Establishment And Functions Of The Central Securities Depository In Ghana
The Central Securities Depository (CSD) functions in a form of a “bank” for securities where all transactions (debit and/ or credit of securities) of investors are made. This Article Presents an overview on the establishment and functions of Central Securities Depository.
The Central Securities Depository (CSD) is a computer based data recording system that records the holding of securities which includes debentures, shares, bonds or notes issued or proposed to be issued by a body corporate and any right, warrant or option in respect of them, bonds, treasury bills or other loan instrument of the Government of Ghana or of any other country, rights of interest, whether described as units or otherwise under a collective investment scheme, and other rights, interests or instruments that the Minister may, by notice in the Gazette, prescribe. The law that governs the Central Securities Depository (CSD) is the Central Securities Depository Act, 2007 (Act 733) which regulates the dealings in securities and also establishes the office of the Central Securities Depository. In Ghana, organizations appointed by the CSD are the participants of the CSD. These participants are called Depository Participants and they act as agents for the CSD. They are in two main categories which are Primary Dealer and Licensed Brokers. The primary dealers are the banks, discount houses and brokerage firms by the Bank of Ghana to take part in the primary auction of the Government of Ghana and the Bank of Ghana Securities. The licensed brokers are firms licensed by the Ghana Stock of Exchange to trade in shares of listed companies and corporate debt.
Application procedure for the establishment of a CSD
A person who intends to establish or operate a Central Securities Depository shall apply in writing to the Commission. The application must made by the applicant in a manner and form prescribed by the Commission.
The Commission shall grant an application in writing if it is satisfied that the proposed central securities depository rules of the applicant are rules approved by the Commission, the establishment and maintenance of the central securities depository, promote the positive development of securities market in the country, and the interest of the public dealings with securities, will be served.
The Commission may impose conditions in relation to the paid-up or authorized capital of the depository, the shareholding of the members of the depository, the appointment of the board of directors and management of the depository, and any other matters that the Commission considers appropriate in approving an application.
Termination and set-off
The Central Securities Depository may terminate its agreement to clear or settle securities transactions. It may also terminate to act as a depository for securities with an insolvent participant or with a participant in respect of whom insolvency or bankruptcy proceedings are commenced.
Where the central securities depository terminates its agreement, the depository may set-off obligations between the insolvent participant and the depository in accordance with the provisions of the agreement. If there is a net termination sum owed to the depository by the insolvent participant, the depository shall be considered as a creditor of the insolvent participant in respect of that net termination sum.
AUTHOR: AB Lexmall & Associates