Securities and Listed Securities: A Comprehensive Analysis
Securities and Listed Securities
Concept and Regulation
It is a crucial document for exercising the literal and autonomous rights indicated within. It connects the corporeal (the title) and intangible (the right). The document’s owner (possessor, if bearer; with additional requirements, if nominative) can demand the right’s provision.
Its role is to facilitate credit rights transmission. Linked to the document, it’s considered movable property, suitable for transmission or circulation.
The Right to the Incorporated Title
Characteristics of this right:
- It incorporates an inherent right to claim a cash benefit. It can incorporate various rights on individualized things; the preferred term is securities.
- The right’s content is literal; its limits and modalities depend on the title’s terms. Securities referring to other documents are often called incomplete literal titles.
- The right is self-built. Transmitting the title grants the new purchaser an independent right, regardless of prior owner-debtor relationships, provided good faith exists. Each purchaser is freed from personal exemptions invokable against former owners.
Exercising the Attached Right
The person must meet the title’s requirements (nominative, to order, or to bearer). They can claim the benefit indicated in the title, varying by title type.
Statement in the Title and Fundamental Connection
Form of Declaration and Debtor’s Obligation
The issuer’s statement, as reflected in the document, creates an obligation under the title’s terms. Each title-value scheme requires specific details; these are essential for the document to acquire a security nature. These requirements don’t need to be present at issuance; some can be added later. The statement is valid if the title is complete before submission to the debtor.
Title form defects, if present at maturity, can be opposed by the debtor to any holder.
The Title and the Fundamental Relationship
Title issuance usually stems from a prior relationship. Causal titles show an intimate connection between the right and the underlying business (e.g., shares in a company incorporate rights determined by statutes and the partnership agreement).
Abstract titles are those where the right is independent of the underlying contract. The title-holder has a credit right beyond that arising from the causal relationship.
Effects of the fundamental relationship on the title:
- If the title is causal, the attached right is subject to the fundamental relationship’s rules; in abstract titles, this doesn’t apply.
- In relations between the issuer and the first holder, exceptions to the title’s built-in obligation are not opposable to a third-party bona fide possessor.
The fundamental relationship’s effects don’t extinguish (by novation) this relationship and its rights.
Classes of Securities
Securities are classified by issuer (public or private), literalness (complete or incomplete), and fundamental relationship (causal or abstract).
Constitutive and Declarative Titles
This considers whether the title creates the incorporated right.
Constitutive titles create the right upon issuance (e.g., a promissory note fulfilling legal requirements creates a right for the holder against the signer).
Declarative titles incorporate a pre-existing right (e.g., a company shareholder’s rights exist before securities are issued; the securities merely attach the membership to the title).
Securities Issued Individually and in Series
Consider how titles are issued. Some are issued individually (e.g., bills of exchange, promissory notes, and checks), with the issuer making a statement for each security. Others result from a single transaction (e.g., company formation), creating numerous identical securities. This includes any financial right with its own legal configuration and transmission system, capable of widespread trading in impersonal financial markets.
Mass securities incorporate features for an unnamed group, corresponding to a specific benefit. Series securities have a set of economic and corporate rights.
Titles: Exchange, Participation, and Tradition
This considers the nature of the attached right.
Exchange titles incorporate a pecuniary credit right (e.g., bills of exchange, promissory notes, and checks).
Participation titles give the holder a position in a social organization, embodying rights and powers. The holder’s position is dominated by the underlying relationship (e.g., stocks or shares).
Tradition titles grant the holder the right to deliver goods, possess them, and dispose of them by transferring the title. Possession is indirect; the immediate possessor is another person (carrier or receiver). If the issuer loses the title, they lose legal possession; the title holder, possessing the goods, can obtain them by surrendering the title.
Registered, To Order, or Bearer Securities
This is based on how the title-holder is legitimized, determining circulation rules.
Registered securities are held by a specific person and cannot be transmitted without notifying the debtor; the holder can claim the benefit stated. Circulation differs between individually and series-issued securities.
To order securities designate an initial holder and successive lawful holders. It’s personal but, through endorsements, can be transferred without notifying the debtor or issuer. Circulation is facilitated. Legitimacy is established by the coincidence of the presenter and the designated holder (e.g., bills of exchange, promissory notes, and checks).
Bearer securities legitimize the possessor as the holder. They don’t designate a specific owner; possession implies ownership.