Regulation No. 2/2022 of 14/04/2022 on Participation in the Central Securities Depository

BANK OF THE REPUBLIC OF BURUNDI

REGULATION No. 2/2022 OF 14/04/2022 ON PARTICIPATION IN THE CENTRAL SECURITIES DEPOSITORY

APRIL 2022

Page 1 of 29

---

TABLE OF CONTENTS

PRESENTATION NOTE ........................................................................................................................ 3 LEGAL BASIS ................................................................................................................................... 4 CHAPTER I: GENERAL PROVISIONS .......................................................................................... 5 ARTICLE 1: OBJECT AND SCOPE ................................................................................................. 5 ARTICLE 2: PARTICIPANTS ........................................................................................................... 5 ARTICLE 3: FORMS OF PARTICIPATION ....................................................................................... 5 ARTICLE 4: SECURITIES ACCOUNTS AND PORTFOLIOS ................................................................ 6 ARTICLE 5: FINANCIAL SECURITIES ............................................................................................ 6 ARTICLE 6: DEBT SECURITIES ...................................................................................................... 6 ARTICLE 7: NEW CATEGORIES OF FINANCIAL INSTRUMENTS ................................................... 7 ARTICLE 8: SECURITIES IDENTIFICATION ................................................................................... 7 ARTICLE 9: INSTRUMENT MANAGEMENT .................................................................................... 7 ARTICLE 10: SYSTEM OPERATIONS ............................................................................................. 7 ARTICLE 11: ISSUANCE OF PUBLIC SECURITIES ON THE PRIMARY MARKET .............................. 8 ARTICLE 12: ACCOUNTING FOR ISSUANCES AND VERIFICATION OF ACCOUNTING BALANCES ...... 8 ARTICLE 13: REPURCHASE OF SECURITIES BY THE ISSUER ....................................................... 8 ARTICLE 14: INTERBANK AND SECONDARY SECURITIES MARKETS ............................................. 9 ARTICLE 15: SECURITIES ACCOUNT MOVEMENTS ........................................................................ 9 ARTICLE 16: CLOSURE OF SECURITIES ACCOUNTS ...................................................................... 9 ARTICLE 17: CONDITIONS FOR EXECUTING OPERATIONS ......................................................... 9 ARTICLE 18: ORDER PROCESSING ............................................................................................... 10 ARTICLE 19: TRADING CALENDAR AND SCHEDULES .................................................................... 10 ARTICLE 20: IRREVOCABILITY OF ORDERS AND FINALITY OF SETTLEMENT ............................ 10 ARTICLE 21: CANCELLATION OF ORDERS .................................................................................. 10 ARTICLE 22: CORRECTION OF ACCOUNT CHARGES ..................................................................... 11 ARTICLE 23: SYSTEM MANAGEMENT ......................................................................................... 11 ARTICLE 24: SECURITY, SUPERVISION AND GOVERNANCE OF THE SYSTEM .............................. 12 ARTICLE 25: PARTICIPANTS IN THE SYSTEM .............................................................................. 12 ARTICLE 26: COMPLIANCE WITH THE REGULATION .................................................................... 12 ARTICLE 27: COMPLIANCE WITH OPERATING AND SECURITY RULES ......................................... 13 ARTICLE 28: LIABILITY ................................................................................................................. 13 ARTICLE 29: ALLOCATION OF COSTS .......................................................................................... 13 ARTICLE 30: CHARGING OF COSTS ............................................................................................. 13 ARTICLE 31: MONETARY SANCTIONS .......................................................................................... 14 ARTICLE 32: SUSPENSION OF A PARTICIPANT ............................................................................ 14 ARTICLE 33: EXCLUSION OF A PARTICIPANT .............................................................................. 14 ARTICLE 34: REVISION OF THIS REGULATION AND/OR ITS ANNEXES ......................................... 15 ARTICLE 35: ASSIGNMENT OF RIGHTS ......................................................................................... 15 ARTICLE 36: EXEMPTION FROM LIABILITY .................................................................................. 15 ARTICLE 37: CLAIMS AND DISPUTES .......................................................................................... 16 ARTICLE 38: REPEALING PROVISIONS ......................................................................................... 16 ARTICLE 39: ENTRY INTO FORCE .................................................................................................. 16 ANNEXES TO THE REGULATION ON PARTICIPATION IN THE CENTRAL SECURITIES DEPOSITORY SYSTEM (CSD) ................................................................................................................... 17

Page 2 of 29

---

PRESENTATION NOTE

In accordance with Law No. 1/34 of December 2, 2008 establishing its Statutes, the Bank of the Republic of Burundi (BRB) is a national public institution endowed with legal personality and administrative and financial autonomy.

To achieve its main objectives of ensuring price stability and the proper functioning of the financial system, the Central Bank carries out, among other missions, the promotion of a reliable, efficient, and robust national payment system.

In this context, it takes all necessary measures to organize and ensure the efficiency and robustness of payment systems.

To this end, the Central Bank has decided to implement:

1. an automated payment and settlement system, named 'RTGS', through which all payment and settlement operations between participants in this system are carried out.
2. an automated system for managing financial securities and liquidity, named Central Securities Depository 'Central Securities Depository (CSD)', to optimize and make more efficient the conduct of monetary policy and financial market operations, which includes: a) a depository system offering issuance, placement, custody, and settlement/delivery functions for securities; b) tools facilitating credit institutions' access to interbank resources and Central Bank refinancing; c) tools for monitoring the secondary securities market; d) tools for managing money and financial market operations.

Since the CSD system is interfaced with the RTGS system for the cash settlement of securities transactions, each CSD participant must be a participant in RTGS or be represented therein.

This Regulation and its annexes aim to establish the conditions for access to the CSD system, its operating rules, as well as the rights and obligations of the various participants.

Page 3 of 29

---

LEGAL BASIS

The Bank of the Republic of Burundi,

Having regard to Law No. 1/02 of February 4, 2008 on combating money laundering and the financing of terrorism;

Having regard to Law No. 1/34 of December 2, 2008 establishing the Statutes of the Bank of the Republic of Burundi;

Having regard to Law No. 1/17 of August 22, 2017 governing banking activities;

Having regard to Law No. 1/07 of May 11, 2018 establishing the National Payment System;

Having regard to Law No. 1/05 of February 27, 2019 governing the Burundian capital market;

Having regard to Law No. 1/08 of October 29, 2020 governing the Burundian Capital Market Regulatory Authority;

Having regard to Decree No. 100/49 of March 14, 1979 establishing the legal deposit of the Republic of Burundi archives;

Having regard to Regulation No. 001/2017 of July 14, 2017 on payment services and payment institution activities;

Having regard to Regulation No. 002/2017 of July 14, 2017 on commercial agents in banking and payment services operations;

Having regard to Regulation No. 01 of January 3, 2019 on the protection of consumers of financial products and services;

Having regard to Regulation No. 002 of October 29, 2019 governing the Bank of the Republic of Burundi's interventions in the money market;

Having regard to Instruction No. 03/2017 regulating the Treasury Securities Market in Burundi;

Hereby enacts this Regulation:

Page 4 of 29

---

CHAPTER I: GENERAL PROVISIONS

ARTICLE 1: OBJECT AND SCOPE

This Regulation aims to organize the operation and implementation of the Central Securities Depository - Central Securities Depository (CSD). It defines the conditions for participation in said system and the operations managed therein.

ARTICLE 2: PARTICIPANTS

Participants in the CSD system are:

1. The Bank of the Republic of Burundi;
2. Credit Institutions authorized by the Central Bank of Burundi;
3. The National Post Office;
4. Stock Exchange Companies;
5. Any other financial institution authorized by the Bank of the Republic of Burundi and meeting the participation conditions for the system.

Loss of the above eligibility status automatically entails loss of Participant status in the CSD system, without condition or notice, followed by the closure of the securities accounts referred to in this Regulation, particularly Article 4, and the liquidation of their balances.

ARTICLE 3: FORMS OF PARTICIPATION

The Participant holds a securities account in the system. It is directly connected to it via a platform and manages its own transactions in the system and position monitoring. It must possess reliable technical infrastructure and telecommunications means enabling access to the system and compliance with its operational standards.

Stock Exchange Companies may execute transactions in the system but must be linked to a Participant in the RTGS to ensure settlement of their transactions.

The Participant must demonstrate that it has appropriate and competent human resources for using the CSD.

It must first correctly complete the participation request form found in Annex 1 and submit it to the Central Bank.

The Central Bank may refuse system access to any applicant if risk analysis reveals that its participation could compromise the Central Bank's ability to process and settle operations quickly, securely, and correctly.

Page 5 of 29

---

Any natural or legal person not participating in the RTGS system and wishing to execute securities transactions in the CSD system must strictly have a settlement agent in the system, who themselves holds a settlement account in the RTGS, with which they are required to sign a specific bilateral agreement for the settlement of their operations.

These natural or legal persons are declared as investors in the CSD system and hold a sub-securities account linked to their settlement agent's securities account.

ARTICLE 4: SECURITIES ACCOUNTS AND PORTFOLIOS

A single securities account is opened in the CSD system for each participant, linked to their settlement account in the RTGS system. Each account may have as many sub-accounts as necessary, and each sub-account may contain all types of securities.

Each investor (client, beneficial owner) holds a sub-account with a Settlement Agent Holder, and this sub-account is managed solely by said Holder.

The portfolio represents the total balance of securities in a sub-account; it is divided into sub-balances defining the status of securities held in the sub-account: available securities, securities reserved for specific use, blocked securities, unavailable securities.

CHAPTER II: INSTRUMENTS ACCEPTED IN THE SYSTEM

ARTICLE 5: FINANCIAL SECURITIES

Financial securities consist of Treasury securities (Bills and Bonds), Central Bank securities (Bills and Bonds), and corporate securities (shares and bonds), which are issued in the CSD.

ARTICLE 6: DEBT SECURITIES

The Central Bank studies and potentially qualifies corporate debt securities (promissory notes/commercial paper) presented by participants and judges their eligibility for Central Bank refinancing operations. It also monitors their market value and updates it in the system.

Page 6 of 29

---

ARTICLE 7: NEW CATEGORIES OF FINANCIAL INSTRUMENTS

The Central Bank may create new categories of securities admitted in the system, particularly upon the operational launch of the national and sub-regional Securities Exchanges.

ARTICLE 8: SECURITIES IDENTIFICATION

Each issuance is identified by a unique code composed of twelve alphanumeric characters.

ARTICLE 9: INSTRUMENT MANAGEMENT

Securities or instruments managed in the CSD are qualified and differentiated by the value associated with a list of parameters characterizing them.

The main parameters appear in the list below, which is not exhaustive:

1. Instrument type, notably Treasury bills, Treasury bonds, Central Bank bills and bonds, corporate shares and bonds, commercial paper, and any other instrument defined by the Central Bank;
2. Instrument name;
3. Instrument code, issuance date, issued amount;
4. Number of securities issued;
5. Face value, coupon payment frequency;
6. Interest calculation method, interest rate;
7. Maturity date;
8. Capital amortization calculation method.

Each instrument is associated with a payment profile:

1. Accrued interest calculation;
2. Interest payment schedule;
3. Amortization schedule;
4. Payment due at maturity.

Corresponding payment orders are automatically generated by the CSD and transmitted to the RTGS system for settlement.

CHAPTER III: OPERATIONS ACCEPTED IN THE SYSTEM

ARTICLE 10: SYSTEM OPERATIONS

The CSD system offers the standard functionalities of a depository system, notably securities account keeping, settlement/delivery, and settlement finality, as well as the management of securities operations and schedules. It also allows for the management of:

1. Issuances and placements of financial securities on the primary market, according to usual auction methods, namely, at requested price, variable rate, fixed rate, or fixed price;
2. Liquidity injection and withdrawal operations;
3. Operations at the Central Bank's permanent facilities, notably the lending facility, the intra-day advance facility, the special refinancing facility;
4. Secondary market securities operations;
5. Interbank market operations.

ARTICLE 11: ISSUANCE OF PUBLIC SECURITIES ON THE PRIMARY MARKET

The CSD system enables the automation of all operations related to the issuance of public securities via auction on the primary market, notably:

1. Creation of instruments/securities;
2. Announcement of the auction to participants;
3. Opening of the auction;
4. Recording of bids, for which offers will be entered by participants from their platform, with all required security;
5. Tallying of offers, ranking, and calculation of results;
6. Validation of results by the Public Treasury and the Central Bank;
7. Cash settlement of auction results from participants' settlement accounts or their representatives in the RTGS, followed by the simultaneous transfer of securities to the securities accounts of winning participants.

ARTICLE 12: ACCOUNTING FOR ISSUANCES AND VERIFICATION OF ACCOUNTING BALANCES

On behalf of the issuer, the Central Bank creates securities subject to a double entry in an Issuance Account and a technical account.

The Central Bank verifies that the volume and total amount of awarded securities are equal to the sum of the nominal values of securities recorded in participants' accounts, taking into account their pre-auction balances.

ARTICLE 13: REPURCHASE OF SECURITIES BY THE ISSUER

The CSD system allows issuers to proceed with the early repurchase of all or part of the securities they have issued, either by directly acquiring them on the secondary market, through an intermediary they have appointed, or by organizing a public repurchase offer. Public repurchase offer operations for securities are carried out according to the same procedures as Treasury bill and bond issuance auctions.

ARTICLE 14: INTERBANK AND SECONDARY SECURITIES MARKETS

The CSD system enables the execution of interbank and secondary securities market transactions from participants' platforms (initiation of transactions, matching, and automatic settlement of transactions executed in the System) for the securities portion, and in the RTGS for the cash portion.

ARTICLE 15: SECURITIES ACCOUNT MOVEMENTS

The securities account must always show a credit or zero balance. The Central Bank is responsible to the Participant for the proper recording, in their securities account, of accounting movements generated by the CSD based on operations performed on the securities.

ARTICLE 16: CLOSURE OF SECURITIES ACCOUNTS

In the event of closure of a securities account, either by decision of the Central Bank or at the Participant's request, the latter must take all necessary measures to settle their securities account and regularize any ongoing or pending operations before the desired closure date. From the effective date of the decision or request, the use of their securities account is prohibited to them, except for balance clearance needs.

Failing action by the Participant to settle their securities account within thirty (30) calendar days, the Central Bank may take any necessary measures on behalf of the Participant, at the latter's expense and risk. The Central Bank disclaims all responsibility for acts performed in this context.

CHAPTER IV: PROCEDURES AND PRACTICAL MODALITIES FOR EXECUTING OPERATIONS

ARTICLE 17: CONDITIONS FOR EXECUTING OPERATIONS

Operations to be settled in the System are executed, either upon receipt of valid order(s) issued by the Participant, or at the initiative of the Central Bank.

It is each participant's responsibility to take necessary measures to avoid insufficient provision in their securities account. The Participant must have a sufficient number of securities in their securities account to ensure the success of any potential operation.

Page 9 of 29

---

If the Participant does not have sufficient financial instruments in their securities account, any operation initiated by said Participant will be refused by the system.

ARTICLE 18: ORDER PROCESSING

To be considered for processing, orders must satisfy the technical and functional conditions of the CSD system.

The Participant is required to use one of the communication means listed in the relevant technical and/or functional specification document(s) for transmitting its orders to the CSD system.

It is solely the Participant's responsibility to ensure appropriate internal security controls regarding orders sent to the CSD system from its technical platform.

ARTICLE 19: TRADING CALENDAR AND SCHEDULES

The Central Bank publishes the calendar of public holidays every year. The CSD system takes public holidays into account, including exceptional ones.

Trading time windows and cut-off times are published by the Central Bank in Annex 6 of this Regulation.

ARTICLE 20: IRREVOCABILITY OF ORDERS AND FINALITY OF SETTLEMENT

An order is introduced into the System when the CSD system has received and recorded said order.

The receipt date is the one derived from the electronic timestamp applied to the order.

An order is deemed irrevocable from the moment it can no longer be modified or unilaterally cancelled by the Participant, i.e., after the end date and time for submissions.

Without prejudice to specific rules applicable to emergency situations and subject to corrective entries, the settlement of an operation is considered final, i.e., irrevocable and unconditional, when the securities account records the operation and the cash counterpart is settled in the RTGS.

ARTICLE 21: CANCELLATION OF ORDERS

Cancellation of orders transmitted in the CSD is envisaged in the following cases:

Page 10 of 29

---

1. Cancellation by the CSD system: Orders that do not respect the technical and functional conditions of the system, as well as those not processed by the end of the recycling deadline, are automatically cancelled by the CSD system. Furthermore, orders not validated by the end of the trading day are automatically rejected by the System. The Central Bank assumes no responsibility regarding an order rejected or cancelled due to non-compliance with conditions related to the concerned operations.

2. Cancellation by the Participant: An order received from the Participant and acknowledged by the system cannot be unilaterally cancelled by the Participant until the moment it is presented for settlement.

3. Cancellation by the Central Bank: An order received from the Participant and acknowledged by the system may be cancelled by the Central Bank for the proper conduct of operations and/or the closing of the trading day.

ARTICLE 22: CORRECTION OF ACCOUNT CHARGES

Subject to applicable legislative and regulatory provisions, the Central Bank may, after notifying the Participant by email message, correct or reverse, via instructions for opposite movements, any credit or debit on a securities account. This procedure is applied when the credit and/or debit is erroneous or results from incorrect processing of an operation.

After notifying the Participant, the Central Bank proceeds with any regularization consequent to erroneous or undue payments linked to securities operations.

CHAPTER V: ROLE OF THE CENTRAL BANK

ARTICLE 23: SYSTEM MANAGEMENT

The Bank of