One of the key tasks of KDPW S.A. is to supervise the operation of securities depositories by KDPW Participants and to monitor their compliance with the participation conditions in accordance with the KDPW Rules (hereinafter “Rules”), which lay down the rights and obligations of the participants of the depository system, define the area of supervision of their compliance, set out the mode of supervision and the measures to be taken in case of identified irregularities. The operation of the securities depository by KDPW and the Participants relies on the rules of keeping securities registers set out in the Rules and adequately transposed into internal regulations of the participants, as well as KDPW regulations defining the scope and mode of performing other actions relating to keeping securities registers.
Supervision of the operation of securities depositories by Participants with respect to compliance with the Rules and the provisions of Resolutions of the KDPW Management Board and, within the limits applicable to the operation of securities depositories, with the provisions of generally applicable legislation, includes the following:
- analysing documents, information and reports submitted by participants
- inspections at the offices of the Participant.
KDPW checks compliance with the participation requirements set out for participants in the depository system and reviews the compliance with the requirements of entities which apply for KDPW participant status on the basis of documents attached to the participation application. This includes a check of compliance with the following conditions:
- material and technical requirements for direct participants, which ensure the required connectivity with the KDPW depository system and the secure exchange of electronic documents sent to and received from that system,
- material and technical requirements for participants operating securities accounts or omnibus accounts, which ensure in a secure and legal way that entries are made in accounts, information on such entries is processed and archived, and contents of documents on the basis of which the entries are made are reproduced,
- for the purposes of securities registration, direct participants employ an adequate number of persons who have the appropriate expertise and experience or qualifications in keeping securities registers. The title of Securities Registration Specialist is deemed to constitute confirmation of appropriate qualifications and expertise in keeping securities registers.
The functions listed above are allocated in the KDPW S.A. organisation to the Supervision Department (“SD”).
Selected responsibilities of the Supervision Department
Supervision is exercised from the time of submission of an application by an applicant who wishes to sign a KDPW participation agreement until the agreement is terminated and the participant’s accounts are closed. The detailed supervision responsibilities include among others:
- verification of the aggregation of individual holding balances derived from the securities registers kept by participants and the consistency of such aggregate balances presented in daily reports submitted by participants with the balances of corresponding entity accounts kept in KDPW;
- on-site checks at the offices of the participant – direct inspections which cover the following scope: broadly understood securities registers (internal regulations concerning the organisation of registers, the chart of accounts and the registration procedures, the registration system, registration reports, etc.), archiving registration evidence and registration data stored on electronic media, the security of registration systems and registration activities ensuring business continuity in case of a failure or a force majeure event, including compliance with relevant internal regulations.
Where any non-compliance with the KDPW participation requirements is identified, SD takes disciplinary measures, of which the most severe measures include motions to the KDPW S.A. Management Board to take disciplinary action.
The Polish Financial Supervision Authority is notified of any irregularities identified in the course of an inspection to the extent of points 1 and 2;
- reviewing applications of entities which wish to become KDPW system participants, giving opinions on applications for extension of the scope of participation to cover additional activities. An entity which applies for KDPW participation submits an application together with attached documents, which are checked for completeness and used as the basis for evaluation of the entity’s compliance with the material and technical requirements (depending on the scope of the participation agreement to be signed or extension of an agreement applied for);
- monitoring holding balances and trading in bonds issued by the State Treasury on the basis of monthly reports submitted by the participants according to the relevant Regulation of the Minister of Finance;
- analysing erroneously concluded sale transactions (transactions executed without a valid client order or transactions whose details do not correspond to a correct client order) which cause temporary multiplication of an issue, on the basis of monthly reports;
- preparing regular information which presents to the KDPW S.A. Management Board the ranking of KDPW participants who are KDPW_CCP cash market clearing members on the basis of statistics from the KDPW system concerning participants’ correct performance of functions in the depository system, data provided by participants, and results of the checks of daily reports, as well as submitting individual information to this extent addressed to individual direct participants covered by the ranking.