The Rights of Account Holders
Elgar Financial Law series
Chapter 4: Summary of Part I
Securities transfer law is an area of commercial private law that regulates the holding and transferring of securities including the creation of encumbrances. All of these processes occur in the back-end environment subsequent to the execution of a trade with securities within particular securities holding systems that may be classified on the basis of relationships into the direct and intermediated holding systems. The latter exist in a number of varieties. This Part focused primarily on analyzing the distinctive features of intermediated holding systems. Rights and duties of market players participating in contemporary securities holding systems should be clearly set out in a legislative framework that addresses, at a minimum, the following features and functions. Securities no longer circulate in the form of certificates but are immobilized at CSDs and transferred by entries to electronic accounts maintained by intermediaries. Accordingly, laws must recognize the validity of securities maintained in accounts with intermediaries and provide such accounts with legal effects equivalent to those for certificated, bearer and uncertificated securities. As Professor Goode writes, 'in most countries the law has yet to catch up with these developments'. This lack of appropriate legal regulation perpetuates the risk of legal uncertainty. Securities transfer laws have been moving away from an approach based on the nature of security (certificated vs. uncertificated) to one based on the type of holding (intermediated vs. direct). The key feature of securities held in intermediated systems is their capability of being credited to a securities account.
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