient financial resources during six months after the granting of an authorisation;

• (b) an interim financial report;

• (c) statements concerning the financial situation of the applicant CSD, including a balance sheet, income statement, changes in equity and in cash flows and a summary of accounting policies and other relevant explanatory notes;

• (d) audited annual financial statements of any parent undertaking for the three financial years preceding the date of the application.

• (a) a summary that provides an overview of the plan and its implementation;

• (b) the identification of the critical operations of the applicant CSD, stress scenarios and events triggering recovery, and a description of recovery tools to be used by the applicant CSD;

• (c) an assessment of any impact of the recovery plan on stakeholders that are likely to be affected by its implementation;

• (d) an assessment of the legal enforceability of the recovery plan that takes account of any legal constraints imposed by Union, national or third country legislation.

SECTION 3 Organisational requirements

Article 9

Organisational chart

An application for authorisation shall include an organisational chart that describes the organisational structure of the applicant CSD. The chart shall include the following:

• (a) the identity and tasks of the persons responsible for the following positions:

• (i) senior management;

• (ii) managers in charge of the operational functions referred to in Article 47(3);

• (iii) managers in charge of the activities of any branches of the applicant CSD;

• (iv) other significant roles in the operations of the applicant CSD;

• (b) the number of staff members in each division and operational unit.

Article 10

Staffing policies and procedures

An application for authorisation shall include the following information on the applicant CSD's policies and procedures related to staff:

• (a) a description of the remuneration policy including information about the fixed and variable elements of the remuneration of the senior management, the members of the management body and the staff employed in the risk-management, compliance and internal control, internal audit and technology functions of the applicant CSD;

• (b) the measures put in place by the applicant CSD to mitigate the risk of over-reliance on the responsibilities entrusted to any individual person.

Article 11

Risk monitoring tools and governance arrangements

• (a) a description of the governance arrangements of the applicant CSD established in accordance with paragraph 2 of Article 47;

• (b) the policies, procedures and systems established in accordance with paragraph 1 of Article 47;

• (c) a description of the composition, role and responsibilities of the members of the management body and senior management and the committees established in accordance with Article 48.

Article 12

Compliance, internal control and internal audit functions

• (a) a description of the monitoring and evaluation tools for the adequacy and effectiveness of the applicant CSD's internal audit systems;

• (b) a description of the control and safeguard tools for the applicant CSD's information processing systems;

• (c) a description of the development and application of the applicant CSD's internal audit methodology;

• (d) a work plan of the internal audit function for three years following the date of application;

• (e) a description of the roles and qualifications of each individual who is responsible for internal audit referred to in Article 47(3)(d) under the oversight of the audit committee referred to in Article 48(1)(b).

• (a) a description of the roles and qualifications of individuals who are responsible for the compliance and internal control function and of any other staff involved in the assessments of compliance, including a description of the means to ensure the independence of the compliance and internal control function from the rest of the business units;

• (b) the policies and procedures of the compliance and internal control function, including a description of the compliance role of the management body and senior management;

• (c) where available, the most recent internal report prepared by the persons responsible for the compliance and internal control function or by any other staff involved in the assessments of compliance within the applicant CSD.

Article 13

Senior management, management body and shareholders

• (a) a copy of a curriculum vitae which sets out the experience and knowledge of each member;

• (b) details regarding any criminal and administrative sanctions imposed on a member in connection with the provision of financial or data services or in relation to acts of fraud or misappropriation of funds, in the form of an appropriate official certificate where available in the relevant Member State;

• (c) a self-declaration of good repute in relation to the provision of financial or data services, where all members of the senior management and management body shall state whether they have been subject to any of the following:

• (i) they have been convicted of any criminal or administrative offence in connection with the provision of financial or data services or in relation to acts of fraud or misappropriation of funds;

• (ii) they have been subject to an adverse decision in any proceedings of a disciplinary nature brought by a regulatory authority, a government body or agency or they are subject to any ongoing proceedings;

• (iii) they have been subject to an adverse judicial finding in civil proceedings before a court in connection with the provision of financial or data services, or fraud in the management of a business;

• (iv) they have been members of the management body or senior management of an undertaking whose registration or authorisation was withdrawn by a regulatory body while connected to the undertaking at least one year before the date of withdrawal of authorisation or registration;

• (v) they have been refused the right to carry on any type of activities which require registration or authorisation by a regulatory body;

• (vi) they have been members of the management body or of senior management of an undertaking against whom insolvency proceedings have been opened at least one year before proceedings have been opened;

• (vii) they have been members of the management body or the senior management of an undertaking that was subject to a sanction by a regulatory body while they were connected to the undertaking at least one year before such a sanction was imposed;

• (viii) they have been otherwise fined, suspended, disqualified or subject to any other sanction in connection with the provision of financial or data services by a government, regulatory or professional body;

• (ix) they have been disqualified from acting as a director or in any other managerial capacity, dismissed from employment or other appointment in an undertaking as a result of misconduct or malpractice.

For the purposes of point (c)(i) of this paragraph, the self-declaration shall not be required where an official certificate is submitted under point (b) of this paragraph.

• (a) evidence of compliance with Article 27(2) of Regulation (EU) No 909/2014;

• (b) a description of the roles and responsibilities of the members of the management body;

• (c) the target for the representation of the underrepresented gender in the management body, the relevant policy on how to meet that target and the method used by the applicant CSD to make public the target, policy and its implementation.

• (a) a description of the ownership structure of the applicant CSD referred to in point (i) of Article 4(2), including a description of the identity and size of interests of any entity in a position to exercise control over the operation of the applicant CSD;

• (b) a list of the shareholders and persons who are in a position to exercise, directly or indirectly, control over the management of the applicant CSD.

Article 14

Management of conflicts of interest

• (a) a description of the policies and procedures concerning the identification, management and disclosure to the competent authority of potential conflicts of interest and of the process used to ensure that the staff of the applicant CSD is informed of those policies and procedures;

• (b) a description of the controls and measures put in place to ensure that the requirements referred to in point (a) on the management of conflicts of interest are met;

• (c) a description of the following elements:

• (i) the roles and responsibilities of key personnel, especially where they also have responsibilities in other entities;

• (ii) arrangements ensuring that individuals who have a permanent conflict of interest are excluded from the decision making process and from the receipt of any relevant information concerning the matters affected by the permanent conflict of interest;

• (iii) an up-to-date register of existing conflicts of interest at the time of the application and a description of how those conflicts of interest are managed.

Article 15

Confidentiality

• (a) information relating to participants, clients, issuers or other users of the applicant CSD services;

• (b) other information held by the applicant CSD as a result of its business activity not permitted to be used for commercial purposes.

• (a) the internal procedures concerning permissions of access to information that ensure secured access to data;

• (b) a description of any restrictions on the use of data for reasons of confidentiality.

Article 16

User committee

An application for authorisation shall include the following information on each user committee:

• (a) the mandate of the user committee;

• (b) the governance arrangements of the user committee;

• (c) the operating procedures of the user committee;

• (d) the admission criteria and the election mechanism for the members of the user committee;

• (e) a list of the proposed members of the user committee and the indication of interests that they represent.

Article 17

Record-keeping

• (a) an analysis of the extent to which the applicant CSD's existing record-keeping systems, policies and procedures are compliant with the requirements under Article 54;

• (b) an implementation plan detailing how the applicant CSD will comply with the requirements referred to in Article 54 by the date on which it becomes applicable.

SECTION 4 Conduct of business rules

Article 18

Goals and objectives

An application for authorisation shall include a description of the goals and objectives of the applicant CSD referred to in Article 32(1) of Regulation (EU) No 909/2014.

Article 19

Handling of complaints

An application for authorisation shall include the procedures the applicant CSD has established for the handling of complaints.

Article 20

Requirements for participation

An application for authorisation shall include all necessary information concerning the participation in the securities settlement systems operated by the applicant CSD in accordance with Article 33 of Regulation (EU) No 909/2014 and Articles 88-90 of this Regulation. That information shall include the following:

• (a) the criteria for participation that allow fair and open access for all legal persons that intend to become participants in the securities settlement systems operated by the applicant CSD;

• (b) the procedures for the application of disciplinary measures against existing participants that do not comply with the criteria for participation.

Article 21

Transparency

Article 22

Communication procedures with participants and other market infrastructures

An application for authorisation shall include the relevant information concerning the use by the applicant CSD of international open communication procedures and standards for messaging and reference data in its communication procedures with participants and other market infrastructures.

SECTION 5 Requirements for services provided by CSDs

Article 23

Book-entry form

An application for authorisation shall include information on the processes concerning book entries that ensure the compliance of the applicant CSD with Article 3 of Regulation (EU) No 909/2014.

Article 24

Intended settlement dates and measures for preventing and addressing settlement fails

• (a) the procedures and measures to prevent settlement fails in accordance with Article 6 of Regulation (EU) No 909/2014;

• (b) the measures to address settlement fails in accordance with Articles 7 of Regulation (EU) No 909/2014.

Institutions referred to in Article 69(1) of Regulation (EU) No 909/2014 shall include in the implementation plan referred to in the first subparagraph an analysis of the extent to which their existing rules, procedures, mechanisms and measures comply with the requirements under Articles 6 and 7 of Regulation (EU) No 909/2014.

Article 25

Integrity of the issue

An application for authorisation shall include information concerning the applicant CSD's rules and procedures for ensuring the integrity of securities issues referred to in Article 37 of Regulation (EU) No 909/2014 and Chapter IX of this Regulation.

Article 26

Protection of participants' and their clients' securities

An application for authorisation shall include the following information concerning the measures put in place to protect the securities of the applicant CSD's participants and those of their clients in accordance with Article 38 of Regulation (EU) No 909/2014:

• (a) the rules and procedures to reduce and manage the risks associated with the safekeeping of securities;

• (b) a detailed description of the different levels of segregation offered by the applicant CSD, a description of the costs associated with each level, the commercial terms on which they are offered, their main legal implications and the applicable insolvency law;

• (c) the rules and procedures for obtaining the consents referred to in Article 38(7) of Regulation (EU) No 909/2014.

Article 27

Settlement finality

An application for authorisation shall contain information concerning the rules on settlement finality put in place by the applicant CSD in accordance with Article 39 of Regulation (EU) No 909/2014.

Article 28

Cash settlement

If the settlement of the cash payments is intended to take place in accordance with Article 40(2) of Regulation (EU) No 909/2014, the applicant CSD shall explain why settlement in accordance with Article 40(1) of Regulation (EU) No 909/2014 is not practical and available.

Article 29

Participant default rules and procedures

An application for authorisation shall include the rules and procedures put in place by the applicant CSD to manage the default of a participant.

Article 30

Transfer of participants and clients' assets in case of a withdrawal of authorisation

An application for authorisation shall include information concerning the procedures put in place by the applicant CSD to ensure the timely and orderly settlement and transfer of the assets of clients and participants to another CSD in the event of a withdrawal of its authorisation.

SECTION 6 Prudential requirements

Article 31

Legal risks

Article 32

General business risks

Article 33

Operational risks

• (a) a copy of the outsourcing agreements;

• (b) the methods used to monitor the service level of the outsourced services and activities.

Article 34

Investment policy

An application for authorisation shall include evidence demonstrating that:

• (a) the applicant CSD holds its financial assets in accordance with Article 46(1), (2) and (5) of Regulation (EU) No 909/2014 and Chapter XI of this Regulation.

• (b) the investments of the applicant CSD are compliant with Article 46(3) of Regulation (EU) No 909/2014 and Chapter XI of this Regulation.

Article 35

Capital requirements

An application for authorisation shall include the following information concerning the capital requirements:

• (a) information demonstrating that the capital of the applicant CSD, including retained earnings and reserves of the applicant CSD, meets the requirements of Article 47 of Regulation (EU) No 909/2014;

• (b) the plan referred to in Article 47(2) of Regulation (EU) No 909/2014 and any updates to that plan, and evidence of its approval by the management body or an appropriate committee of the management body of the applicant CSD.

SECTION 7

Article 36

CSD links

Where the applicant CSD has established or intends to establish CSD links, the application for authorisation shall contain the following information:

• (a) a description of the CSD links accompanied by assessments of potential sources of risks arising from those link arrangements by the applicant CSD;

• (b) the expected or actual settlement volumes and values of the settlement performed within the CSD links;

• (c) the procedures concerning the identification, assessment, monitoring and management of all potential sources of risk for the applicant CSD and for its participants arising from the link arrangement and the appropriate measures put in place to mitigate them;

• (d) an assessment of the applicability of insolvency laws applicable to the operation of a CSD link and their implications for the applicant CSD;

• (e) other relevant information requested by the competent authority for assessing the compliance of CSD links with the requirements provided in Article 48 of Regulation (EU) No 909/2014 and Chapter XII of this Regulation.

SECTION 8 Access to CSDs

Article 37

Access rules

An application for authorisation shall include a description of the procedures for dealing with the following requests for access:

• (a) from legal persons intending to become participants in accordance with Article 33 of Regulation (EU) No 909/2014 and Chapter XIII of this Regulation;

• (b) from issuers in accordance with Article 49 of Regulation (EU) No 909/2014 and Chapter XIII of this Regulation;

• (c) from other CSDs in accordance with Article 52 of Regulation (EU) No 909/2014 and Chapter XIII of this Regulation;

• (d) from other market infrastructures in accordance with Article 53 of Regulation (EU) No 909/2014 and Chapter XIII of this Regulation.

SECTION 9 Additional information

Article 38

Request for additional information

The competent authority may request from the applicant CSD any additional information necessary for assessing whether, at the time of granting the authorisation, the applicant CSD complies with the requirements of Regulation (EU) No 909/2014.

CHAPTER IV PARTICIPATION OF CSDs IN CERTAIN ENTITIES (Article 18(3) of Regulation (EU) No 909/2014)

Article 39

Criteria for participation of a CSD

In granting the approval for a CSD's participation in a legal person which does not provide the services set out in Sections A and B of the Annex to Regulation (EU) No 909/2014, the competent authority shall take into account the following criteria:

• (a) the extent of the financial liabilities assumed by the CSD as a result of that participation;

• (b) whether the CSD holds sufficient financial resources that fulfil the criteria referred to in Article 46 of Regulation (EU) No 909/2014 to cover the risks resulting from the following:

• (i) the guarantees given by the CSD to that legal person;

• (ii) any contingent obligations undertaken by the CSD in favour of that legal person;

• (iii) any loss sharing agreements or recovery mechanism of that legal person;

• (c) whether the legal person in which the CSD holds a participation provides services that are complementary to the core services offered by the CSD, as referred to in Article 18(4) of Regulation (EU) No 909/2014, such as:

• (i) a CCP authorised or recognised under Regulation (EU) No 648/2012; or

• (ii) a trading venue as defined in point (42) of Article 2(1) of Regulation (EU) No 909/2014;

• (d) whether the participation of the CSD results in the control by the CSD over the legal person as defined in point (21) of Article 2(1) of Regulation (EU) No 909/2014;

• (e) the CSD's analysis of the risks arising from that participation, including any analysis approved by an internal or external auditor, demonstrating that all risks resulting from the participation are adequately managed. Competent authorities shall take into account, in particular, the following aspects of the CSD's analysis:

• (i) the strategic justification for the participation, which takes into account the interests of the users of the CSD, including issuers, participants and their clients;

• (ii) the financial risks and liabilities resulting from a participation of the CSD.

CHAPTER V REVIEW AND EVALUATION (Article 22 of Regulation (EU) No 909/2014)

Article 40

Information to be provided to the competent authority

• (a) the information referred to in Articles 41 and 42;

• (b) a report on the CSD's activities and the substantive changes referred to in Article 16(4) of Regulation (EU) No 909/2014 made during the review period and all related documents;

• (c) any additional information requested by the competent authority that is necessary for assessing the compliance of the CSD and its activities with Regulation (EU) No 909/2014 during the review period.

Article 41

Periodic information relevant for the reviews

For each review period, the CSD shall provide the competent authority with the following information:

• (a) a complete set of the latest audited financial statements of the CSD, including those consolidated at group level;

• (b) a summarised version of the most recent interim financial statements of the CSD;

• (c) any decisions of the management body following the advice of the user committee, as well as any decisions where the management body has decided not to follow the advice of the user committee;

• (d) information on any pending civil, administrative or any other judicial or extrajudicial proceedings involving the CSD, in particular in relation to matters concerning tax and insolvency, or matters that may cause financial or reputational costs for the CSD;

• (e) information on any pending civil, administrative or any other judicial or extrajudicial, proceedings involving a member of the management body or a member of the senior management that may have an negative impact on the CSD;

• (f) any final decisions resulting from the proceedings referred to in points (d) and (e);

• (g) a copy of the results of business continuity stress tests or similar exercises performed during the review period;

• (h) a report on the operational incidents that occurred during the review period and affected the smooth provision of any core services, the measures taken to address them and the results thereof;