Regulation 24. Penalties
1. Buy-ins that IBERCLEAR makes when the period in which sales are overdue runs out will be charged at 2% of the price of the buy-in. This charge will be debited from the settlement account on the date on which the transaction is settled. For the purposes of applying the penalty, the cancellation of a pending sale due to final redemption will be deemed a buy-in.
2. In cases where, pursuant to section 1 of Regulation 8 of Servicio de Compensación y Liquidación de Valores Circular 1/94, if expired sales are settled via exceptional use of the centralised securities lending facility, IBERCLEAR shall not pay the effective amount of the sale and will dock the seller by the same penalty that would have been applied had the buy-in occurred. Therefore, 2% will be docked from the last trading price of the security or the price at which it was sold if the latter is greater and the difference between the sale
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price and the market price where the latter is greater. In line with the provisions of section 6 of Regulation 14 above, the sale price and the amount received for the penalty will be paid in compensation to the lender.
3. In general, naked short sales in the market, backed up with registration references from purchases, changes of ownership, loans or exclusions from the account or deposit which supports the issue of assets or financial instruments made subsequent to the trade date, will be sanctioned with 1 per thousand of the cash amount of the sale for each business day between the trade date and the RR which support the trade. An exception is made for the cases in which acquisition of the securities is carried out through purchase, loan or change of ownership which is different from a trade, in which case the penalty will not be applied when the acquisition allows the sale to be settled on its theoretical settlement date.
When the acquisition of the securities is carried out through a loan or change of ownership which is different from a trade, the penalty will not be applied in the first two days between the trade dates and the formalisation of the trade security acquisition transaction. Similarly, for naked short sales which are supported by Registration References which come from exclusion of the account or deposit which supports the issue of assets or financial instruments in another country, the aforementioned penalty will not be applied for the five business days between the sale date and the security transfer date.
4. When sales rely on buy-ins made by IBERCLEAR, if after applying the penalty for the buy-in as laid out in section 1 above the result is greater than the penalty provided for in the previous section, only the penalty related to the buy-in made by IBERCLEAR will apply.
5. Naked short sales carried out in the market supported by registration references from purchases carried out subsequently at a lower price will also be penalised with the exchange difference which may have taken place between the sale and purchase. In the event that the purchase has been settled free of payment under the provisions of Title V of the Regulation of IBERCLEAR, the exchange for said operation will be calculated using as a reference the last closing price in the Stock Exchange of the security subject to the trade.
Without prejudice to the above, when between the time of the naked sale and that of the subsequent purchase there has been a coupon payment or another financial transaction which reduces the theoretical price of the security, the amount of said transaction will be taken into account when calculating the exchange difference.
6. The short-sell penalty laid out in section 3 herein (or, where appropriate, the buy-in penalty if greater) and the price difference that could occur as a result of applying the provisions of the section above, will apply to the participant member on the same date as the sum for the sale is paid.
7. As for securities listed for trading on the Public Debt Market and AIAF Fixed Income Market, when it becomes evident that, at the close of trading, there is a lack of securities in
a participant member's account to cover the orders pending settlement, a 3,000.00 euros penalty will apply to this entity for each pending transaction. Also, when those transactions cannot be settled due to the impossibility of providing the securities, a further penalty will be applied equal to the one stipulated for securities swaps.
8. In cases where IBERCLEAR has to correct errors that have produced imbalances between the participant members’ third party account and the daily notification of the third party security register for both the Public Debt and the AIAF Fixed Income markets, a penalty of 2,500.00 Euros will apply for each correction.
9. The penalties laid out in sections 7 and 8 above shall be included in the monthly invoice.
10. A penalty of 3,000.00 Euros will apply in the event of default on payment to the bank account of T2S - Bank of Spain or financial institution (whichever account into which the settlements are to be paid) and the maintenance of sales that have expired and are pending verification, either after processing subscription rights or in other circumstances that hinder the buy-in where the security is in the process of being delisted from trading.
The penalty for payment default will be imposed without prejudice to the application of any costs and losses that may arise as a result of the nonpayment, including those arising out of the application of the procedures to draw down funds laid out in article 46.3 of the Organisation and Operating Regulations (Reglamento de Organización y Funcionamiento) and without prejudice to the work carried out by IBERCLEAR to process and follow through the non-payment and, in all other cases, to the application of the buy-in penalty.
Also, if the cash does not have sufficient cash to make the payment of the first settlement cycle of the fixed income and of intraday financing, a penalty of 2,000.00 euros will be applied.
10 bis. Participants which, on the settlement dates, do not comply with the obligation to deliver securities or pay the cash corresponding to those trades settled and registered by IBERCLEAR under the provisions of Title V of its Regulation, will be sanctioned with an amount of 80.00 euros +1.5% calculated on the cash value of the trade which has not been complied with. There is a maximum penalty limit of 150,000 euros per trade not complied with.
When non-compliance refers to trades which have been communicated to IBERCLEAR free of payment, the cash value of the trade will be calculated by taking as a reference the last closing price in the Stock Exchange of the security subject to the trade.
11. The penalties laid out herein are exempt from VAT.
12. IBERCLEAR may return the penalty applied for naked sales as well as the possible exchange difference, which is established in Sections 3 and 5 herein, providing that within ten business days following the settlement date of the sanctioned sale, the participant
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requests the substitution of the registration reference used as support for another which eliminates or reduces the applied penalty, and providing that it presents documentary evidence that it belongs to the same final beneficiary or that it shows sufficient documentary evidence in the opinion of IBERCLEAR of true, valid and sufficient ownership which may support the acquisition of ownership of the securities in favour of the final beneficiary prior to the date of the sale subject to the penalty. The period for presenting this documentation will be 20 business days subsequent to the sale's settlement date.
Once this period has passed without presentation of the aforementioned documentation, the application shall be understood as cancelled.