{"id":10426,"date":"2022-07-15T20:22:48","date_gmt":"2022-07-15T20:22:48","guid":{"rendered":"http:\/\/legalblog.ie\/securities-2\/"},"modified":"2022-12-03T22:55:29","modified_gmt":"2022-12-03T22:55:29","slug":"securities-2","status":"publish","type":"post","link":"https:\/\/legalblog.ie\/securities-2\/","title":{"rendered":"Securities"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/legalblog.ie\/securities-2\/#Scope\" title=\"Scope\">Scope<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/legalblog.ie\/securities-2\/#Types\" title=\"Types\">Types<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/legalblog.ie\/securities-2\/#Securities_Regulation\" title=\"Securities Regulation\">Securities Regulation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/legalblog.ie\/securities-2\/#Issues_of_Securities\" title=\"Issues of Securities\">Issues of Securities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/legalblog.ie\/securities-2\/#Intermediaries\" title=\"Intermediaries\">Intermediaries<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/legalblog.ie\/securities-2\/#Holding_Securities\" title=\"Holding Securities\">Holding Securities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/legalblog.ie\/securities-2\/#Insider_Trading\" title=\"Insider Trading\">Insider Trading<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/legalblog.ie\/securities-2\/#Movement_of_Capital\" title=\"Movement of Capital\">Movement of Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/legalblog.ie\/securities-2\/#Holding_of_Securities\" title=\"Holding of Securities\">Holding of Securities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/legalblog.ie\/securities-2\/#Settlement\" title=\"Settlement\">Settlement<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Scope\"><\/span>Scope<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>States regulate securities. Each state regulates its own securities law.\u00a0 Securities laws have converged substantially due to a variety of factors in the last thirty years.<\/p>\n<p>Securities are shares, rights, tradable debt or other investment interest in enterprises or other assets.\u00a0 They may represent a debt, such as in the case of a bond or debt security or equity interest in the case of shares.<\/p>\n<p>An security may come in a variety of formats.\u00a0 A certificated security is a negotiable instrument.\u00a0 It is represented by a document in writing which is freely transferrable in accordance with principles of negotiability. The security has a named owner, it is registered, and the name is entered in a register of the names of owners.<\/p>\n<p>If it is a bearer security, possession of the certificated security proves ownership.\u00a0 No register is kept in this case.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Types\"><\/span>Types<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Most states permit registered and bearer security.\u00a0 Some require registration in all cases.\u00a0 Bearer securities may have strips or coupons attached to them which allow them to be detached and be presented to collect interest.<\/p>\n<p>Registered securities are generally transferred by endorsement and delivery of the certificate and\/or by the execution of an instrument of transfer.\u00a0 The endorsed share certificate or share certificate plus instrument of transfer is sent for registration to the company\/corporate registrar.\u00a0 In some states, a bona fide purchaser of a bearer or security acquires title even if the transferor did not have title.<\/p>\n<p>An uncertificated security is one recorded in the books of the relevant corporation.\u00a0 Most states permits this facility.\u00a0 In some states, certificated securities are not permitted unless the company is quoted on an exchange and traded publically.<\/p>\n<p>Generally, share certificates set a minimum power or nominal value.\u00a0 In the United States, a share may be issued with no par value.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Securities_Regulation\"><\/span>Securities Regulation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In most countries, trading in securities is tightly regulated. U.S. securities laws purport to apply internationally.<\/p>\n<p>Persons who do so for reward must be regulated.\u00a0 Generally brokers and dealers must be licensed either by a state authority or by the membership of a regulated exchange.\u00a0 There are restrictions on providing advice in relation to securities in most states.<\/p>\n<p>Brokers and dealers in securities may group to form a stock exchange.\u00a0 These are marketplaces in which shares and securities are purchased and sold on behalf of investors.<\/p>\n<p>The largest stock exchange in the world is the London Stock Exchange, New York Stock Exchange, NASDAQ, Tokyo Stock Exchange, Frankfurt Stock Exchange, Paris Stock Exchange.\u00a0 They dominate and account for about 90 percent of all global securities transactions.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Issues_of_Securities\"><\/span>Issues of Securities<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>States invariably regulate the issue of securities.\u00a0 Before securities may be issued to the public, a prospectus is usually required.\u00a0 There may be various exceptions. The prospectus must set out full disclosure of all material facts relating to the security and the company which has issued it.<\/p>\n<p>Prospectus rules have been harmonized within the European Union.\u00a0 Typically a prospectus requires the history and details of the organisation, a description of the business, financial statements, details of profits, losses, cash flow, et cetera.<\/p>\n<p>Generally, the officers of the corporation and certain advisers must take responsibility for the truth and accuracy and completeness of the facts that are in the prospectus.\u00a0 In most cases, the prospectus must be filed or registered with a central authority.<\/p>\n<p>There is a period after filing before stocks\/securities may be issued.\u00a0 During this period, there is, at most, a limited permitted distribution of shares. After the listing authority approves the prospectus, sales of security transactions take place.<\/p>\n<p>Most states exempt smaller certain classes of security issues from requirements for registration.\u00a0 The exemptions may apply to issues by governmental and quasi-governmental authorities.\u00a0 They may include limited offerings to a relatively small number of persons or issues to certain persons or below certain thresholds within a certain period.<\/p>\n<p>The securities may be offered on foreign exchanges.\u00a0 They would generally need to be registered on the foreign exchange.\u00a0 Securities may be dual quoted on two exchanges.<\/p>\n<p>The European Union Directive and Regulation on prospectuses seeks to provide for a single set of common EU-wide rules in relation to disclosure requirements on prospectuses.\u00a0 See the separate chapter in that regard.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Intermediaries\"><\/span>Intermediaries<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The bodies holding or undertaking clearance of security transactions may be regulated.\u00a0 Clearance is the process of exchange of purchase monies for security.\u00a0 In the U.S. a national security clearing corporation deals with the clearance of securities created on U.S. exchanges.\u00a0 The depositary or \u00a0trust company holds certificates for public traded companies and settlement is done by debiting the account of the seller and crediting that of the buyer in clearer\u2019s books.<\/p>\n<p>In other states, the buyer and seller may conduct an actual trade.\u00a0 It is generally settled within a handful of days in developed countries and a number of weeks in developing countries.<\/p>\n<p>There are two international clearing houses which handle the clearance and settlement of securities internationally.\u00a0 Euroclear and Clearstream. Euroclear is based in Brussels and handles over 100,000 securities in some 80 and more countries.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Holding_Securities\"><\/span>Holding Securities<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Clearstream provides settlement and clearance for a range of euro bonds, domestic bonds and equities.\u00a0 It also provides registry and administration services.<\/p>\n<p>Depository receipts are instruments negotiated by a bank.\u00a0 They may represent international companies\u2019 \u00a0shares.\u00a0 They may be traded on a local exchange.<\/p>\n<p>The receipt is created by a broker purchasing company shares and depositing them at a custodian bank in that state in the name of the depository bank in another.\u00a0 It instructs the depository bank to issue a receipt.<\/p>\n<p>Where the depositary bank is a U.S. bank, the instruments are American Depository Receipts (ADR).\u00a0 European depository receipts are issued by euro banks, and Global depository received by other banks.\u00a0 Numerous companies have securities held through the depository receipt.<\/p>\n<p>The advantage of depository receipts is that the shares remain in the home state.\u00a0 The stock remains registered in the name of the depository bank.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Insider_Trading\"><\/span>Insider Trading<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Most states have laws to prevent market manipulation and insider trading.\u00a0 Some states however view insider trading as normal practice.<\/p>\n<p>U.S. and European Union laws prohibit insider trading.\u00a0 This comprises using non-public information in purchasing shares on behalf of oneself or on behalf of one&#8217;s account through a connected person.<\/p>\n<p>It&#8217;s generally an offence or restricted activity to tip off and give sensitive information which has not been made public. There are EU-wide rules on market manipulation.<\/p>\n<p>Violation of securities transactions may be a regulatory or criminal offence.\u00a0 It may make the transaction void.\u00a0 It may lead to an award of damages.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Movement_of_Capital\"><\/span>Movement of Capital<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In 1961 the Organisation for Economic and Cooperation and Development adopted a code for the liberalization of capital movement.<\/p>\n<p>States regulate takeovers to prevent abuse by those in charge and also the unfair treatment of shareholders. The offeror must generally disclose information about the takeover and make the offer to all shareholders.<\/p>\n<p>Sufficient time must be given. There are restrictions on actions which may be taken by the company&#8217;s management in this period. They are not permitted to deal in the company\u2019s shares.<\/p>\n<p>The European Union enacted a number of key directives on securities in the mid-2000. Market manipulation, transparency, and prospectus directives and regulations are the cornerstone European-wide rules.\u00a0 See the separate sections in this work on those matters.<\/p>\n<p>Settlement or clearance refers to the process of mastering, registering and guaranteeing trades and calculating obligations.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Holding_of_Securities\"><\/span>Holding of Securities<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In some jurisdictions, certificated securities have been abolished so that all securities are handled electronically.\u00a0 Securities may be entered electronically in the register of holdings maintained by an intermediary such as banks and broker-dealer.<\/p>\n<p>The Hague Convention on the law applicable to rates with respect to securities with intermediaries deals with laws applicable to key issues.\u00a0 These include issues related to the shares themselves, the nature of the rights and security.<\/p>\n<p>It applies to cases involving a choice of whether a choice of laws is applicable to the above issues . Generally is a law agreed upon by the parties.\u00a0 There are constraints on the freedom of choice.\u00a0 An insolvency court must respect the application of the law determined by the convention.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Settlement\"><\/span>Settlement<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The EU community settlement finality directive is assigned to ensure efficiency and stability in dealing with multiple participants and to reduce risks.\u00a0 It applies to systems governed by the law of a member state and applies to all participants in the system and collateral security provided in connection with participation in a system.<\/p>\n<p>The directive seeks to secure the finality of settlements in relation to transfer orders and netting.\u00a0 It seeks to reduce risks under insolvency law.\u00a0 The directive provides the determination of the law of the state which applies.<\/p>\n<p>The EU collateral directive complements the settlement finality directive.\u00a0 It addresses certain risks involved in security given by financial instruments.\u00a0 It covers securities held directly and indirectly.<\/p>\n<p>States are obliged, despite certain insolvency laws, to achieve the necessary protection for the security\/ collateral taker. \u00a0The directive provides that the law of the state in which the account is maintained applies to the priority realization of property effects and perfection of collateral security.<\/p>\n<!--themify_builder_content-->\n<div id=\"themify_builder_content-10426\" data-postid=\"10426\" class=\"themify_builder_content themify_builder_content-10426 themify_builder tf_clear\">\n    <\/div>\n<!--\/themify_builder_content-->\n","protected":false},"excerpt":{"rendered":"<p>Scope States regulate securities. Each state regulates its own securities law.\u00a0 Securities laws have converged substantially due to a variety of factors in the last thirty years. Securities are shares, rights, tradable debt or other investment interest in enterprises or other assets.\u00a0 They may represent a debt, such as in the case of a bond [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[144],"tags":[],"_links":{"self":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/10426"}],"collection":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/comments?post=10426"}],"version-history":[{"count":2,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/10426\/revisions"}],"predecessor-version":[{"id":21044,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/10426\/revisions\/21044"}],"wp:attachment":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/media?parent=10426"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/categories?post=10426"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/tags?post=10426"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}