Regulation No. 03/CEMAC/UMAC/CM on Stock Repurchase Operations in the BEAC Money Market

ECONOMIC AND MONETARY COMMUNITY OF CENTRAL AFRICA REGULATION No. 03/CEMAC/UMAC/CM MONETARY UNION OF CENTRAL AFRICA ON STOCK REPURCHASE OPERATIONS ON THE BEAC MONEY MARKET

Given the Treaty establishing the Economic and Monetary Community of Central Africa (CEMAC) and its Addendum relating to the institutional and legal system of the Community;

Given the Convention of 16 October 1990 creating the Banking Commission in Central Africa (COBAC) and the Convention of 17 January 1992 on the Harmonization of Banking Regulation in the States of Central Africa, in their modified and current versions;

Given Regulation CEMAC/UMAC No. 06/03 of 12 December 2003 on the organization, functioning, and supervision of the Central African financial market;

Considering that the regulation of stock repurchase operations contributes to strengthening confidence between participants on the money market and to the achievement of the common monetary policy objectives of Member States;

Considering the mission of the BEAC in animating and dynamizing the money market in general and the interbank market in particular;

Given the approval by the Monetary Policy Committee of the BEAC during its session of 18 December 2014;

Given the concurring opinion of the Board of Directors of the BEAC delivered during its session of 26 March 2015, in Yaoundé;

The present Regulation defines the conditions and modalities for carrying out stock repurchase operations on the BEAC Money Market, including the interbank compartment.

For the purposes of this Regulation, a stock repurchase (pension livrée) is the operation by which a participant on the Money Market, the transferor, transfers full ownership to another participant, the transferee, for an agreed price, and by which the transferor and the transferee respectively and irrevocably undertake, the former to repurchase the financial assets and the latter to re-transfer them at an agreed price and date.

The financial assets subject to a stock repurchase under this Regulation are:

• Securities issued in one of the Member States of the Economic and Monetary Community of Central Africa (CEMAC) or abroad;
• Treasury bills and bonds;
• Negotiable debt securities (TND) issued in one of the Member States of the CEMAC as well as instruments of the same nature issued abroad;
• And, in general, all claims represented by a negotiable instrument on a market;
• Non-negotiable public and private instruments.

Participants on the interbank stock repurchase market must, under penalty of nullity of their transactions, sign beforehand a Framework Convention relating to stock repurchase operations on the interbank market, conforming to the model approved by the Monetary Policy Committee of the BEAC.

A copy of each framework convention signed between participants on the interbank stock repurchase market is sent to the BEAC within a period of ten (10) working days for approval.

Any delivery of financial assets, whether under the stock repurchase or the re-transfer in the context of the settlement of the stock repurchase operation, must be carried out in such a way that the acquirer has full ownership.

Non-dematerialized private instruments are considered delivered if, at the time of the stock repurchase, they are effectively and physically delivered to the transferee or their agent. Regarding order instruments, they must be previously endorsed in accordance with current regulations.

Dematerialized financial assets, circulating by account-to-account transfer, are considered delivered if they are credited to an account opened in the name of the title owner with a licensed intermediary or, where applicable, with the issuing legal entity, and if they are, at the time of the stock repurchase, effectively transferred and credited to the transferee's account.

Any stock repurchase or any of the rights or obligations arising therefrom for one of the parties to the stock repurchase operation cannot be transferred or assigned by that party without the prior consent of the other party. These transfers or assignments of rights or obligations are declared to the BEAC by the party initiating them.

Unless otherwise indicated by the parties to the stock repurchase operation regarding another reference currency, stock repurchase operations are carried out in the currency issued in the CEMAC which has legal tender and liberating power, namely the CFA franc, also designated by the acronym XAF.

Stock repurchase operations are concluded by any means of proof freely determined by the parties. They take effect between the parties upon the exchange of their consent.

The conclusion of each stock repurchase must be followed by an exchange of confirmation by any means leaving a written trace. Each confirmation must at least include:

• The name of the contracting party,
• The amount of the transaction,
• The value date;
• The maturity date;
• The agreed price or rate;
• The dates and modalities of payment;
• The time of the transaction;
• Other information deemed pertinent, where applicable.

In the event of a dispute over the terms of a confirmation by one of the parties, that party must immediately inform the other party by any means leaving a written trace, indicating the object of the dispute.
The dispute will be resolved in accordance with the modalities for establishing proof of consent to the stock repurchase operation provided for by the Framework Convention signed between the concerned parties, notably the recordings of telephone conversations exchanged between them relating to the conclusion and execution of their stock repurchase operations.

Stock repurchase operations are concluded with or without prior margin constitution.
When the stock repurchase is concluded with margin constitution, the parties agree on the modalities for determining and returning the margins.
In the event of prior margin constitution, the parties determine, at the time of concluding the stock repurchase transaction, the financial assets or additional cash contributions likely to be necessary during its validity period to take into account any eventual variations in the value of the financial assets subject to stock repurchase.

Without prejudice to the provisions relating to operations on financial securities whose modalities are fixed in the Framework Convention relating to stock repurchase operations and the provisions of Article 7 above, the transferee enjoys, during the entire validity period of the stock repurchase operation, the rights attached to the ownership of the financial assets subject to the stock repurchase operation, subject to his respect of the obligation to return the financial assets, on the agreed date and free of all encumbrances.

Stock repurchase operations are not enforceable against third parties until the effective delivery of the financial assets subject to the stock repurchase.

Debts and claims linked to stock repurchase operations enforceable against third parties are compensable according to the modalities provided for by the Framework Convention relating to stock repurchase operations on the money market.

Revenues resulting from the difference between the re-transfer price and the transfer price for stock repurchase operations of financial assets subject to the stock repurchase are considered as interest.

The parties may at any time agree to substitute financial assets already subject to the stock repurchase or given as additional collateral with other financial assets, provided that on the date they realize the substitution, the new financial assets have a value at least equal to that of the initial financial assets. The substitution is realized by the transfer, by the transferor to the transferee, of the ownership of the substituted financial assets and by the transfer, by the transferee to the transferor, of the financial assets initially subject to the stock repurchase. The substitution has no novatory effect on the stock repurchase considered or on the additional collateral already constituted. Consequently, the parties remain bound in the terms and conditions agreed between them for the stock repurchase considered, the re-transfer obligation now bearing on the substituted financial assets.

In the event of late payment of the transfer price, the stock repurchase between the parties remains in the initial terms regarding the transfer and re-transfer prices, even if the concerned titles were not delivered on time by the transferor for cause.

Late interest is applied to the transferee without prior notice and without prior formal demand and are calculated, on the transfer price, based on the duration between the initial date of the transfer (inclusive) and the effective date of payment (exclusive).

In the event of late delivery of the titles, the stock repurchase between the parties remains in the initial terms regarding the transfer and re-transfer prices of the titles, even if the transfer price has not been paid by the transferee due to the late delivery of the titles by the transferor.

Late interest is applied to the transferor without prior notice and without prior formal demand and are calculated, on the transfer price, based on the duration between the initial date of payment (inclusive) and the effective date of delivery of the titles (exclusive).

In the event of late payment of the re-transfer price, it is recalculated as if the stock repurchase operation considered should have matured from the origin on the effective date of payment of said price, even if the concerned titles were not delivered on time by the transferee due to the late payment. The transferor undertakes in all cases to pay, in addition to the recalculated re-transfer price, late interest which will be due without delay, of right and without prior formal demand, and will be calculated on the re-transfer price from the re-transfer date as initially provided for (inclusive) until the date of its effective payment (exclusive).

In the event of late re-transfer of the titles subject to the stock repurchase and in the hypothesis where the re-transfer price has not been paid on time due to the non-re-transfer of the titles, the re-transfer price will not be modified in any way, so that on the effective date of re-transfer of the titles subject to the stock repurchase, the transferor is only obliged to pay the initially agreed re-transfer price.

In the event of late re-transfer of the titles subject to the stock repurchase and in the hypothesis where the re-transfer price has been paid to the transferee, the latter undertakes, in addition to the re-transfer of the titles, to pay late interest on the re-transfer price, calculated at an interest rate equal to the sum of the rate of the stock repurchase considered and the late rate, which will be due without delay, of right and without prior formal demand from the date of its payment (inclusive) until the effective date of re-transfer of the titles subject to the stock repurchase (exclusive).

Without prejudice to the provisions of Articles 19 to 22 of this Regulation, the party delivering or paying late on the date of transfer or re-transfer is obliged to bear all costs, damages, and interest, and penalties of which the other party would be liable due to the delay in question and which it would be able to justify.

The stock repurchase operation can be terminated in the event of default of one of the parties or the occurrence of a new circumstance affecting one of the parties.

Constitutes a case of default of one of the parties (the "Defaulting Party"), one of the following events:

• The non-performance of any contractual obligation under the Framework Convention relating to stock repurchase operations or a stock repurchase operation to which no remedy has been provided, either upon notification of the non-performance by the other party, the non-defaulting party, when this non-performance concerns the constitution or re-transfer of margin, or within a period of three working days from said notification in other cases;
• Any important declaration contained in the Framework Convention which proves to have been inaccurate at the time it was made or rectified by that party;
• The de facto cessation of activity, the opening of a liquidation procedure or any other equivalent procedure.

The occurrence of a case of default gives the non-defaulting party the right, upon simple notification addressed to the defaulting party, to suspend the execution of its payment and/or delivery obligations and to terminate all stock repurchases in progress between the parties, regardless of the place of their conclusion or execution. The notification specifies the case of default invoked as well as the effective date of the termination. The parties are no longer obliged to any payment or delivery for the terminated stock repurchases. Termination gives, however, right, for these same stock repurchases, to the payment of the termination balance whose calculation modalities are specified in the annex of the Framework Convention relating to stock repurchase operations on the money market; The parties are deemed definitive owners of the cash and titles delivered on the date of termination.

Constitutes a new circumstance for a party, the affected party, one of the following events:

• The entry into force of a new law or new regulation, the modification of a law or any text with obligatory character or the modification of the judicial or administrative interpretation made thereof, which entails a modification of the stock repurchase for the affected party or a new deduction or withholding of a fiscal nature on an amount that this party must receive from the non-affected party under said stock repurchase;
• The manifest and substantial deterioration of the activity, assets, or financial situation of the affected party which would result notably from a merger, spin-off, or asset transfer;
• The opening of a collective procedure for clearing liabilities, an arbitral or judicial procedure, or an administrative measure against the issuer of the titles subject to the stock repurchase and which has a negative impact on the value of the titles and from which could result a manifest and substantial deterioration of its activity, assets, or financial situation.

ARTICLE 28:
Upon the occurrence of a new circumstance mentioned in Article 27, paragraphs 1 and 3, the parties agree to suspend the execution of their payment and delivery obligations for the only stock repurchases affected, and to seek in good faith a mutually satisfactory solution notably through the mechanism of title substitution, within a period of 15 days from the knowledge of the new circumstance.

The notification specifies the effective date of the termination, which date cannot be prior to the 15-day period referred to in the preceding paragraph.
Upon the occurrence of a new circumstance mentioned in Article 27, paragraph 2, all stock repurchases will be considered as affected. The other party, the non-affected party, has the right, upon simple notification addressed to the affected party, to suspend the execution of its payment and/or delivery obligations and to terminate all stock repurchases in progress between the parties, regardless of the place of their conclusion or execution. This notification specifies the effective date of the termination. If a new circumstance directly leads to the occurrence of a case of default, this default will be deemed not to have occurred and only the provisions relating to the occurrence of a new circumstance will then be applicable. In the event of termination of a stock repurchase, the termination balance is established according to the calculation method defined in the annex of the Framework Convention relating to stock repurchase operations on the money market concluded by the parties. The termination balance must reflect the market value of the titles subject to the stock repurchase on the date of their termination and take into account the margin constituted by one party for the other. Any Framework Convention as well as any stock repurchase concluded in violation of the provisions of this Regulation is null and void by operation of law.

Stock repurchase operations concluded under this Regulation are subject to the accounting principles dictated by COBAC.
The modalities for the application of this Regulation will, as needed, be specified by Instructions or Circular Letters of the Governor of the BEAC.
The provisions of this Regulation may be completed or modified by Community Regulation taken by the UMAC Ministerial Committee.
The present Regulation enters into force as of the date of its signature and abrogates all prior contrary provisions. It is published in the Official Bulletin of the Community.