1Обухова_RESUME_Civil law regulation of n..mentary securitiies holding_УАД (Гражданско-правовое регулирование учёта прав на бездокументарные ценные бумаги), страница 3

Alsothe study shows the practice of considering similar disputes by judicial bodies offoreign countries. In the thesis, the working and reporting documents for thedevelopment of conventions, normative acts of the European Union (Directives,Regulations) and national legislation of the respective authorities were used.The purpose of the dissertational research and particular research tasks.The overall purpose of the research is theoretical comprehension of models fornon-documentary securities holding as well as analysis of the risks and thedistribution of titles to and upon a non-documentary security.Particular research tasks include: analysis of the prerequisites and current stateof the legal regulation of non-documentary securities in domestic and foreign law;determination of factors contributing to the implementation of a particularsecurities holding model in the regulatory paradigm for the examined jurisdictions;9  identification of the ratio of legitimizing factors and related approaches to thedistribution of titles to securities(thus between intermediaries and ultimatepurchasers); identification of risks of discrepancy of legal approaches in case ofinternational holding chain.The object of the research includes the model for non-documentary securitiesholding; specificity of non-documentary securities as an object holding;characteristics and distribution of title to and under non-documentary securities aswell as the legal consequences of implementation of a particular holding model.The scientific novelty of the research for the legal doctrine is that for the firsttime in the Russian legal literature a comprehensive analysis of models and formsof non-documentary securities holding was carried out.

Understanding the ratio oftitles to non-documentary securities allows to examine in more detail the legalrisks that arise with the implementation of each form of securities holding.Thus the theme of the research has a certain scientific novelty, is topical in boththeoretical and in practical sense. The study of the legal nature of non-documentarysecurities and their holding models allows to optimize the legislative base,systematize existing regulatory acts and improve qualitatively the regulation of thesecurities market as a whole.The theoretical and practical significance of the research is that theconclusions and proposals formulated in the dissertation expand the scope ofliterature and thus knowledge on models and forms of non-documentary securitiesholding; on the objective relationship between titles to and upon a nondocumentary security.Separate conclusions made in this research could be used in the subsequenttheoretical analysis of the problems of non-documentary securities.10  The practical benefit of the research is that the conclusions based on theanalysis of the foreign regulatory practice and precedents are applicable for thesimilar cases in the Russian courts.

The thesis proposes solutions for some legalproblems that only appear in domestic practice (for example, the realization of therights of the ultimate acquirer in the system of indirect accounting of nondocumentary securities).Methodology and methods of research.The methods employed in the research are the following: of the formal logics(including deduction, induction, analysis and synthesis), theoretical modeling,classification, extrapolation as well as methods of comparative jurisprudence and ahistorical-retrospective method.The conducted research has made it possible to formulate and substantiate thefollowing main propositions and conclusions to be defended:1. The classical formula defining the relationship between the right to (that wasunderstood as a right to thing) and upon the security in connection to title to thematerial, physically existing document as a main feature of securities hasundergone revision when non-documentary securities first appeared.

The struggleof the latter for the status of independent object of law (but based on provisions forclassic documentary securities) is accompanied by the loss of material element anda significant change in the rules of legitimation.The disappearance of the material element compelled the legislator to makechoice between the two regulatory models. The first model allows an attempt torestore the connection between titles to and upon security in several ways. Thoseare the preservation of the ‘property element’ under a certain holding concept(immobilization in some jurisdictions presupposes the preservation of the propertyregulatory regime applied to non-documentary securities).

The entitlement of the11  ultimate purchaser in the form of control in respect of a non-documentary securityalso gives the legal relationship between the ultimate acquirer and the issuer a‘reflected effect’. In the framework of such a model (the approach of Great Britain,Germany) a non-documentary security even held by the intermediary grants aspecial right to an object having the features of absolute rights.2.

The final disappearance of the title to security as a specific object (the secondmodel – ‘pure dematerialization’) leads to certain difficulties with the localizationof rights ‘upon security’ and potentially to the multiplication of such rights at alllevels of holding chain. There arises the necessity to distinguish the title (andexclude the ‘reflected effect’) to a non-documentary security between allintermediate participants of the holding chain and the ultimate purchasers. In ordernot to reduce and simplify a non-documentary security to a simple model of acontractual claim under the account agreement (that could be equal among all theparticipants in chain) dematerialization implies the concept of securities as suigeneris rights that are not identical with the title to security and the claim undersecurities account contract.The application of this model also allows to refrain from the uncertainqualification of the legal nature of securities as the object held.

In systems of ‘puredematerialization’ non-documentary securities can be held and accounted for asrights arising from the account under the relevant contract (the US model), but mayunder certain circumstances acquire against third parties.3. Analysis of common practices used in foreign holding systems shows that theform of non-documentary securities holding correlates with the legal nature of theobject held and significantly changes it. The two main existing holding systems aredirect (e.g. using distributed registers with the names of ultimate purchasers) ortransparent (the existence of intermediaries with a ‘consulting role’ that do notinfluence the title of the ultimate purchaser); and also intermediated (when there isa hierarchy of intermediaries and their titles).

The criterion for distinguishing the12  mentioned system is the presence of intermediaries in the holding chain; theinfluence they cause on the title of the ultimate acquirer. Thus, the distribution ofthe titles upon a security in the ‘holding chain’ as well as the legitimation isdifferent.4. It is established that the legal consequences caused by the mismatch of titlesand general approach to legitimation in the holding chain produces grounds for thedistinguishing securities to those held directly (when the holding and legitimationposition coincide) and indirectly (the status of the legitimated person may belongeither to intermediary or to the ultimate purchaser).In the case when the issuer's register for indirectly held securities is a source forlegitimation, the essence of the rights of the ultimate purchaser (client under thesecurities account agreement) varies.

In particular, the sphere of ultimatepurchaser’s control may be limited to the contractual claims to the intermediary,than he should not be considered as the holder in terms of title to a nondocumentary security.Being a private law category the title to a non-documentary security cannot befulfilled by the evidence of the de facto holding of the ultimate purchaser. Theissuer is often (in Russian and foreign practice) obliged to analyze the accountingchain under the public law (tax, AML/CTF) requirements. However, suchinteraction between the issuer and the ultimate purchaser lacks the legally bindingstatus and thus does not affect the title of the ultimate purchaser upon a nondocumentary security.5.

The indirect holding is a legal phenomenon that allows to employ the uniformprocedure to holding and transfer of the titles to and upon property (in bothdocumentary and non-documentary form). At the same time, the legal status andtitle of the ultimate purchaser of intermediated securities are significantly differentfrom those in transparent systems and direct holding systems.13  Depending on forms of securities holding a respective combination of titles toand upon a non-documentary security differs.

At the same time, the commonterminology and regulation ignores the mentioned difference.Introduction of separate terms for non-documentary securities held with orwithout the intermediary (with a change in the title of the purchaser). Such adecision is common in foreign practice (Swiss Bucheffekten, account /intermediated securities in certain EU Directives, American book-entry securities).In certain acts of the Bank of Russia, a special type of indirectly held securitiesthose held by a depository are called depository securities29. The introduction ofthis or similar terms applied only to indirectly held securities rather than genericterm could draw the line between those two significantly different types ofsecurities.6.

The Russian model of non-documentary securities holding is generally acombination of direct (opening of the holder's accounts with the registrar) andindirect (with depository as an intermediary) holding. The market infrastructurereform, inter alia, caused the uncertainty in the legislation regarding the status ofthe entitled person (legitimation).Definitions of key terms remain unchanged despite the sufficient change of thecontent (for example, the definition of the term owner in proprietary sense thatdoes not remove the uncertainty in legitimation upon security); sometimes termsare misused.