Intermediated Securities and Legal Certainty
London School of Economics - Law Department
February 10, 2014
LSE Legal Studies Working Paper No. 3/2014
This contribution shows that holding securities through chains of intermediaries compromises the ability of investors to exercise their rights. This problem is not remedied by Geneva Securities Convention (‘the Convention’ or ‘GSC’). It will be argued in the paper that research should be carried out to determine if a mechanism can be created that enables ultimate investors to hold securities directly. Further work on creating a harmonized set of rules at a functional level will not improve legal certainty, reduce systemic risk or enhance market efficiency. The problems associated with the current framework are a function of the process of intermediation itself. Legal and systemic risk and market efficiency are adversely affected by the number of intermediaries operating in this context. Law cannot help here. Structural reform can. It is worth investigating if a framework can be created that allows for securities to be held directly by ultimate investors.
Number of Pages in PDF File: 28
Date posted: February 13, 2014