What are uncertificated securities?

Good day to you, dear readers! In my new article, I will tell you about financial assets that do not have a paper implementation. The focus today will be uncertificated securities.

When trading these securities, the city where the seller and the buyer live is not important. Such objects can be transferred remotely. Now there are applications for anyone who wants to become a shareholder. It is enough to deposit a small amount of money there to buy the first non-documentary asset.

The use of uncertificated securities on the stock exchange helps companies grow faster. Their only drawback is intangibility. Therefore, some people treat them with prejudice. It is much easier for many people to own securities that can be read, felt, kept in a safe or a safe deposit box.

At the same time, paperless securities are currently very common, they are used for the benefit of the economy in all developed countries. There they are the main way to certify the rights to dividends. This method is convenient for the market, as it meets its modern needs — on the stock exchange, you can quickly transfer the right to own a security.

What it is?

Security (CB) is recognized as non-documentary if it secures rights using electronic systems and is not issued on paper.[/box

Characteristic features and traits

The main feature of the Central Bank, which I am telling you about, is the absence of a material embodiment.

All financial assets are subject to registration in registers. But making entries on non-documentary securities requires special responsibility. The following data is recorded:

  • name of the security;
  • room;
  • validity;
  • face value;
  • information about the issuer;
  • signatures (electronic).

[bold]Compilation of registers is carried out by organizations with the appropriate license.[/bold] This ensures the reliability of operations and the impossibility of their illegal adjustment at the will of the issuer or copyright holder.

Execution

The person who issued it or provided security must fulfill the obligations under the security.

The right holder, which is indicated in the accounts for the relevant asset, can demand execution.

[box type="orange"]Obligations are considered completed if the issuer has fulfilled them to the right holder.

In some cases, claims are recognized by law as extinguished if they are fulfilled before a third party.

Transfer of law

Securities are transferred by order of the copyright holder.

The record keeper debits the valuable asset from the current account and credits it to the account of the new holder. Rights are transferred at the same time.

encumbrance

An encumbrance by a pledge or otherwise arises from the moment a corresponding entry is made to the account of the right holder by a person keeping records of the securities.

When a security is credited to an account that records encumbered securities, the encumbrance condition arises automatically.

Differences between documentary and non-documentary securities

I will present the differences between these types of securities in the table:

Documentary

Undocumented

Materiality

There is

Not

signs

A document with details, the name of the issuer and other data

Property right recorded in the register

Advantages and disadvantages of owning uncertificated shares

I will present the pros and cons of owning a book-entry share in the table:

Advantages

Flaws

Cannot be lost, spoiled, removed

 

You will not be able to own a bearer share (presentation implies only paper registration)

The shareholder can at any time receive a document confirming his right

 

To prove rights, you will have to rely only on compliance with the form and details, the authenticity of the supporting document

Low cost due to no production costs

Conclusion

Non-documentary securities are not drawn up on forms. All changes are recorded in the registries. For issuers, electronic issuance is good for low costs.

I hope I have replenished your knowledge with the next portion. Stay updated, invite your friends!

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