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Custody services

Under the Serbian Law on the Securities Market and other Financial Instruments, banks that provide custody services are supervised by the Securities Commission, which issues licences to perform these services. Four banks in Serbia are licensed to provide custody services, some of which act as sub-custodians for global custody banks.

Banks that provide custodial activities for voluntary pension funds are also controlled by the National Bank of Serbia (NBS). The custody bank must have a separate organizational unit to exclusively handle custody services, which must be headed by a manager who has received approval from the Securities Commission. The custody bank must also provide periodic reports on its custody services activities to the Securities Commission (and the NBS, as applicable).

In Serbia all securities have been dematerialized and records are kept with the Central Registry of Securities (CRS), the sole securities depository in Serbia. All securities accounts (for example, ownership accounts and omnibus accounts) are kept with the CRS, which conducts both clearing and settlement activities.

Under the Securities Act, a custody bank may: (i) open and manage a securities account kept with the CRS, for the account of a securities holder; (ii) open and manage a securities account kept with the CRS in the name of the custody bank but for the account of a securities holder (that is, the custody bank's client) or in the name of a client that is not a lawful possessor of securities but who holds securities for a lawful holder (that is, an omnibus account); (iii) execute orders to transfer rights with respect to securities and orders to record third party rights with respect to securities; (iv) make collections based on issuers' claims on the basis of matured securities, accrued interest and dividends on behalf of a securities holder, and exercise other rights of its security holder clients; (v) provide services in connection with lending securities; (vi) notify shareholders of annual meetings of stock companies and represent shareholders at these meetings; (vi) upon the client's instructions, attend to the tax liabilities of a securities holder; and (vii) conduct other activities under the Law on Investment Funds, the Law on Voluntary Pension Funds and the Rules of Conduct of a Custody Bank.

All securities kept in an omnibus account are not the property of the custody bank, but are owned by the persons in whose name the securities are kept. When managing omnibus accounts, the custody bank must keep separate records of the securities and the persons in whose name the accounts are kept. All information related to the omnibus accounts must be treated as confidential and the bank must prevent any unauthorized access to the records.

By Nikola Jekic and Maja Stankovic

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