Research On Pledge Of Intermediated Securities

Intermediated securities are held on a fungible basis through intermediaries.The draftsmen acknowledge that as a specific financial asset,intermediated securities distinct from the certificated securities,the approach created rules for intermediated securities which generally parallel the rules in use for certificated securities raises complications and difficulties.In particular,intermediated securities as one of the most important collateral,is intimately related to the modem pledge legal development on the continent(conclude our country)and elsewhere.Part ? analyzes the existence and nature of the property right of a investor who holds securities through a securities intermediary.Because the securities have been exchanged for another securities and are mixed with other securities so it can no longer be identified.Based on the doctrine of specificity,it is not possible to create property or security rights in non-identified property.But,curiously,take a close examination of the present legal systems,most legal systems adopted the description of “ownership”,“security entitlement” and “beneficial interest”as themore rational and logical approach to creation of the intermediated securities transfers,pledges,clearance,and settlement.The clear implication is that property rights are always a legal construct,not an objective physical fact.This paper argues that the investors has a property rights in intermediated securities with three justifications.Investor who holds securities through a securities intermediary,has a rem rights rather than a personam rights against the intermediaries and a third party.Intermediated securities are defined as voting rights and payment of interest or dividend against an issuer,represented by the securities.Protecting customers' cash and securities,and thereby instilling confidence in securities traders,was perceived as essential to protection of the markets.Part ? discuss the perfection and priorities of pledge in securities held through intermediaries,and the resolution of priority disputes in the context of wrongful transfers by an intermediary.There are four major methods available for the perfection of security: credit to a securities account,control,designating entry,self-perfection.Based upon the analysis of the influence of the four methods,it seems that the control is the most fair and efficient one.UCC introduce a key legal concept:control,a new method of perfection designed specifically for security interests in investment property.The significant contribution made to property law of the concept of control,is the establishment of aconceptual framework by which the separation of ownership and possession is now possible with intermediated securities.This part also focus on the bona fide acquisitions and priority rules in the intermediated securities holding systems.Part ? examines repledge of intermediated securities under the implementation of UCC and Directive 2002/47/EC of the European Parliament.Repledge has had a vigorous existence,which increases liquidity in the financial market.The UCC provides an independent right for pledgee to repledge collateral,Directive allows the secured party to use and dispose of the collateral securities as if it were the owner of them.Directive embraces the case where the creditor,who has received collateral,has a right to repledge or dispose of the collateral and is only obliged to replace it with the equivalent asset.This repledge however should be without prejudice to national legislation about separation of assets and unfair treatment of creditors.Part ? deal with execution measures in a pledge,which to justify the pledgee in foreclosing on the collateral to obtain payment of the secured obligation in an enforcement event.The execution measures has traditionally referred auction,disposition,collection,strict foreclosure,and so on.The execution measures above dose not fit the need for stable and efficient financial market transactions based on collateral.So new regulations have arisen: Pactum Commissorium and Close-out netting.Asrapid and non-formalistic execution measures,Pactum Commissorium and Close-out netting has several advantages for financial market participants.It reduces credit risk,to safeguard financial stability and limit contagion effects,and can also contribute to reducing settlement and liquidity risk and,as a consequence,systemic risk.Finally,based on the discussion of the first four parts,this article will look into the need for a reform of the Chinese law.The brief comparison of the legal systems and a re-evaluation of the Chinese securities pledge show that a comprehensive re-think of the Chinese legal position on these issues is inevitable,which is unable to provide for sufficient protection of the investor.The purpose of this paper is to deconstruct Chinese securities pledge to ensure the legal framework for pledge is to operate in a way which maximises economic benefit,the system for perfection and enforcement of pledge or repledge should be simple,fast and inexpensive.