What are uncertificated securities? Russian securities market

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The financial market includes several sectors. One of them is the stock exchange. The securities market is a source of receipt and redistribution of funds. Investors buy shares of promising companies and banks, accelerating their growth. There are documentary and non-documentary securities in circulation here. The features of their functioning will be discussed in the article.

Definition

The securities market is a set of economic relations concerning the issuance and circulation of the Central Bank. It is also called the stock exchange. The main purpose of the market is to ensure the financial development of the economy. This can be done with the help of bank loans and through securities. In the second case, funds are sent by investors:

• to growing companies that can generate income in the short term;
• to promising industries that can accumulate profits and capitalization in the long run.

In the primary marketplaced by the Central Bank at the time of issue. This is where financial resources are mobilized. Issuers, investors, underwriters, FFMS are participants in this sector. In the secondary market, there is a resale of securities, the direction of capital to promising industries. Here the market rate of assets is formed.

Functions of the RZB

• Redistribution of capital between sectors of the economy.
• Insuring financial risks with options and other derivatives.
• Accumulation of free funds.
• Investing in the economy.
• Flow of capital to profitable industries.
• Function of "overheating investment". The value of securities fluctuates. After the rush demand, capitalization of assets begins, the price returns to the market.
• Providing market development information.

Issuable securities

This is the most common type of shares on the market. Such securities secure the property rights of the owner, subject to assignment and unconditional exercise, in the manner prescribed by law; appear as a result of the release; have the same amount of rights regardless of the time of purchase.

Issuing securities include:

• share - secures the owner's rights to receive dividends, manage the organization, share the property after the liquidation of the organization;
• bond - confirms the right of the holder to receive from the issuer the nominal value of the Central Bank or other property within the agreed time frame;
• option - secures the holder's right to buy/sell within a specified period of timenumber of shares at a fixed price.

Emission securities are issued in two forms, these are:

• certificate indicating the holder;
• non-documentary form of emissive securities - provides for fixing owners in the register.

History of occurrence

The definition of the term "uncertificated securities" came from American law. In the 80s of the last century, negotiable, commodity and stock certificates with different legal regulatory regimes were used. In Art. 8-102 USTC defines the concept of securities in uncertificated form: this is a share in the issuer's property that is not represented by another document, and its transfer is recorded in special books.

France was the first to "dematerialize" the certificate. Since 1984, the country's legislation has secured such an opportunity in relation to shares and bonds. In Germany, a special law allowed the issuance of "global certificates".

Securities market in Russia

With the development of information technology, the form of confirmation of property rights from documentary was changed to electronic. Such certificates are also called securities, but they are subject to the legal rules of ownership. This trend of securitization reflects well the mobility of financial relations. The turnover of "dematerial" securities is fixed by Art. 142-149 of the Civil Code of the Russian Federation. The issuer, having received a license, can fix the rights with the help of electronic computers. The order and rules of these operationsregulated by law.

uncertificated securities are electronic documents. The law defines the procedure for fixing, confirming and making transactions on them. Responsibility for the safety of records lies with the person who updated the register. It also draws up a “decision on the issue of the Central Bank”, registers it with state authorities. This document certifies the right of the owners. It is made in triplicate. One remains with the owner, the second is attached to the registry, and the last one is transferred to the vault.

The peculiarity of such documents is that the issuer's obligation is expressed in the form of an entry on a special "depo" account, which contains all the necessary details. In this form, the law allows the issue of shares and bonds. But the issue of bills, carried out in this way, is prohibited.

Handling issues

Domestic law also allowed the use of "dematerial" securities. AO in case of issues should only register their issue in the books, and may not spend money on preparing forms. Government short-term bonds are another example of non-documentary securities. The law allows the issuance of any type of certificate in this form. But there is no legal regime for regulating disputes over them. All issues are resolved on the basis of the provisions of Art. 28 of the Federal Law "On the RZB", which states that the ownership of such objects is transferred in the same way as for things.

Legal

In American law, the object of property is the rights themselves. For Russian legislation, this approach is unacceptable. There is no concept of obligation in American law. Therefore, the automatic transfer of these interpretations and regulations to the domestic market is impossible. The buying and selling of securities should be governed by established rules of law.

Before amendments were made to the RF CG, issue issues were regulated by the “Regulations on the issue of the Central Bank” No. 78. This document provided for the possibility of the existence of certificates in the form of entries on accounts. The new concept of securities from the Civil Code provides that the main purpose of the document is to fix certain property rights. Their transfer is possible without a certificate. In Art. 149 of the Civil Code states that the rights to securities are recorded in a special register. And this already deprives one of the functions of this tool.

Analyzing these norms of the law, we can conclude that paperless securities are property rights that can be certified by a general rule or by fixing an entry in the register.

Ways to solve the problems of the domestic RZB

1. Redistribution of blocks of shares, allocation of financial resources for the restoration and development of production in Russia.
2. Overcoming political instability, economic crisis.
3. Improvement of legislation.
4. Increasing the role of the state: the final choice of the stock market functioning model, definitionsources of replenishment of the budget, the formation of an effective oversight system.
5. Protection of investments in documentary and book-entry securities.
6. Development of depository, clearing and agency networks that register the movement of documents.
7. Expanding the volume of information about the activities of issuers. Creation of a common system of market assessment indicators, introduction of ratings, development of a network of publications specializing in certain sectors of the economy as investment objects.

Features of the European model

The American market is the most developed in terms of infrastructure, profitability, capitalization, turnover, and liquidity. The regulatory framework was laid down after the economic crisis of the 1930s. last century. At the same time, the concept of capital management was revised. The laws "On the Central Bank" (1933), "On the Stock Exchange" (1934) and other acts came into force. Therefore, uncertificated securities are currently freely circulating in the US.

The Western European market functions more efficiently than the domestic one, although it is inferior to the American one. This is a great merit of the mega-regulator, his well-established work. Each sector of the financial market performs a certain list of functions. And in the event of a shortage of capital, resources are redistributed. All these activities are regulated by the respective ministries (Finance and Economic Affairs).

Trends in the development of global securities markets

• Asset concentration - the concentration of capital from professional participants on the world's largest stock exchanges. The result is improved reliabilitycertificates and bidding organizers.
• Globalization - the rapid growth of central bank issues.
• Computerization of the market - the use of the latest technologies, their constant updating, providing means of communication available to any investor.
• Strengthening state regulation is due to the need to protect the rights of investors, improve the reliability of documents, issuers, the transparency of the functioning of stock exchanges, the security of computer data processing systems.
• Introduction of Internet technologies.
• Distribution of new tools, systems and infrastructure.
• Securitization is the transfer of funds from traditional forms (savings and deposits) to the Central Bank in order to combine illiquid assets and put them into circulation.
• Mergers and acquisitions by leading exchanges of their partners.

Registered papers VS Central Bank to bearer

For some time, all Russian securities were regulated by the same legal acts. With the introduction of changes in the legislation, the rights of the holder after the disappearance of certificates received independent significance. Such documents do not take on the properties of things, but change the way they are fixed. As a result, there is a need to improve the protection of the interests of the owners. The “replacement” of paper carriers leads to the disappearance of classical personal certificates. A non-documentary form of bearer securities is unlikely to appear. And “dematerialized” orders, although not prohibited by law (Article 149 of the Civil Code), will not be widely used. Therefore, uncertifiedonly issuing securities remain.

Conclusion

The securities market in Russia functions to ensure the financial development of the economy. In circulation are certificates in non-documentary form. In fact, this same share, which confirms the owner's contribution to the property of the enterprise, is recorded in the registers for the fact of transfer.