Read the summary and the most important questions on HC week 50

• 1 Financial transactions by institutional investors

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• What was the real problem with the latest crisis?

  The way the system responded to it.

• What is a security?

  It sounds like a contract --> when you're investing in something and someone gives you rights back, sounds like a contract. They're not. The fact that to reflect the obligations of the company to the investor, certificates have been created. So a security is a property right.

• What is the purpose of the certificate?

  From the issuer's prosprective, it allows the issuer to rely on whoever happens to have that certificate. The issuer or the third party can rely on the fact that I got this physical piece of paper.

• What is the net effect of certificates?

  The original obligation, the contractual promises, converted from contract rights to property rights in respect of any disposition of property.

• IF you deliver your physical certificates to a bank, does it become the bank's property?

  No. The bank is holding it for you --> the bailee concept.

• What caused a lot of confusion?

  We're in a world with dematerialized certificates. The property law concepts that apply to these pieces of property hasn't change for the most part. All those laws assume that the property is actually tangible.

• Where do you run into cross border issues?

  Not all CSD's are subject to the same law.

• What are the five systems of holding securities?

  1. Trust model

  2. Security entitlement model

  3. Undivided property model

  4. Pooled property model

  5. Transparant model

• What is the trust model?

  Trust concepts are important. trusts are not involving the CSD.  The CSD has no ownership interest at all. Subject of the trust is the security. The first intermediary is the trustee and has a legal title for a legal ownership.  that's the owner of the shares. The trustee is not the beneficial owner. It's holding the shares as a fiduciary for the beneficiary, the trustor. The trustor has the equitable title. While this intermediary has an equitable title, it has a beneficial owner at the same time for the same property. It is also a trustee.

• What is the security entitlement model?

  You got the issuer, the nominee and the CSD. The nominee is known as a bare trusteeship. The nominee is the legal owner of the securities. What the intermediaries en eventually the beneficial owner are holding is a bundle of rights: securitie entitlements.