Quite to the contrary, they very often have regulatory or oversight competencies themselves. Therefore, the Editors have suggested a revision of the Convention text that would address this problem. The provisions of this Convention are part of the law of any State that is a Contracting State. The lack of such a provision is intended to avoid possible confusion with respect to the relationship between the general principles and the non-Convention law, since this Convention often defers matters to the non-Convention law. However, Article 10 2 sets some limits on these and other obligations of an intermediary. However, under Article 29 1 , every Contracting State must recognise an intermediated holding system for securities that are traded on an exchange or regulated market see the commentary on Article 29 1. Example 28-1 illustrates the operation of Article 10 1.
The fact that a State is a Contracting State does not necessarily result in the application of the Convention on an issue involving intermediated securities which may arise in that State. For example, a number of jurisdictions take the position that investors and holders of limited interests enjoy some form of property right in securities and are considered as shareholders or bondholders by the issuer. His book Trusts in Switzerland Zurich, 2001 was the foundation for Switzerland ratifying the Hague Convention on Trusts. The Convention does not take any position as to whether an intermediary not acting for its own account is entitled to receive and exercise the rights attached to securities. On the one hand, there may be reasons for applying the Convention to both regulated and unregulated intermediaries.
Sub-paragraph 6 2 c is the core part of Article 6 2. An interest in intermediated securities granted by an intermediary so as to become effective against third parties under Article 12 has priority over the rights of account holders of that intermediary unless, at the relevant time, the person to whom the interest is granted actually knows or ought to know that the interest granted violates the rights of one or more account holders. Rights and interests that have become effective against third parties under Article 11 or Article 12 are effective against the insolvency administrator and creditors in any insolvency proceeding. Paragraph 1 is subject to: a the provisions of the account agreement, any other agreement between the intermediary and the account holder or any other agreement entered into by the intermediary with the consent of the account holder; b the rights of any person including the intermediary who holds an interest that has become effective against third parties under Article 12; c subject to Article 22, any judgment, award, order or decision of a court, tribunal or other judicial or administrative authority of competent jurisdiction; d any applicable provision of the non-Convention law; and e if the intermediary is the operator of a securities settlement system, the uniform rules of that system. It is not possible for the Convention to enumerate the various laws that may restrict account holders from holding securities otherwise than through a securities account. An account agreement may be oral or in writing or in any other form.
Consequently, it is necessary to notify the exemption of certain systems from the application of certain rules of the Convention to all Contracting States. However, this wording does not prescribe how such securities shall be held from an operational, accounting or legal point of view. The intermediaries through whom it holds its securities whether certificated or not are mostly account keepers and auxiliaries in its exercising the rights attached to the securities. Article 7 is not intended to preclude L from being protected under Article 18 1. Consistent with the functional approach, this Convention does not take any view as to the legal nature or doctrine of the interest created or represented by book-entries in securities accounts, and therefore does not answer that question. Special provisions in relation to collateral transactions 6. Thomas Keijser wrote parts of and edited the Official Commentary on behalf of the Unidroit Secretariat.
Not all account holders may be entitled to receive and exercise the rights attached to securities. Article 18 Acquisition by an innocent person 1. In some jurisdictions, the general laws governing property rights and insolvency may not apply to, or may contain special provisions related to, the clearing and settlement of securities transactions. However, legally distinct subsidiaries can maintain securities accounts for their parent company or subsidiaries even if they are fully integrated from an economic and operational point of view, for example, where the parent company keeps 100% of ownership. This Article does not modify the priorities determined by Article 19 or Article 20 2. If such autonomous interpretation does not provide the answer, the matter is deferred to the non-Convention law.
However, the context in which the term is used in the Convention mandates such exclusion. Relationship between Article 8 and Article 9 1 8-13. Method a applies only to interests granted to the relevant intermediary; the other two apply for any person acquiring an interest from the account holder. The application of this Convention requires that at least one intermediary is involved in the holding of the securities in question. The question arises whether the debit and credit entries in one transaction are to be regarded as effecting a single transfer of property from A to B, or whether the debit must be analysed as extinguishing an interest of A, and the credit as creating an interest of B, in a manner such that the two interests need not be regarded as identical. Article 9 does not address the duties of an account holder acting as an intermediary in respect of the intermediated securities it holds on behalf of its account holders. Where the securities are credited to the securities account, the account holder is given the rights enumerated in Article 9 1 a.
In such a case, the forum State will apply the Convention, not because of Article 2 a , but because its conflict rules direct the application of the law of a Contracting State, State B. He worked in the Russian Federation as the legal expert on a project for the European Union. Systemic risk is the risk that there are possible spill-over effects such as significant liquidity or credit problems affecting other participants in the system or even other parts of the financial infrastructure that may ultimately threaten the stability of the financial system. Kanda has published widely, in Japan and internationally, in the areas of commercial law, corporate law, banking regulation and securities regulation. These define the relationships, rights and interests of the operators, the participants and their customers and the manner in which and time at which rights and obligations, both in respect of contractual obligations and regarding proprietary aspects of the holding of securities, arise through the operation of the system.
In each subscription of a new security, each one of these actors forwards the security to the immediate lower level by a debit of its account and a credit of the account of its correspondent. The definition in Article 1 b is thus clearer if read in the reverse order, i. This allows for the evolution of market practice and the creation of new types of securities capable of being held in the intermediated holding system. Second, they must be capable of being acquired and disposed of in accordance with the provisions of the Convention, mostly Articles 11 and 12. A Contracting State may declare that, if all securities and intermediated securities held by an intermediary for its account holders, other than itself, are in segregated form under arrangements such as are referred to in paragraph 4, under its non-Convention law the allocation required by paragraph 1 applies only to those securities and intermediated securities and does not apply to securities and intermediated securities held by an intermediary for its own account. Article 10 1 provides for the most basic obligation that an intermediary owes to its account holders.
A Contracting State may exclude securities accounts maintained by unregulated, unlicensed or unsupervised intermediaries from the scope of application of this Convention see Article 4 a. Neither Article 12 nor the Convention deal with successions where the assets and liabilities of an account holder vest in another person or other persons because of death, liquidation, merger, etc. Still other rights are conferred by the non-Convention law. Soon after, D has been declared insolvent before repaying the loan. In that capacity he has coordinated the work on the Official Commentary on the Geneva Securities Convention. What constitutes a debit is not determined by the Convention, but by the non-Convention law.