Intermediation and Beyond

The global shift from the direct holding of securities by investors to the current intermediated holding system raises many important legal issues. These include the impact of the intermediated holding system on the rights of investors, and the enforcement of those rights against intermediaries and issuers. The cross-border nature of many holding patterns adds another layer of complexity to these issues, and reduces legal certainty. Against this, intermediation offers benefits for many investors, including the ability to hold a cross-border portfolio with one intermediary, a reduction in costs and the facilitation of the use of securities in the collateral, repo, and securities lending markets. This book covers a number of legal topics relating to intermediated securities including the history of intermediation, the benefits and problems in the current intermediated holding system, and how future legal and technological developments could help to resolve these problems while retaining the benefits of intermediation. It also examines the possible impact of FinTech on this area, in particular the potential for Blockchain to be used in the issuing, holding and settlement of securities, the extent to which this will solve some of the difficulties that currently exist, and whether the use of Blockchain will create new difficulties that will need to be overcome. This book, which originated in a series of workshops organised by the Commercial Law Centre at Harris Manchester College, Oxford, will appeal to those interested in financial and corporate law, including academics, practitioners, policy makers and students. Preface Summary Contents Detailed Contents Table of Cases Table of Legislation (National) Table of Legislation (EU) Table of Treaties and Other International Instruments List of Contributors List of Abbreviations 1. Introduction I. The Genesis of the 'Intermediation and Beyond' Project and Book II. Introduction to Intermediated Holdings III. Terminology IV. The Shape of this Book 2. Historical Introduction: The Growth of Intermediation and Development of Legal Analysis of Intermediated Securities I. Introduction II. Historical Development of Intermediation III. Intermediation and the Traditional Legal Structure of Securities IV. Responses to Intermediation: Supplementation and Adaptation of Traditional Structures V. Debt Securities and the Effect of Intermediation on Structure VI. Conflict of Laws VII. Suggested Principles to Guide Further Reform VIII. Conclusion 3. The Legal Nature of Intermediated Securities: An Insurmountable Obstacle to Legal Certainty? I. Introduction II. The Move Towards Intermediation and its Effect on the Nature of Investors' Rights III. Intermediation and Legal Risk IV. A Cross-jurisdictional Analysis of the Different Possible Approaches V. The Limited Impact of International Harmonisation Attempts VI. Some Examples of the Impact of Divergent Analyses on Legal Certainty VII. The Way Forward – New Models of Holding Securities? 4. Why are Securities Held in Intermediated Form? I. Introduction II. What is Intermediation? III. Why Intermediation Arises IV. Risks and Protections for Intermediated Holders V. Intermediation in a Distributed Ledger Future VI. Conclusion 5. Intermediated Securities: The Long Haul to a Modern, Comprehensive Legal Structure I. Introduction II. FMLC Proposals for a New Legal Framework for Intermediated Securities III. The Law Commission IV. The Law Commission's Return to Intermediated Securities V. The Future 6. Are Warranties in an Immobilised Bearer Note Enforceable? I. Introduction II. Secure Capital III. Existing Methods for Enforcement of Warranties IV. Could a Deed of Covenant Allow for Direct Rights to be Enforced by a UAH? V. Conclusion 7. Enforcing Debt Securities I. Introduction II. The Current State of the Law III. The Problems IV. Why Does this Matter? V. Possible Solutions VI. Conclusion 8. Two Consequences of the Intermediated Holding of Debt Securities: Examining Discharge of Debt and Set-off I. Introduction II. No Look Through Principle III. Discharge of Debt IV. Set-off V. Conclusion 9. Intermediation and Bondholder Schemes of Arrangement I. Introduction II. The Meaning of 'Creditor' for Scheme Purposes III. The Problem that Arises in Bondholder Schemes IV. A Legal Response: Abolish the Headcount Test V. Conclusion 10. Investment Chains and Corporate Governance I. The Issues II. Intermediary Chains III. Identification of Beneficial Owners IV. Voting V. Other Governance Rights VI. Conclusion 11. Stewardship and Collateral: The Advantages and Disadvantages of the No Look Through System I. Introduction II. The Effect of Securities Finance on Account Holders III. The Intermediated Holding System and No Look Through IV. Operational Change and the Service of Collateral Takers V. Investor Engagement VI. Law Reform VII. Case Law VIII. Recommendations IX. Conclusion 12. Intermediated Securities from the Perspective of Investors: Problems, Quick Fixes and Long-term Solutions I. Introduction II. Characteristics of the Current Infrastructure III. Implications of Current Outsourcing Arrangements for Asset Values IV. Explaining the Infrastructure from the Perspective of Custodians V. The Perspective of Investors VI. Quick Fixes – Holding Directly and Avoiding English Law VII. The Role of Technology VIII. Pointers Towards Long-term Solutions IX. Conclusion 13. European Harmonisation of Intermediated Securities Law: Dispossession and Segregation in Regulatory and Private Law I. Introduction II. Priorities for Harmonisation III. Segregation IV. Dispossession V. Public-Private Law Solutions and Coherence VI. Conclusion 14. Conflict of Laws and Relational Rights I. Introduction II. Steps Towards a Consistent Rule III. Conclusion 15. Intermediated Securities Holding Systems Revisited: A View Through the Prism of Transparency I. Introduction II. Intermediated Securities Holding Systems: Transparency, Non-transparency, and Variations on the Theme III. Intermediation and Transparency in Context IV. Transparent Information Technology Systems as Valuable Illumination and as Catalyst and Roadmap for Law Reforms V. Conclusion 16. Intermediated Securities and Distributed Ledger Technology I. Introduction II. What is DLT? III. Mitigation of Risk IV. The Nature of the Legal Relationship V. Regulation VI. Practical Challenges VII. The Cross-border Conundrum: Issues of Private International Law VIII. Conclusion 17. Conclusion I. Introduction II. Legal Responses to Problems Arising in English Law III. Transnational Legal Responses IV. Market-based Responses V. Structural Approaches VI. Conclusion Index Introduction / Louise Gullifer and Jennifer Payne -- Historical introduction : the growth of intermediation and development of legal analysis of intermediated securities / Guy Morton -- The legal nature of intermediated securities : an insurmountable obstacle to legal certainty? / Victoria Dixon -- Why are securities held in intermediated form? / Christopher Twemlow -- Intermediated securities : the long haul to a modern, comprehensive legal structure / Roy Goode -- Are warranties in an immobilised bearer note enforceable? / Raymond Cox -- Enforcing debt securities / Richard Salter -- Two consequences of the intermediated holding of debt securities : examining discharge of debt and set-off / Louise Gullifer -- Intermediation and bondholder schemes of arrangement / Jennifer Payne -- Investment chains and corporate governance / Paul Davies -- Stewardship and collateral : the advantages and disadvantages of the no look through system / Joanna Benjamin and Louise Gullifer -- Intermediated securities from the perspective of investors : problems, quick fixes and long-term solutions / Eva Micheler -- European harmonisation of intermediated securities law : dispossession and segregation in regulatory and private law / Matthias Haentjens -- Conflict of laws and relational rights / Philipp Paech -- Intermediated securities holding systems revisited : a view through the prism of transparency / Thomas Keijser and Charles W Mooney, Jr -- Intermediated securities and distributed ledger technology / Sarah Green and Ferdisha Snagg -- Conclusion / Louise Gullifer and Jennifer Payne "The global shift from securities being held directly by an investor to many securities being held via an intermediary raises important legal issues, including the impact on the rights of investors and the enforcement of those rights against intermediaries and issuers. The cross-border nature of such issues adds another layer of complexity and reduces legal certainty. Against this, intermediation offers benefits for many investors including a reduction in costs and the facilitation of the use of securities in the collateral, repo and securities lending markets.This book will cover a number of topics relating to intermediated securities including the history of intermediation, the benefits and problems in the current system of intermediated securities and how future legal and technological developments could help to resolve these problems while retaining the benefits of intermediation. It also examines the possible impact of FinTech on this area, in particular the potential for Blockchain to be used, the extent to which this will solve some of the difficulties that currently exist, and whether it will create new difficulties that will need to be overcome.This important statement on the question of intermediation will appeal to corporate law academics, practitioners and to students of corporate law"-- Provided by publisher