The Rights of Account Holders
Elgar Financial Law series
Chapter 2: Securities account relationships
Immobilization of securities with CSDs changed the pattern in which securities are held and transferred. In contemporary intermediated holding systems CSDs play a critical role. Accordingly it is necessary to examine the relationships that CSDs typically engage in including: 1)the relationship with the issuer of the security; 2)the relationship among CSDs; and 3)the relationship of the CSD vis-à-vis its participating intermediaries. The relationships of the CSD with the issuer, with other CSDs, and with its participants are characterized similarly in transparent and indirect holding systems. First, the relationship of the CSD with the issuer is direct. Second, the relationships among multiple CSDs and the relationships of the CSD and its participating intermediaries are account-based. Third, the relationship of the intermediaries with direct access to the CSD against the issuer is indirect because these intermediaries may assert their claims only against the CSD and have no privity with the issuer. These upper-level relationships are complemented by the relationships of the CSD participating intermediaries with other intermediaries and the ultimate account holders. As discussed below, all of these relationships are in some respects dependent on one another yet in other respects completely independent of one another. Delivery of a global or jumbo certificate to a CSD or the CSD's registration on the issuer's books creates a relationship between the two. This relationship may be characterized as direct and it is similar to the relationship between the issuer and its shareholders that hold certificated securities.
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