The Law of Securities, Commodities and Bank Accounts

The Law of Securities, Commodities and Bank Accounts

The Rights of Account Holders

Elgar Financial Law series

Marek Dubovec

In this unique study Marek Dubovec examines contemporary commercial relationships between investors and their intermediaries – relationships based on accounts that hold intangible rights to securities, funds, and commodity contracts. Such accounts have replaced the traditional physical possession and delivery of tangible objects, such as security certificates, coins, and commodities that were previously used in commercial relationships.

Chapter 3: Transfers of intermediated securities, finality and security interests

Marek Dubovec

Subjects: law - academic, commercial law, finance and banking law, international economic law, trade law, regulation and governance


One of the fundamental rights of account holders is to transfer their securities. Outright transfers, such as sales, are typically completed by book entries whereby the account of the transferor is debited and the account of the transferee is credited. However, book entries are equally utilized by creditors that receive credits of encumbered securities to their accounts. Both types of transfers are effectuated by intermediaries in the same way banks execute payment orders of their depositors. The purpose of this chapter is to analyse the mechanics of transfers and their effects on the rights of account holders. Transfer is an act that changes the owner or fragments the rights to the security. It is functionally equivalent to the delivery of an asset that occurs upon or after the conclusion of a purchase agreement. Transfer may be accomplished differently depending on the type of asset being transferred. Transfers of securities add an extra layer of complexity resulting from the various forms of the holding systems. On the one hand, while transfers of securities in a direct holding system may involve an issuer that registers the names of transferees and issues new certificates, transfers in intermediated holding systems do not require any entries on the issuer's books. The common feature for transfers of all forms of securities, irrespective of the type of holding, is the assistance of the transferor who transmits an order to the intermediary to cause the security to be transferred.

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