Security (finance)

A security or securities ( Swiss ) is a note representing a private law in such a way that the right of the instrument against the debtor can only be invoked if the holder of the certificate submits them to the debtor. A certificate serves as proof of visualization and a right. Without the possession of the deed, the legal right therein not be invoked. Records are outdated in the age of IT-based accounting and there it only because of the historically grown legal basis that requires a securitization. Gradually, more and more states are part of the modernization of their right to over to abolish certificates and replace it with accounting entries ( in Germany approximated by collective custody of global certificates, in federal government securities as a real value right in the form of a book- entry). In the States the laws still calls certificates, they are still issued. However, they usually leave never the bearing point of the CSD, which leads over the shares in the inventory and transfer book, and they meet there no purpose except by their existence to preserve the formal requirements. Only in very rare cases, securities are actually brought in as a document in circulation ( see table business). It has fallen into disrepute because it allows anonymous Verwahrbarkeit and portability without data tracks and mostly illegal background happens (eg tax evasion, money laundering, darkening of wealth, black money ), while legitimate concerns (eg advertising measure, jewelry and anniversary securities ) are the exception.

• 5.1 Marketability
• 5.2 tradability
• 5.3 Securitisation of a law
• 5.4 Notification of claim
• 5.5 loss of the security

• 6.1 evidence and proof function
• 6.2 Liberation Function / legitimation function
• 6.3 Presentation Function
• 6.4 transport function

• 9.1 After designation of the beneficiary / beneficiaries ( = who is entitled to performance )
• 9.2 After the securitized law
• 9.3 After the relationship to the underlying transaction
• 9.4 After the economic function
• 9.5 After the equivalent
• 9.6 After justifiability
• 9.7 After the earnings
• 9.8 After the listing
• 9.9 Issue Price

Definition

The Swiss Code of Obligations defines a securities vividly:

In Germany and Austria there are, however, in general law is no legal definition of the security concept. From the word itself gives far is that it is a document in which an asset or monetary value or other right is securitized.

Even today, is being held in Germany and Austria to the principles which the legal historian Heinrich Brunner in 1882, the definition of security concept. After that, it is a document in which a private right in the way is evidenced that the possession of the certificate is required to enforce the law.

Elements of the definition

This definition in turn includes several portentous terms. The instrument concept is criminally defined as " a font that has been built in order to establish a right or a legal relationship, vary or revoke or to prove a fact of legal significance " (§ 74Vorlage: § / Maintenance / RIS Search Section 1 Clause. 7 öStGB ). A document is an embodied, in general or for the initiated understandable, human thoughts declaration which is suitable and intended to provide evidence in legal transactions, and indicates by exhibitors. The Court also German has done hard time with the certificate term. The concept of private rights should allow the distinction to certificates with public rights which are not securitized. Authentic instruments are built by authorities as part of their official powers or by a notary public within its business area in the prescribed form. The linguistically inelegant use of the word " taking possession ", to clarify that the possession of the certificate is a precondition for the exercise of rights against the debtor. From the perspective of the debtor this is featured with discharging effect only pay benefits if his certificate is presented. If the debtor fails to provide the certificate, it can make use of the right of refusal of performance. Thus, since the debtor bearer and to order, in the same form as in Rektapapieren ( § 808 paragraph 2 sentence 1 and § 797 para 1 BGB, Article 47 schg, Article 39 and Article 50 WG) only against presentation of the document must afford combines this feature all types of securities.

Securities laws in term

Special laws use very different investment concepts, which is due to the different regulatory objectives. Some laws deal in detail with the security concept. Because securities and securities trading are closely related to the credit system in conjunction, it is close to that particular deal prudential regulations, the term securities.

The definition in § 1 paragraph 11 sentence 2 of the Banking Act No. 1-4 followed by banking regulators and bank-related goals. It makes use of a non -exhaustive list, and indicates that no documents have to be issued ( so-called " stock rights " ) and tradability is provided at a market.

The Depotgesetz used in § 1 paragraph 1 Custody Act, an exhaustive list, which transmitted to the Securities ' shares, mining shares, interim certificates, interest, dividend and renewal coupons, according to the owners or by endorsement bonds, also other securities if they are justifiable, with the exception of banknote and paper money. Securities for the purposes of this Act are also registered bonds, if they are issued in the name of a securities depository " belong. This law is a banking regulatory law, which only applies as between the banks and the Federal Financial Supervisory Authority / Deutsche Bundesbank. However, it is permissible if other laws (such as § 4 para 2 No. 7 AWG) refer to this. Then the legal definition of the Custody Act also applies in the scope of the Foreign Trade Act.

Accounting issues are at the forefront in § 266 para 2 Part B III HGB. Here are shares in affiliated companies, treasury stock and "other securities". Under this last-named label all of the securities are to be reported, which do not belong to any other item and are always negotiable.

Also, § 7 para 1 RechKredV used an enumeration that particular recourse negotiable and listed on the properties and defines those terms in paragraphs 2 and 3. Accordingly, securities that meet the requirements of a listing shall be considered as eligible for listing. Securities that are listed on a stock exchange for trading on the regulated market shall be considered as listed.

Securities may embody the following rights:

Accruals

The required securitization closes mere documentary evidence of ( = proof of the existence of the right ), in particular receipt, promissory note, contract of sale, as well as for simple legitimacy certificates ( = evaluation of eligibility of Vorlegers to take delivery of a performance ), especially cloakroom, luggage storage bill or repair sheet of the definition.

No securities are:

• Certificate of a department store, because although he represents the right to receive goods in the said value from the issuer, but may not be declared invalid.

• Banknotes are considered legal tender. A few decades ago a bill was through their gold cover quite often a security, because it could be any time exchanged for a fixed quantity of gold (ie, the U.S. dollar until 1973 ).

• Identity card, passport or an identity card evidencing a public duty to identify, so no private law.

• Documentary evidence such as promissory notes and receipts. Such documents have a purely evidential function; the right is completely independent of their existence.

• Simple legitimation documents such as wardrobe trademarks or repair bills. Although they have such securities legitimizing function, but lacks in the securitization of the right ( certificate = right ). Thus, these documents free the debtor from his performance, but do not alter the rights of the creditor. The depositor of the garments may be about to prove his right otherwise by accurately describes the garments and their contents.

However, the character of securities have stamps, tickets, phone cards or tickets. These are so-called "small" bearer securities within the meaning of § 807 BGB, the exhibitors through power to the - unnamed - can liberate owner, the owner to demand the performance is right and the possession of the deed to assert the law is required. Small bearer securities are bearer instruments that reflect the legal relationship and the issuer incomplete. In it, the rules on bearer bonds in accordance with § 807 BGB apply partial ( § § 793, Section 1, § 794, § 796, § 797 BGB).

What what is considered as a simple document of title and as an investment in a particular case, decide primarily the will of the issuer, a subsidiary, according to trade.

The " wide " and "narrow" security concept

The " wide " security concept of Heinrich Brunner is the very definition today: a bond is a document in which securitized a private right of way is that the possession of the certificate is required to enforce the law. This definition includes bearer, order and Rektapapiere.

The "narrow" security concept restricts this general definition. Hereafter are only the documents for securities that are transferable according to property law principles. Only the owner and order papers Rektapapiere this purpose are counted, are not. In this article securities term is understood by 'wide'.

The purpose of securities

In contract law contracts are form- free in general. Keep the parties of their contractual rights and obligations yet written, this is done for reasons of easier provability. When a loan outside consumer legal requirements granted, the creditor may require the borrower to issue a debt certificate. Sets the creditor after the due date of the promissory note loan debt the debtor before he can thus prove his claim. If he loses the promissory note, so goes his right to repayment under no means - it's just up to him to prove it in a different way. When promissory note so it is a mere documentary evidence.

If, however, agreed that the debtor with discharging effect does to the person who submits the certificate, the certificate function Liberation ( liberation function ) in favor of the debtor has, regardless of who they submit. The creditor may, in this case the certificate to one of his creditors, in turn, pass on, now presenting the instrument with the debtor intended here. Under these circumstances, it is in the certificate is a security.

Characteristics of securities

Securities have common characteristics which they only acquired the character of a security.

Marketability

From the laws will forth can be made between marketable and less marketable securities. Marketability means that a security by its legal structure more or less can be transferred from one owner to the next owner easily. The securitization of law only ensures the marketability of a security. Among the marketable include the owner and order papers which are designed more or less fungible and may be transferred by mere delivery or endorsement. Highest marketability will be played by bearer securities because their portability through increased Gutglaubensschutz is even more extensive than in the tangible goods.

As little marketable the Rektapapiere are constructed in which the mere delivery of the paper does not even have a right to change the fact securitized result: the securitized receivables must be transferred by way of assignment, and she follows the certificates representing securities of a complicated legal fate. The recipient assignee against the assignor is entitled to restitution of the act ( § 985, § 952 paragraph 1 sentence 2 German Civil Code), and the old creditors is also to hand over all related documents bound with the requirement ( § 402 BGB). These legal hurdles make Rektapapiere not just marketable. If the legislature special hurdles in the transferability to, he wants to prevent in particular the transport ability. Shares in a limited liability company - which, incidentally, no securities - can according to § 15 para 3 and 4 GmbHG only be transmitted in the form of a notarized assignment; it already requires the blame legal obligation business of notarization, not to mention the actual assignment as available business.

An increased form of marketability, the merchantability dar. To achieve this, standardization and typification of securities certificates is essential. If the legislature does not help here, the practice has the task to promote this. The most advanced of merchantability case of checks, bills of exchange and exchange- listed securities.

Tradability

Purchase, sale, administration and custody of securities for others is a permit -requiring banking business within the meaning of § 1 of the Banking Act. Tradability, in particular exchange capability, requires the highest level of marketability. Therefore, the bearer shares are predestined as verkehrsfähigste all types of securities for exchange trading. If you want to order papers (such as the name of share) to be traded on the stock exchange, they must contain an endorsement in blank. Registered shares are publicly technically available if the last transfer ( § 68 para 1 AktG) - and only this - is expressed by a blank endorsement. Registered shares that can be transferred with the consent of the Company ( § 68 para 2 AktG), are also available when the last transmission - and again only this - was carried out by blank or if the shares blank re-registration requests of the seller are included. In the guidelines of the German Stock Exchange for the " Availability of damaged, officially- listed securities " is, among other things as an essential feature of a security I 1 e) the blank endorsement in blank and the highlighted digit.

Securitization of a right

All securities, the securitization of private law is common. While the share vests all rights of a shareholder of the corporation, the savings book entitles the creditor to the withdrawal of the documented savings assets in it in the specified limits. Re- stored quite differently about the rights of one ( Order) warehouse warrant entitling its legitimate owner to collect the stored goods. As already shows this short list, the rights arising from securities are designed completely different. They range from the right to vote at the annual general meeting of a public company on the ownership of goods stored up to monetary property rights in the passbook.

If Bearer Securities the right with the certificate is so strongly associated that agreement and transfer the deed transferred automatically securitized in her rights to the new owner. For ordering and Rektapapieren, however, the mere delivery of the certificate does not lead to transfer of rights of rights vested. Order papers require an endorsement, claims made ​​Rektapapieren must be transmitted with assignment. In the latter, the connection of property law is already so relaxed with the certificate that the transfer of the securitized claims is required by way of assignment, during the transfer of the certificate is classified under civil law as a necessary consequence. Nevertheless, the transfer of all types of securities, of great importance, because in the enforcement of the securitized claim the debtor or exhibitor shall surrender the certificate.

Assertion of the claim

Assertion of the claim means that the respective owners of the paper may demand his right to performance by the debtor against surrender of the Note at maturity of the securitized herein law. If it be agreed that the debtor with discharging effect does to the person who submits the certificate, so did the deed Liberation function ( liberation function ) in favor of the debtor, regardless of who they submit.

The legitimate possession of the security justified the full presumption of substantive permission of the owner. The debtor may oppose to the owner only objections concerning the validity of the exhibition, arising out of the deed or the exhibitor holds, directly against the owner. Was the debtor at the time of exhibition as incompetent or he can demonstrate that the owner has already received the promised performance in the document, then the debtor is exempt from the performance. This applies even if the owner is unable to provide the certificate. The obligor of a security may in fact demand that the certificate shall then be given, if it is to effect the performance. In § 796 BGB is a broad exclusion of objections is provided. The debtor must therefore contrary to the creditor stop a few leistungshindernde objections.

While the holder of paper each rug for the debtor is considered to be substantive right to demand performance, the responsibility of the debtor in order and Rektapapieren specific auditing requirements. In order papers of the respective rug the certificate is physically justified if a complete Indossamentenkette, which must be due to the exhibitors is available. The debtor of an order instrument is 3 sentence 2 of the WG only obligation under Article 40 para to examine the outer regularity of Indossamentenkette before his performance. He checked therefore the chain of endorsements on their completeness, but it is irrelevant whether the endorsements effective or the signatures are genuine. If the obligor to an unauthorized rugs of the order paper, it is of the power free ( § 365 para 1 HGB in conjunction with article 40, paragraph 3 WG).

Loss of the security

If the instrument is lost, the vested rights herein, however, does not go under. Required for the assertion of rights of lost securities is then a cancellation after the completed array method. The exclusion judgment of annulment replaced the lost securities and gives the owner the original legal position in the securities ( § 479 FamFG ). The line-up procedures provided by law for owners and order papers for qualified identification papers and the mortgage deed. If, however, a promissory note is lost, an array method is not provided in accordance with § 371 BGB; the right may be invoked thus without banns process, which is why the promissory note is not part of the securities. A platoon procedure for lost documents is therefore a further criterion for the securities property.

If a security is lost (through theft or loss), then the law ( § 479 FamFG ) are claimed by the debtor only in the squad because of a method (§ § 433 ff FamFG ) erwirkten exclusion judgment. This is the consequence of the law of the debtor, that this is only obliged to pay compensation if his certificate shall be issued by the owner.

Essential functions of securities

All securities meet more or less common functions that can be systematized as follows:

Evidence and proof function

The contents of the securities certificate proves any interested parties, particularly the owner that the exhibitor to a performance under the conditions laid down in the document. In legal disputes, this instrument is used in particular as evidence of the scope. The legislature has created with the certificate process, a special variant of the civil proceedings. After that, a claim be asserted, which is directed to the payment of money or delivery of property or securities acceptable if all required for acquisition of the right facts are undisputed or can be proved by certificates (§ 592 ZPO). Securities are the only admissible evidence in document processes. From this it is apparent that significant probative process legally belongs to the Securities.

Liberation Function / legitimation function

During the Liberation function ensures that the debtor must pay to each holder of the national certificate with discharging effect, the legitimation function constitutes a legal presumption that the holder of the certificate is to be regarded as justified. The Liberation function, exceptionally not, if the debtor has actual knowledge that the holder of the certificate of the true owners, and this is not easily detectable. In the legitimation function is assumed by operation of law, which is the respective holder of the certificate and the material rights. This is fully applicable to bearer securities, limited for the order paper, but not in Rektapapieren (except mortgage deed ). When the mortgage deed is according to § 1155 BGB a legitimation effect in favor of the holder if an unbroken chain of publicly certified declarations of assignment actually leads back from him on in the Land Registry enrollees. The Liberation function has already been recognized early bearer securities. Thereafter, each holder of the deed by the debtor may request payment at maturity, and the debtor shall be discharged by the owner released from his debt ( paid ).

Documents that have both the legitimacy and the Liberation function are referred to as identity papers; a distinction is made between simple and qualified legitimation papers. Simple are baggage check or cloakroom; this may afford the debtor discharging the debt, even without presentation of the document. For qualifying legitimation papers, however, must and shall afford the debtor only upon presentation of the certificate.

Presentation function

The law requires the holder of the security that he must submit to the debtor the document where the provisions of law. This is technically laws implemented in different ways, such that the holder may demand payment from the debtor ( § 793 paragraph 1 sentence 1 BGB in bearer bonds) codified or explicitly Vorlegungserfordernis (§ 1160 para 1 BGB in the mortgage deed, Article 38 of the WG change). To prevent further payments of the debtor under the same document, the law, the delivery of the certificate to the debtor asks for payment ( for example, Article 39, Section 1 WG). The original requirement for securities increases road safety by displacement of the right to refuse performance of the debtor under § 410 BGB.

Transport function

The securitization actually invisible rights in a document enables its transmission according to property law standards, except turn the Rektapapiere. Thus, the term "embodiment ", which an invisible law is adopted by a written declaration in a physically existing document dates. However, the securitization of securities no longer part of the regulatory authorities, the conceptual formative elements. The certificate can then through the transfer pursuant to § § 929 ff BGB be transferred as goods with the result of a bona fide acquisition pursuant to § § 932 ff BGB, bearer securities even in stolen or lost certificates (§ 935 para 2 BGB). In addition, the possession of the certificate gives the right certificate of title to her ( § 1006 BGB ), the order for papers Special provisions apply (Art. 16 para 1 WG, Article 19 schg, § 365 paragraph 1 HGB and § 68 para 1 AktG ). In Rektapapieren the transport function does not apply because the transfer of the right whose assignment is required and a transfer of the paper for the transfer of rights is neither necessary nor sufficient.

Components

Marketable securities, also called effects, usually exist from

• The shell: This is the main document, the securitized creditor or shareholder rights.
• The bow: This is a split into several similar sections and numbered paper. The individual sections are called coupon or dividend receipt. Against the levy of a coupon with a Paying Agent rights of the instrument may be asserted, however, in connection with the submission of the jacket. This concerns in particular dividends or interest payments, but also changes, subscribe for new shares or similar .. The coupons thus securitize primarily the income law.
• The renewal coupon ( Talon ): In exchange for the renewal certificate to any Paying Agent, the holder receives a new certificate ( for example, if the coupons of the old arch are consumed). Often the renewal coupon but is included as a special section in the bow.

Identification

In the German stock market trading securities have been classified in the narrow sense of a six-digit identification number, the securities identification number WKN or; this was replaced on 22 April 2003 by the International Securities Identification Number (ISIN). The ISIN is a twelve-digit number-letter combination that is composed according to the following pattern:

National number of country code ( NSIN ) Check digit DE 000575200 0, Is in the national identification numbers unless already existent, the current WKN (in the example: Bayer AG, WKN 575200 ) is incorporated right-aligned, the front positions are filled with zeros.

The country code is only to the law under which the security was as such, ie the legal right hook. He does not agree with the law of the issuer. A share in a foreign company can therefore under German law in the form of a global note will then receive an identification with DE country code (see also American Depositary Receipt). Share certificates for the same company can be simultaneously represented, even after several jurisdictions. You will then be correspondingly different labels and apply for the custody of different legal bases. A securitized in the form of a global certificate German share of a foreign company may, for example, are held in collective safe custody, while a value of foreign law in the same company can be held in securities account.

Classifications

After designation of the beneficiary / beneficiaries ( = who is entitled to performance )

• A) bearer (English: bearer paper): These are securities which guardian is the rugs. Transmission is by agreement and mere delivery of the instrument. Examples are: Bearer shares, bearer bond or bearer check. Furthermore, the technical bearer instruments, namely: Order papers with blank endorsement (see B) and
• Rektapapiere with in blank.

• B ) Order Papers (engl about: order paper): These are securities which entitled it the common or the one who is the designated this as the new owner ( = endorsees ). Transmission is by agreement, endorsement ( = transfer note usually on the back of the order paper) and handover. Examples are: a) the native order papers: Order check, change, interim license and registered share.
• B) the gekorenen order papers: (transport) insurance policy ( order ) warehouse receipt, bill of lading, bill of lading, commercial instructions and the commercial obligation form, unless they are provided with the positive order clause. If there is no positive order clause is Rektapapiere (see C ).

• C) Rektapapiere (or registered securities ) ( engl: nonnegotiable / registered instrument ). These are securities whose rights can be transferred by agreement, assignment and transfer of the deed. Guardian is solely the fact aforesaid. Examples are: passbook
• Insurance Certificate
• Mortgage deed, mortgage and bond Debenture.

Where such securities provided with an in blank, there are technical bearer.

After the securitized law

• Debt securities WP ( = securitization of receivables) Bills, checks, bonds

• Share

• Investment certificate
• Mortgage deed

• Warehouse receipt, bill of lading, bill of lading

After the relationship to the underlying transaction

• Abstract WP ( = a securitization regard to the underlying business law ) change
• Check

• Share

After the economic function

• Effects (WP of the capital market ) debenture bond
• Share

• Check
• Change

• Bill of lading
• Bill of lading
• Warehouse receipt

After the equivalent

• Monetary securities Coupon
• Check
• Change

• Debt securities bond
• Bond
• Retirement letter

• Share
• Colonial society share

• Bill of lading
• Bill of lading
• Warehouse receipt

After justifiability

• Defensible WP: effects

• Mortgage deed
• Land charge certificate

After the earnings

• Bearing WP Zero - Bond

• Traditional bonds

• Shares

After listing

For exchange- traded securities, the price of a security is defined as:

• Unit Quotation for shares, investment shares, warrants
• Percentage quotation on pensions
• Per thousand quotation for pensions

Issue Price

• Price or price, have to pay investors who first purchase of mutual fund shares or other securities.
• Price can be subscribed to the shares of a Fund.

It corresponds to the redemption price plus sales charge.

Protection of securities transactions

Investors in Germany can call various arbitration centers in case of complaints relating to securities transactions. As regards the competence is relevant, which banking division belongs to the bank with which the investor has completed the securities business. Net regulatory complaints processed the Federal Financial Supervisory Authority.

For cross-border disputes between consumers and financial services providers ( such as banks or investment firms ) is the European network of the Financial Dispute Resolution Service (FIN- NET).