Ancillary Services

A pledge serves as a contractual agreement between an investor (pledgor) and a bank (pledgee), outlining the provision of funds in exchange for securities according to mutually established terms for an agreed-upon duration. Within this contractual framework, specific conditions govern the allocation of rights, including entitlements to receive interests, redemptions, and other relevant aspects.

In order for ECSD to accept the pledge case, a set of documents must be provided for each pledge request:

• A cover letter from the bank to ECSD requesting to pledge the subjected security, the letter should be signed by the bank's authorized signatories
• A true copy of a valid pledge contract with live stamps (Bank stamp/ signature verification stamp), including “a clause that identifies who will benefit from the redemption proceeds.”
• A foreclosure letter signed by the client and stamped with the “signature verification stamp for external use”.
• A pledge request stamped and signed by the bank’s authorized signatories.

      ECSD plays a pivotal role with dual responsibilities:

Firstly, ECSD enforces a pledge on the positions specified in the pledge contract, ensuring compliance with the agreed-upon terms. 

Secondly, ECSD diligently disburses interests or redemptions to the rightful recipient, as dictated by the contractual terms. ECSD also provides de-pledge services.

In the event that the pledgor pays off the related debt to the pledgee bank and wishes to release the pledge, they need to submit the following:

·         A cover letter from the bank to the ECSD requesting the release of the pledge, the letter should be signed by the bank's authorized signatories

·         A pledge release request stamped and signed by the bank’s authorized signatories.

·      In the event of legal action, administrative measures, or regulatory decisions, ECSD enforces a freeze on either partial tranches or complete positions in accordance with the instructions received. 

·     The CSD system additionally offers custodians an extensive list of freezing codes, allowing them to autonomously freeze partial tranches or entire positions according to their own preferences, without requiring direct intervention from ECSD.

• The sole authority to remove a freeze on government bonds and/or bills is vested in ECSD, dependent on obtaining clear directives from the initiator, especially in situations where the original freeze was instigated by legal actions.
• In cases where the original freeze request is based on factors other than legal issues or CBE facilities, custodians have the capability to independently unfreeze partial tranches or complete positions without needing to involve ECSD.

When ECSD receives a custodian announcement of a deceased client, the following process will take place:

·        Freeze the deceased client’s owned positions across the CSD system (i.e. using UIC under different custodians.)

·        Suspend any cashflow payment (Disbursement of interests or redemptions) related to the deceased client’s financial position according to this freeze code.

·        Receive a formal request from the heirs. A solo request from one of the heirs will trigger the process to distribute the deceased client’s frozen securities position.

·        Have ECSD’s legal department review the related supporting documents “death certificate / inheritance notification”.

·        Before heritage distribution, ECSD to check if the heirs’ have their own UIC. If they have a valid UIC, ensure that it is registered under any of the exiting custodians in the CSD. If not, request them to create a new unified code through a licensed custodian and sign a custody agreement with the local custodian.

·        Start deallocating position from the deceased client and allocate the positions to the heirs’ codes based on a three-level validation process.