AMF-UMOA

WEST AFRICAN MONETARY UNION FINANCIAL MARKETS AUTHORITY

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INSTRUCTION NO. 76/AMF-UMOA/2023

ON THE GOVERNANCE OF THE CENTRAL DEPOSITORY / SETTLEMENT BANK (DC/BR)

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The West African Monetary Union Financial Markets Authority,

Having regard to the Revised Treaty of the West African Monetary Union (UMOA) of July 12, 2019, which entered into force on October 1, 2022, modifying the name of the Regional Council for Public Savings and Financial Markets (CREPMF) to the West African Monetary Union Financial Markets Authority (AMF-UMOA);

Having regard to the Convention of July 3, 1996 establishing the Regional Council for Public Savings and Financial Markets (hereinafter the "Regional Council") and its Annex on the composition, organization, functioning, and powers of the Regional Council for Public Savings and Financial Markets, particularly Article 21;

Having regard to General Regulation No. 001/97 of November 28, 1997 on the organization, functioning, and supervision of the regional financial market, particularly Articles 10 and 16;

Having regard to the OHADA Uniform Act on commercial company law and economic interest groups of January 30, 2014;

Having regard to Instruction No. 3/97 of November 29, 1997 on the authorization of the Central Depository/Settlement Bank;

Having regard to Decision No. 004 of April 29, 2021/CM/UMOA appointing the President of the Regional Council for Public Savings and Financial Markets;

Having regard to the deliberations of the AMF-UMOA at its 98th ordinary session on December 23, 2023, held in Cotonou, Republic of Benin;

HAS ADOPTED THIS INSTRUCTION

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TITLE 1. GENERAL PROVISIONS

Article 01: Definitions

For the purposes of this Instruction, the following terms shall mean:

a) Administrator: a natural person designated by the articles of association or by the General Meeting, in accordance with the provisions of commercial company law applicable to the Central Depository/Settlement Bank. He/she is a member of the deliberative body. A natural person, serving as the permanent representative of a corporate administrator, shall be treated as an administrator.

b) Independent Administrator: an administrator who has no relationship of any kind with the DC/BR or its group that could impair his/her judgment independence or place him/her in a situation of actual or potential conflict of interest.

c) Non-Executive Administrator: an administrator who has no management responsibilities within the DC/BR.

d) General Meeting: the body bringing together the shareholding members forming the DC/BR's share capital. It has the power to take any decision affecting the DC/BR, subject to powers legally vested in the executive body or the deliberative body. To this end, it deliberates under the quorum conditions defined by the applicable commercial company law and the articles of association.

e) Conflicts of Interest: a situation where the personal interests of a member of the governance bodies or a staff member, or those of persons with whom they have a family relationship, are incompatible with the interests of the DC/BR and could, therefore, influence the impartiality expected of them in performing their duties.

f) Corporate Governance Statement: A statement covering all key information related to the application of the DC/BR's governance rules during a given year.

g) Central Depository/Settlement Bank or DC/BR: The company authorized, by approval from the AMF-UMOA, to carry out, throughout the territory of the Union States, the following activities: the book-entry conservation and circulation of securities admitted to its operations, the management of the settlement/delivery cycle, and cash payments, in its capacity as a Settlement Bank, of balances resulting from clearing related to stock exchange transactions.

h) Chief Executive Officer (CEO): a natural person, appointed by the legally empowered body, notably the Board of Directors, to manage the DC/BR and represent it in dealings with third parties. The CEO is vested with the broadest powers to act on behalf of the DC/BR, within the limits of the corporate purpose and subject to those expressly attributed to the General Meetings or specifically reserved for the deliberative body by legal or statutory provisions.

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i) Executives: Persons who are members of the executive body, notably those holding the position of director, head of branches or representative offices or subsidiaries, provisional administrator, and liquidator.

j) Corporate Governance: the set of relationships between the DC/BR's executive body, its deliberative body, its shareholders, and other stakeholders that establish the framework within which the DC/BR's objectives are set, along with the means to achieve them and monitor their implementation. Governance determines the allocation of powers and responsibilities as well as decision-making mechanisms within the internal texts governing the DC/BR;

k) Family Relationship: the relationship between two persons belonging to the same family, notably spouses, direct and collateral relatives up to the fourth degree, including parents, grandparents, great-grandparents, children, grandchildren, great-grandchildren, brothers and sisters, uncles and aunts, great-uncles and great-aunts, nephews and nieces, first cousins;

l) Duty of Care: the obligation, for any administrator and any member of the executive body, to make decisions and act in an informed and prudent manner regarding the DC/BR. The duty of care refers to the prudence with which the administrator or executive body member would manage his/her own affairs;

m) Duty of Loyalty: the obligation, for any administrator and any member of the executive body, to act in good faith in the interest of the DC/BR. Under this obligation, the administrator or executive body member must not act in his/her own interest or in the interest of a person or group, to the detriment of the DC/BR and the entire regional financial market of the UMOA;

n) Governance Bodies: the deliberative body, including its specialized committees, as well as the executive body;

o) Deliberative Body: the Board of Directors in joint-stock companies or the collegiate body in companies constituted under another form. It is vested with all powers to act in all circumstances on behalf of the DC/BR, within the limits of the corporate purpose and powers reserved for the General Meeting;

p) Executive Body: the set of structures contributing to the day-to-day management of the DC/BR and ensuring the effective implementation of the activity direction defined by the deliberative body. In particular, the CEO, Deputy CEOs, Secretary General, Heads of control functions, Directors of Departments grouping together Directorates, and Directors of Directorates directly attached to the CEO are considered members of the executive body.

q) Related Parties: natural and legal persons who are directly or indirectly linked to the DC/BR. Related parties include in particular: i. the parent company of the DC/BR and any entity over which it exercises exclusive control, joint control, or significant influence; ii. any entity over which the DC/BR exercises exclusive control, joint control, or significant influence; iii. a natural person who exercises exclusive control, joint control, or significant influence over the DC/BR;

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iv. a natural or legal person holding at least 10% of voting rights within the DC/BR;
v. the administrators and executives of the DC/BR;
vi. private companies in which the natural persons referred to in points iii), iv), and v) above exercise management, administration, or directorship functions, or hold more than 25% of the share capital;
vii. persons having a close family relationship with the natural persons referred to in points iii), iv), and v) above.

Terms not defined in this Instruction or its Annexes shall have their usual meaning.

Article 02: Object and Scope

This Instruction sets the minimum governance rules to be observed by the Central Depository/Settlement Bank (DC/BR).

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TITLE 2. GOVERNANCE FRAMEWORK AND GUIDING PRINCIPLES

Article 03: Guiding Principles of Corporate Governance

The DC/BR must:

1. have objectives focused on its safety and efficiency that explicitly support the stability of the financial system and the development of the regional financial market.
2. have documented governance provisions that define clear levels of responsibility. These provisions should be communicated to shareholders, competent authorities, stakeholders, and, more generally, to the public.
3. clearly state the roles and responsibilities of the Board of Directors and the procedures governing its functioning, including procedures for identifying, managing, and resolving members' conflicts of interest, which should be documented. The Board must annually review both its overall performance and the performance of its individual members.
4. designate within its Board of Directors members possessing appropriate skills, integrity, and incentives to fulfill their roles.

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Article 04: Principles of Proportionality and Transparency

The DC/BR shall implement a transparent governance framework adapted to its size, structure, the nature and complexity of its activities, as well as its risk profile, and, where applicable, that of the group to which it belongs.

The governance framework must be adapted to its scale and the potential consequences of its failure on the stability of the UMOA regional financial market.

The governance framework must in particular:

• be designed and implemented taking into account, among other things, information system security, coverage of all risks incurred by the DC/BR, and potential conflicts of interest;
• establish and formalize strategies, policies, and procedures to be implemented to define and organize the various means necessary to achieve sound governance;
• define the roles and obligations of stakeholders;
• meet the needs of the DC/BR as a whole and of each of its organizational and operational units;
• integrate mechanisms aimed at maintaining and/or restoring its functioning in case of disruption;
• reflect, over time, changes arising from the DC/BR's characteristics and its external environment, as well as developments in governance best practices;
• provide mechanisms to ensure the integrity and commitment of stakeholders, who must be sufficiently numerous, competent, and possess a good knowledge of the DC/BR's activities, risks, and legal obligations.

The DC/BR's articles of association must incorporate the principle of transparency regarding the dissemination of information to stakeholders.

Article 05: Corporate Governance Organizational Structure

The DC/BR shall be equipped with a Board of Directors and specialized committees. It shall be led by a Chairman of the Board of Directors and a Chief Executive Officer.

Article 06: Corporate Governance Charter

The DC/BR must have a Corporate Governance Charter, which sets out the principles and rules on which the Board, its administrators, and its committees operate. This charter must be approved by the company's Board of Directors.

This charter must include at minimum the provisions of the model attached to this Instruction.

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TITLE 3. BOARD OF DIRECTORS AND SPECIALIZED COMMITTEES

Article 07: General Responsibilities of the Board of Directors

The DC/BR's Board of Directors must:

1. define and approve the DC/BR's overall strategy, its general governance framework, its corporate culture, as well as its principles and values;
2. clearly state the roles and responsibilities of the executive body;
3. define a clear and documented risk management framework, including the DC/BR's risk tolerance policy, assigning responsibility for risk-related decisions and addressing decision-making in crisis or emergency situations. Governance provisions should enable risk management and internal control functions to have sufficient authority, independence, resources, and access to the Board;
4. ensure that the DC/BR's design, rules, overall strategy, and major decisions appropriately take into account the legitimate interests of its direct and indirect participants, as well as those of other concerned stakeholders. Major decisions should be clearly communicated to concerned stakeholders and made public if they impact the market as a whole.

The Board of Directors bears ultimate responsibility for the DC/BR's financial soundness and its compliance with the legal and regulatory provisions governing its activities.

It must effectively engage in the DC/BR's activities, in accordance with its legal, regulatory, and statutory powers. To this end, it is required to stay informed of significant changes arising from the DC/BR's economic or operational environment and act promptly to protect the long-term interests of the regional financial market and the DC/BR.

Article 08: Specific Responsibilities of the Board of Directors

In the context of implementing its specific responsibilities, the Board of Directors must in particular:

1. continuously ensure the adequacy of capital levels relative to defined commitments, particularly within the framework of the public service concession granted to the DC/BR;
2. monitor the design and implementation of the DC/BR's remuneration system and related control processes;
3. ensure that transactions with related parties, including intra-group transactions, are identified, assessed, and subject to appropriate requirements;
4. promote a corporate culture valuing ethical behavior, adhere to these values, and ensure their compliance by the executive body and DC/BR staff;

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5. ensure that the DC/BR maintains regular relations with the AMF-UMOA;
6. ensure the realization of necessary investments to guarantee business continuity and achieve performance objectives;
7. review reports and Decisions of the AMF-UMOA and follow up on the implementation, within required deadlines, of the Decisions and recommendations contained therein.

The Board of Directors must in particular approve:

8. all DC/BR policies;
9. the DC/BR's General Regulations and implementing texts;
10. the DC/BR's risk appetite level and risk limits;
11. decisions on outsourcing activities and the use of new products or services, substantial modifications to existing products or services, as well as important strategic initiatives and operations such as major acquisitions, changes to systems, processes, and the business model;
12. risk and internal control governance frameworks. It is required to ensure that the implementation of said frameworks complies with all requirements set forth respectively in the Instruction on risk management and that on internal control.

Article 09: Obligations of the Deliberative Body towards the Executive Body

In addition to its assigned powers and obligations, the Board of Directors must supervise the management of the DC/BR's executive body activities.

To this end, the Board of Directors must in particular:

1. monitor and evaluate the performance of the CEO, Deputy CEOs, and heads of control functions;
2. ensure compliance with the requirements of the public service concession granted by the Union member States to the DC/BR;
3. ensure the assessment of tariffs applied by the DC/BR;
4. ensure the implementation of innovative actions and development activities;
5. set performance objectives and remuneration levels for the executive body that are adequate and consistent with the DC/BR's long-term strategy and financial soundness.

Article 10: Delegation of Powers and Competences of the Board of Directors

The Board of Directors may delegate certain of its powers and competences to specialized committees.

The delegation of powers or outsourcing of certain DC/BR activities does not exempt the deliberative body from its responsibilities.

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Article 11: Composition of the Board of Directors

The Board of Directors must be composed, in a balanced manner, of administrators with complementary skills and experience in areas of interest to the DC/BR. Without prejudice to legal or statutory provisions, the number of Board members takes into account the principle of proportionality and is subject to periodic reviews.

Non-executive administrators must represent, at all times, at least three quarters (3/4) of the Board of Directors' members.

The Board of Directors must include at least two (02) independent administrators.

Article 12: Qualification Criteria for an Independent Administrator

Without prejudice to the definition set forth in Article 01, the criteria to qualify an administrator as independent are as follows:

1. not be or have been, during the preceding four years, an employee or member of the executive body of the DC/BR;