The securities markets have changed dramatically over the last 20 years. The vast majority of securities are now held through intermediaries rather than directly. The number of cross-border transactions has increased exponentially. But these developments have also created legal uncertainty. Different jurisdictions classify rights relating to securities in different ways, resulting in inconsistency in treatment. This raises transactions costs and systematic risk.1 It can also lower values of securities, and limit access to capital in times of financial distress.2
The Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary (HSC)3 attempts to remedy these concerns by offering a uniform set of conflict of laws rules to be applied on a global basis. The HSC has been adopted by the United States. When it goes into effect on April 1, 2017, the HSC will pre-empt the Uniform Commercial Code (UCC) choice of law rules in certain securities transactions, even for transactions that are not primarily international in character.4 Today we discuss the general framework of the HSC as well as how it will affect the choice of law rules under Articles 8 and 9 of the UCC in regard to certain securities, security entitlements and securities accounts.
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