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Systems Of Securities Registration, Custody And Settlement

Posted on:2011-01-06Degree:DoctorType:Dissertation
Country:ChinaCandidate:G LiuFull Text:PDF
GTID:1116360305453867Subject:Civil and Commercial Law
Abstract/Summary:PDF Full Text Request
Systems of registration, custody and settlement provide the securities comfirmation procedure that protects securities holders free from adverse claims, which differ from regulations of issuer transations that bring forth securities; and the mechanism enssuring the performance of trading contracts that adjusts the conflicts of interests involved in securities ownership, transfer and pledging, which differ from regulations of trading transations that emphasize on institution and effectiveness of securities contracts.China's securities market started wholly in the early of 1990s, and promptly stepped into a new stage of immobilization and dematerialization after introducing foreign advanced technology, equipment and operating systems. However, systems of registration, custody and settlement are faced with serious legal issues which involve chaotic relationships between system participants, discrepancies between legal rules and realistic operations in the circumtance of dematerialization and lack of legal rules of indirect holding system for the backwardness of securities regulations. Based on analysis of securities rights, this doctoral dissertation, aimed at promoting the legislative process of dematerialization and consummating securities ownership, transfer and pledging laws, defines the basic attributes of securities, makes clear the basic relationships in systems of registration, custody and settlement, introduces institutional arrangements of registration, custody and settlement in the context of different holding systems.This whole dissertation is divided into four parts. Its contents are summarized as follows:Chapter One. The Analysis of basic relationships in systems of registration, custody and settlement: Relationships in systems of registration custody and settlement were relatively clear and securities ownership, transfer and pledging laws were based on possession and delivery rules of things in the context of the direct holding system based on certificated securities. However, the indirect holding system has been widely adopted by various states where immobilization and dematerialization were realized since the late 1960s, which is characterized by nominee registration, multi-level custodian and pooled accounts. In the course of the evolution of holding systems, the attributes of securities highlight which are rights by themselves and serve as investment tools; and systems of registration, custody and settlement develop into nets of delicate legal relationships participated by multi-parties that have muti-levels and multi-attributes, because intermediaries interposed themselves in the legal relationships between issuers and investors and between sellers and buyers. In our state, China Securities Depository and Clearing Corporation Limited (SD&C) is the Central Securities Depository providing services of registration, custody and settlement. SD&C generates securities holders lists according to records of securities accounts to confirm the fact of holding securites as a agency for issuers. SD&C which has only one level legal relationship with investors, takes charges of opening and maintaining accounts for all securities investors. Moreover, SD&C credits or debits accounts directly to realize securities trading instead of providing twice level settlement services relied on securities firms.Chapter Two. Securities Regulation: Securities Comfirmation: Confined in the framework of things and ownership, the academic community consider certificate or securities rights as the object of ownership and use the concept of securities ownership instead of securites rights in the context of disposing securities. In fact, securities comprises bundles of rights which is legal, transferable and divisible, therefore, securities could have a independent legal status in the system of civil rights. After dematerialization, investors who cannot hold securities by themselves, acquire securities rights and interests by account control, therefore, registration becomes the means of comfirming securities and the effective element of disposing securities while securities ownership, transfer and pledging laws cannot be based on possession and delivery rules of object. In addition, the securities rights are divided in quality by England where traditional trust law analysis is introduced and by USA where"securities entitlement"is created, and in quantity by civil law countries such as Germany, Japan and South Korea where"co-propriatary right"is proposed, for explaining the nature of interests under nominee registration. As far as our state is concerned, trust is used to explain the relationship between the nominee and the beneficiary in the light of rules of margin transaction.Chapter Three. Securities Custody: Conflict of Interests in Securites Ownership, Transfer and Pledging: In the interaction of immobilization and dematerialization, intermediaries open and maitain securities accounts for investors who become wholly reliant on intermediaries to acquire investment interests, which is the origin of wrong doing of and solvency risk from intermediaries. In the context of direct holding system, investors have complete and separated securities rights even if securities are in custody, while in the context of indirect holding system where securities are commingled in accounts and recorded under the name of nominees, the"bad actor transferee"could have material impact on the inevitable risk of intermediary theft and the general principle will preclude recovery of securities from transferees who were wholly blameless and unaware of the intermediary's wrongdoing. Custodians and customers were involved in conflicts of interests in securities ownership, transfer and pledging because of custody risk. The law provides three mechanisms to adjust interest relations in custody: Firstly, self-regulation that entitles investors to choose a custodian and negotiate with the custodian; Secondly, mandatory intervention that regulates uniform capital rules and customer protection rules on securities firm; Thirdly, policy equilibrium that provides investors with issurance fund.Chapter Four. Securities Settlement: Conflict of Securities Rights and Settlement Pledge: As a contract performing process in which sellers deliver securities to buyers while buyers pay for securities to sellers, settlement is an important step for the disposition of securities. For protecting investors from counterparty and system risk, central clearing corporations in various countries serve as Central Counterparties which guarantee performances of trading contracts. However, at the same time, CCPs concentrate all risks in itself. This chapter reveals conflicts of securites rights of investors and settlement pledge of clearing corporation by a analysis of bond repurchase crisis happened in China and offers the best proposal that is to establish priority rules for clearing corporation which help resolve conflicts of interest and guarantee the smooth operation of the central clearing system.
Keywords/Search Tags:Securities Registration, Securities Custody, Securities Settlement, Securities Rights
PDF Full Text Request
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