Securities Operations: A Guide to Trade and Position Management

6

Security Forms

6.1 INTRODUCTION

Historically, issuers printed paper certificates in order to represent equity and debt issues. When purchasing a security, an investor would receive a certificate from the issuer (when buying a new issue) or from the seller (when buying in the secondary market). The certificate was intended to provide proof of ownership.

For an individual issue, certificates were usually designated as being in either registered or bearer form; the similarities and differences of each are highlighted towards the end of this chapter.

The following sections describe the characteristics of registered and bearer securities, as it is important to understand their nature in order to appreciate how settlement procedures differ, thereby increasing the probability of operational efficiency.

The two main forms of securities are registered and bearer form.

6.2 REGISTERED SECURITIES

The holders of a registered security will have their name and address recorded on a register of holders typically maintained by a registrar or transfer agent on behalf of the issuer.

The purpose of the register is to hold a complete list of all holders of the issue; most equity issues are in registered form, as the issuer of equity must be able to identify the owners of the company (refer to Chapter 2). Some bonds are issued in registered form.

The register contains:

• the name of the holder
• the address of the holder
• the quantity of shares or bonds held
• the date of registration and of changes to ...