The Economic Truth

Signed in as:

filler@godaddy.com

Account

About The Economic Truth

The Universal Commercial Code United States: Below Are Links To The Important Sections of The UCC in Regards to Asset Ownership

Secured Transactions (Article 9): This is perhaps the most relevant part of the UCC regarding asset ownership. It governs secured transactions, where a borrower agrees that the lender may take property owned by the borrower as collateral if the borrower fails to fulfill the debt obligation.
Sales (Article 2): This part covers the sale of goods, including aspects such as the transfer of title, risk, and insurable interest in goods.
Leases (Article 2A): This governs the leasing of personal property.
Negotiable Instruments (Article 3): While this part mainly deals with items like checks and promissory notes, it also touches upon aspects of ownership and transfer of these instruments.
Bank Deposits and Collections (Article 4): This part includes provisions about the bank-customer relationship and the handling of checks.
Letters of Credit (Article 5): This covers letters of credit, which are often used in international trade to guarantee payment.
Investment Securities (Article 8): This governs the transfer and registration of securities and certain aspects of the rights of shareholders.
Documents of Title (Article 7): This part addresses documents like bills of lading and warehouse receipts, which can represent ownership of goods.to providing high-quality educational consulting services to students and parents, assisting them in achieving their academic goals.

The UCC Detailed

Under UCC Article 8, which governs investment securities, the ownership and rights associated with registered securities and bearer securities are distinctly defined:

Registered Securities: Registered securities are investment securities that are registered in the name of the holder in the records of the issuer or its agent. The owner of a registered security is the person in whose name the security is registered. This type of security is transferred by registering the transfer in the issuer's books. Ownership and rights in registered securities are typically clearer because the identity of the owner is recorded.

In the context of the Uniform Commercial Code (UCC) Article 8, which deals with investment securities, registered securities are held by the individual or entity in whose name the security is registered. This is a key distinction from bearer securities, which are held by whoever physically possesses them.

Here's a more detailed breakdown for registered securities:

Holder in Registered Form: A registered security is issued in the name of a specific holder. This means the issuer or its agent maintains a record of who owns the security. The legal title to the security, and the rights that come with it, belong to the person or entity whose name appears on that registration.
Transfer of Ownership: The transfer of ownership of a registered security typically requires notifying the issuer or its agent to update the registration. This process often involves endorsing the security certificate (if there is one) and completing other transfer documentation.
Rights and Protections: Because the owner's identity is known to the issuer, registered securities offer certain protections. For example, if a certificate is lost or destroyed, it's usually easier to replace it when the security is registered.
Nominee Registration: Sometimes, securities are registered in the name of a nominee (like a brokerage firm), which holds them on behalf of the actual owner (the beneficial owner). In this case, the rights of the beneficial owner are typically governed by agreements with the nominee.

In summary, the holder of a registered security is the individual or entity in whose name the security is registered with the issuer, providing a clear and documented ownership trail. For specific legal questions or complex scenarios involving registered securities, it's recommended to consult a legal expert or review the detailed provisions of UCC Article 8.

Bearer Securities: Bearer securities, on the other hand, are not registered in the issuer's books. Ownership of a bearer security is determined by possession. The bearer of the security, meaning the person who physically holds it, is presumed to be the owner and has the rights associated with the security. Bearer securities are transferred simply by delivering the physical document.

In essence, the ownership of registered securities is established through registration records, while the ownership of bearer securities is established through physical possession. These definitions are important for understanding how rights and responsibilities are assigned in transactions involving different types of securities.

Bearer securities are held by the individual or entity that physically possesses them. This is a defining characteristic of bearer securities, making them distinct from registered securities where ownership is recorded in a registry by the issuer.

Key points about bearer securities include:

Physical Possession Equals Ownership: The holder of a bearer security is the person who physically possesses the security document (like a bond or a stock certificate). Ownership and the rights associated with the security are presumed to belong to the bearer — that is, whoever holds the security.
Transfer of Ownership: Transferring ownership of bearer securities is straightforward and is accomplished simply by handing over the physical document. No formal registration or transfer of title in a registry is required.
Anonymity and Risks: Bearer securities provide a degree of anonymity since the issuer does not keep a record of who owns the security. However, this also means that if the security is lost, stolen, or destroyed, the rightful owner may have difficulty reclaiming their rights, as there's no registration to prove ownership.
Usage and Regulations: Bearer securities used to be more common but have become less so in many jurisdictions due to concerns over tax evasion, money laundering, and other illicit activities. Some countries have imposed regulations that restrict or discourage their use.

In essence, the holder of bearer securities is whoever physically has the security in their possession. The simplicity of transfer and the lack of a formal ownership record are characteristic features of these types of securities.

The UCC In Regards to Debt

In the Uniform Commercial Code (UCC) - Article 9, which covers secured transactions, several sections relate to the agreement where a borrower consents to a lender taking assets in case of default. These include:

Section 9-607: This section allows a lender to collect accounts receivable on which it has a perfected lien. It means that if a borrower defaults, the lender can direct the account debtor to pay them directly. This collection can be done with or without the borrower’s cooperation.
Section 9-609: This section permits a secured party to request the borrower to assemble the collateral, and the lender may take possession of the collateral as long as the borrower cooperates.
Section 9-610: This section allows a lender to sell the collateral on a “commercially reasonable” basis after default. The lender must demonstrate that the sale price is commercially reasonable, which could be through a third-party valuation of the collateral.

Additionally, it's important to note that a security agreement within UCC Article 9 needs to be in writing, except when a security interest is pledged (for example, when a borrower gives the collateral to the lender in exchange for a loan). If there's no written security agreement, and the transaction appears to be an Article 9 transaction, the court may recognize it by applying the composite document rule, considering a series of documents evidencing the security agreement.

How is Ownership Settled with the DTCC?

The Depository Trust & Clearing Corporation (DTCC), through its nominee Cede & Co., holds legal title to the securities that are eligible for its services. There are various ways in which investors can hold these DTC-eligible securities:

Street Name: In this case, the investor's name is listed on the brokerage firm's books as the beneficial owner of the shares. The brokerage firm's name appears in DTC's ownership records, while DTC's nominee name, Cede & Co., is listed as the registered owner on the records of the issuer maintained by its transfer agent. Essentially, DTC holds the legal title, and the ultimate investor is the beneficial owner.
Direct Registration: Investors can choose to hold their securities electronically in their own name, rather than in street name, through the direct registration system (DRS). This system allows an investor to be the registered holder directly on the issuer’s books and records. Such investors receive a statement as proof of ownership, and all investor information, dividends, and corporate communications are sent directly to the investor from the issuer or its transfer agent.
Physical Certificate: This is a more traditional method where shares are held in the form of a physical certificate. It is considered a higher risk and more expensive option due to the risks of loss, theft, or damage of the physical certificates. If an investor opts for a physical certificate, the securities are withdrawn from their account at DTC and re-registered in the investor's name. However, many brokerage firms and transfer agents charge a fee for issuing and delivering physical certificates, and in some cases, this option may not be available.

World Central Clearing Parties

Central Clearing Parties Control All Financial Assets? Here's a List of Assets Owned By The Above Central Clearing Parties.

1. Base Metals

2. Cash Bonds and Repos

3. Cash Equities

4. Cash Equities and Listed Derivatives

5. Cash Equities, Derivatives, Securities Lending

6. Cash Equities, Equity Derivatives, ETFs

7. Cash Equity

8. Cash Securities

9. CCP Clearing of Trades in Collateralised Borrowing and Lending

10. CCP Clearing of Trades in Forex Spot

11. CCP Clearing of Trades in Rupee Derivatives

12. CDS

13. Commodities

14. Derivative products on equity indexes, equities, currencies, interest rates, fixed income and commodities

15. Derivatives (Futures, Options, Swaps)

16. Electricity Derivatives

17. Equities

18. Equities, Equity-ETFs, Bonds

19. Equity derivatives, fixed income derivatives, interest rate derivatives, commodity derivatives, precious metal derivatives, FX derivatives, property futures, dividend futures, volatility futures, cash equities, bonds, OTC interest rate swaps

20. Exchange Traded Derivatives, OTC Commodities, OTC Financial Derivatives

21. Exchange Traded Single Stock and Index Options

22. Financial and Commodity Derivatives, Equities and Equities Derivatives, and Gold

23. Fixed Income/Stocks

24. Futures and Options on Energy, Financials and Softs

25. Futures and Options on Futures

26. FX derivatives

27. FX Forward

28. General Collateral Repo

29. Government bonds

30. GSD-Eligible Securities

31. Interest Rates, Equity Index, Agricultural Products, Energy Products, OTC IR Swaps, Index Swaps, Basis Swaps

32. IRS

33. JGB

34. Listed Cash Products

35. Listed Derivatives

36. MBSD-Eligible Securities

37. Non-deliverable EM Currency Forwards

38. NSCC-Eligible Securities

39. Options, Futures, Securities Lending

40. OTC - IRS, OIS, VNS, Basis Swaps, FRAs, Inflation Swaps

41. OTC CDS

42. OTC IRS

43. Precious Metals

44. Primarily Futures and Options on Futures

45. Repurchase agreements

46. Retails and Wholesale Bond

47. Shares, Warrant, Convertible Bonds, ETF, ETC, Stock and Index Futures and Option