1. Introduction

The purpose of this site is to disclose the levels of protection associated with the different levels of segregation in respect of securities held directly for clients with Central Securities Depositories (CSDs) within the European Economic Area (EEA), including a description of the main legal implications of the respective levels of segregation offered and information on the insolvency law applicable.

This disclosure is required under Art. 38(5) and 38(6) of the Central Securities Depositories Regulation (CSDR) in relation to CSDs established in the EEA.


This document is not intended to constitute legal or other advice and should not be relied upon as such. You should seek your own legal advice if you require any guidance on the matters stated herein.


IFB (the “Bank”), registered as a financial institution in Anjouan Comoros, is a Participant of CSD(s) established in the EEA. According to Art. 38(5) and and 38(6) of CSDR a Participant of such CSD shall offer its clients at least the choice between omnibus client segregation and individual client segregation and inform them of the costs and risks associated with each option including a description of the main legal implications of the respective levels of segregation offered and information on the insolvency law applicable.


Under CSDR, the CSDs of which the Bank is a Participant have their own disclosure obligations. We include links to those disclosures in this document.


2. Background

In the Bank’s own books and records, the Bank records each client’s individual entitlement to securities that it holds for that client in a separate client account. The Bank also opens accounts with EEA CSDs in its own name (i.e. the account is held in the name of Bank but designated as client account) or in the name of its nominees in which it holds clients’ securities. As a general rule, the Bank makes two types of accounts with EEA CSDs available to clients: Individual Client Segregated Accounts (ISAs) and Omnibus Client Segregated Accounts (OSAs).


An ISA is used to hold the securities of a single client and therefore the client’s securities are held separately from the securities of other clients and the Bank’s own proprietary securities.

An OSA is used to hold the securities of a number of clients on a collective basis. However, the Bank does not hold its own proprietary securities in OSAs.


3. Main legal implications of levels of segregation


Insolvency (bankruptcy)

Clients’ legal entitlement to the securities that the Bank holds for them directly with CSDs would typically not be affected by the Bank’s insolvency, regardless whether those securities were held in ISAs or OSAs.


The distribution of the securities in the event of insolvency would depend on a number of factors, the most relevant of which are outlined below.


Nature of clients’ interests

The Bank is required under the Official Requirements regarding Safe Custody Business to protect the client’s legal position (proprietary interest in rem) in its securities which the Bank holds in custody, and to separate the client’s legal position from its own rights. However, the specific nature of the client’s legal position in these securities may differ according to the applicable law.

Where the existence or transfer of proprietary rights in financial instruments or other rights in such financial instruments presupposes their recording in a register, an account or a centralised deposit system held or located in a EEA Member State, these rights would generally be governed by the law of the EEA Member State where the register, account, or centralised deposit system in which those rights are recorded is held or located.


The books and records of the Bank constitute evidence of the clients’ proprietary interests in rem in the securities. The ability to rely on such evidence would be particularly important on insolvency. In the case of either an ISA or an OSA, an insolvency practitioner may require a full reconciliation of the books and records in respect of all securities accounts prior to the release of any securities from those accounts.


The Official Requirements regarding Safe Custody Business require the Bank to maintain accurate books and records, which enable the Bank to distinguish securities held for one client from securities held for any other client, and from the Bank’s own securities. The Bank is also subject to regular audits in respect of its compliance with those rules. In relation to an ISA, each client is beneficially entitled to all of the securities held in the ISA. In the case of an OSA, as the securities are held collectively in a single account, each client is normally considered to have a beneficial interest in all of the securities in the account proportionate to its holding of securities. As long as books and records are maintained in accordance with the applicable rules, clients should receive the same level of protection from both ISAs and OSAs.



The statutory requirements are designed to ensure that the Bank holds securities in a quantity and a kind at least equal to the securities credited to client accounts. If notwithstanding these requirements there were a shortfall between the number of securities that the Bank is obliged to deliver to clients and the number of protection that the Bank holds on their behalf in either an ISA or an OSA, this could result in fewer securities than clients are entitled to be returned to them on the Bank’s insolvency. How a shortfall could arise and be treated may be different between ISAs and OSAs.


How a shortfall may arise

A shortfall could arise for several reasons, including administrative error, intraday movements or counter-party default, e.g. following the exercise of rights of reuse.


In most cases, a shortfall occurs due to a mismatch, i.e. the Bank may credit the client accounts immediately on trade date. At the same time, the effective delivery may not happen later (most markets have a settlement cycle of 2 or 3 days). As a result, a recipient client could dispose of its securities when they are credited to its securities account, irrespective of whether the Bank has already received the deposits. This process is referred to as contractual settlement. Contractual settlement may cause a difference between the Bank’s number of securities at the CSD and the clients’ higher number of aggregated securities credited to their securities accounts. In the ordinary course of the settlement, this difference is resolved at the end of the settlement cycle. The contractual settlement increases market liquidity, accelerates deliveries and settlement, and is based on the fact that a failed settlement of an exchange-traded transaction (and the risk that, as a result, a bank does not hold sufficient available securities) is rare. The risk involved with shortfalls is further mitigated by the fact that, if a shortfall arises, a bank is obliged to acquire without delay securities if and to the extent the total number of available securities is less than the total number of securities credited to clients’ accounts (see below).


In the case of an ISA, the securities held in the ISA can only be delivered out for the settlement of transactions made by the ISA client. As a matter of principle, this may reduce the risk of a shortfall but also increases the risk of settlement failure, which, in turn, may incur additional costs (e.g. buy-in costs) or penalties and / or delay in settlements as the Bank would be unable to settle where there are insufficient securities in the account.


Treatment of a shortfall

The treatment of shortfalls may vary depending on whether the securities are held by the Bank in an ISA or OSA.

In the case of an ISA, the relevant client should not be exposed to a shortfall attributable to an account held for another client or client. It cannot be excluded in exceptional situations that a shortfall on any other (ISA or OSA) account would be shared rateably among clients, including clients who do not have an interest in the relevant account. Accordingly, a client holding whose securities are held in an ISA may, in exceptional cases, still be exposed to a shortfall on an account held for another client or client.


In the case of an OSA, a shortfall attributable to the OSA would be shared rateably among the clients about the securities held in the OSA (and potentially other clients). Therefore, a client may be exposed to a shortfall even where securities have been lost in circumstances that are entirely unrelated to that client. Any shortfall in particular security held in an OSA is allocated among all clients interested in that security in the account. To calculate clients’ shares of any shortfall regarding an OSA, each client’s interests concerning securities held within that account would need to be established as a matter of law and fact based on the bank’s books and records. This allocation would likely be made rateably between clients with interest in that security in the OSA. However, arguments could be made that a shortfall in a particular security in an OSA should be attributed to a specific client or clients in certain circumstances. It may therefore be a time-consuming process to confirm each client’s entitlement. This could give rise to delays in returning securities and initial uncertainty for a client regarding its actual insolvency entitlement.


Security interests

Security interest granted to the CSD

Where the CSD benefits from a security interest (either it benefits from a statutory right or a contractual right based on its terms and conditions) over securities held by the Bank with it (including securities held for clients), there could be a delay in the return of securities to a client (and a possible shortfall) if the Bank failed to satisfy its obligations to the CSD and the security interest was enforced. This applies regardless of whether the securities are held in an ISA or an OSA. However, in practice, we would expect that the CSD would first seek recourse to any securities held in the Bank’s proprietary accounts to satisfy the Bank’s obligations and only then use securities in client accounts. We would also expect the CSD to enforce its security rateably across client accounts held with it.


Furthermore, restrictions apply to situations in which we may grant a security interest over securities held in a client account.

The security interest is granted to the third party.

Security interests granted over clients’ securities could have a different impact in the case of ISAs and OSAs.


Where a client purported to grant a security interest over its interest in securities held in an OSA and the security interest was asserted against the CSD with which the account was held, there could be a delay in the return of securities to all clients holding securities in the relevant account, including those clients who had not granted a security interest (and a possible shortfall in the account). However, in practice, the Bank would expect that the beneficiary of a security interest (e.g. a pledgee) over a client’s securities would perfect its security by notifying the Bank rather than the CSD and would seek to enforce the protection against the Bank rather than against the CSD, with which it had no relationship. The Bank would also expect CSDs to refuse to recognise a claim asserted by anyone other than ourselves as account holders.


Priority right in insolvency proceedings

Clients may have a priority claim in the Bank’s insolvency proceedings in certain situations where the Bank has granted a security interest over securities held in a client account to a depositary (including a CSD), and the depositary has wholly or partly realised its security interest. Such priority rights may only arise in limited circumstances. It would generally require that the Bank has granted (i) a loan to the client and, (ii) with the client’s authorisation, a security interest over the client’s securities to the depositary about a loan of the depositary to us. The client’s priority claim would be settled separately before the declaration of general unsecured creditors and from a separate pool of assets, comprising:

·       to the extent that the depositary has not realised its security interest, the securities that are subject to the security interest that the Bank has granted to the depositary;

·       where the depositary has realised its security interest, any proceeds to which the depositary is not legally entitled;

·       any claims the Bank may have resulting from loans granted to other clients involved in this separate settlement process and any payments made to avert an imminent realisation of a security interest.


Clients would be required to claim the insolvency of the Bank as a priority creditor in respect of those assets. This priority settlement process may arise whether or not the client has an ISA or OSA.


4. Participation in CSDs and CSD disclosures

The rules applicable to the insolvency of a CSD are usually subject to the country's laws in which the respective CSD has its seat. Specific information on the main legal implications of the different levels of segregation offered and information on the insolvency law applicable to the CSDs the Bank participates in are provided below.


Suppose a CSD offers its participants to maintain several individually segregated securities accounts. In that case, the Bank may decide, by any applicable national legal and regulatory requirements, to offer to its clients only one or several of the types of individually segregated securities accounts provided by the CSD. Where the Bank makes use of this option, this is stated from now on:


Clearstream Banking AG (CBF), Germany

Link: https://www.clearstream.com/clearstream-en/strategy-and-initiatives/asset-safety/csdr-article-38-disclosure


Monte Titoli, Italy

Link: https://www.lseg.com/sites/default/files/content/documents/2019_05_13%20E.6%20- %20Account%20Segregation%20Document%20FINAL_CLEAN.pdf


Euroclear, Luxemburg

Link: https://www.euroclear.com/about/en/business/Disclosuresandquestionnaires.html


If you click on the above links, you leave this information/website. The relevant CSDs have provided these disclosures. The Bank has not investigated or performed due diligence on the disclosures and websites, and clients rely on the CSD's disclosures and websites at their own risk.



Bail-in refers to the process under the applicable national law implementing EU Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms (BRRD) under which the firm’s liabilities to clients may be modified, for example, by being written down or converted into equity.


Central Securities Depository (CSD) is an entity that records legal entitlements to dematerialised securities and operates a system for the settlement of transactions in those securities.

Central Securities Depositories Regulation (CSDR) refers to EU Regulation No 909/2014 on improving securities settlement in the European Union and central securities depositories, which sets out rules applicable to CSDs and their direct participants. The CSDR is relevant for the European Economic Area (EEA) and is under scrutiny for incorporation into the EEA Agreement. Upon completion of the adoption process, it will also be in force in the EEA.


EEA means the European Economic Area.


Individual Client Segregated Account (ISA) is used to hold the securities of a single client.


Omnibus Client Segregated Account (OSA) is used to hold the securities of several clients on a collective basis.


Participant means an entity that is a direct participant in a CSD, i.e. an entity that holds securities in an account with a CSD and is responsible for settling transactions in securities that take place within a CSD. 


A direct participant should be distinguished from an indirect participant, an entity that appoints a direct participant to hold securities for it with a CSD.


Resolution proceedings are proceedings for the resolution of failing banks and investment firms under the applicable national law implementing EU Directive 2014 / 59 / EU establishing a framework for the recovery and resolution of credit institutions and investment firms (BRRD)