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Cross-border Transactions of Intermediated Securities pp 325–360Cite as

Chapter 7. The Intermediated System in Switzerland

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Abstract

While Swiss civil law has both Romanic and Germanic legal traditions, the law of securities belongs to the Germanic legal tradition. Under the strong influence of von Savigny’s materialisation theory, as in Germany, securities (Wertpapiere) are not mere shares or bonds, but share certificates and bond certificates embodying such equity, debt or other private rights with value. Unlike Germany, however, the Swiss Code of Obligations (“SCO”) expressly provides the definition of securities, similar to the German common view regarding securities, initially defined by Heinrich Brunners. Article 965 of SCO specifies that a securities certificate (Wertpapier) is any certificate with which a right is combined in such a way that without the certificate, the right may neither be exercised nor transferred to another. As in Germany, securities, i.e. rights incorporated in securities certificates, are transferred by delivering the possession of securities certificates (Arts. 967 & 969 of SCO). Meanwhile, although Swiss Civil Code (“SCC”) does not have a clause defining a thing (Sache), objects of ownership regarding movables (Fahrniseigentum) are tangible things and natural forces that may be subject to legal control (Art. 713 of SCC), and it is understood that corporeality (Körperlichkeit) is the central element in the definition of things. As in Germany, transfer of movables is required to deliver possession of the movables to the transferee (Art. 714 of SCC). As a result, Switzerland also employs a medium of papers to apply the rules of property law to securities and their transfers, treating the papers as tangible things.

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Notes

  1. 1.

    For the features of Swiss civil law, see Konrad Zweigert & Hein Kötz, Introduction to Comparative Law, 3d ed. trans. by Tony Weir (New York: Oxford University Press, 1998) at 167~179; Ernst Rabel, “Private Laws of Western Civilization: Part III. The German and the Swiss Civil Codes” (1949-1950) 10 La. L. Rev. 265 at 271~275.

  2. 2.

    Swiss Bundesrat, Botschaft zum Bucheffektengesetz sowie zum Haager Werpapierübereinkommen (15. 11. 2006) (hereinafter, the “Explanatory Report”) at 9321 (explaining that the connection of a right and a certificate is the central element of the securities definition in Switzerland); Matthias Lehmann, Finanzinstrumente: vom Wertpapier- und Sachenrecht zum Recht der unkörperlichen Vermögensgegenstände (Tübingen: Mohr Siebeck, 2009) at 162 (pointing out that the securities definition in Switzerland is strongly influenced by the German concept).

  3. 3.

    Bundesgesetz betreffend die Ergänzung des Schweizerischen Zivilgesetzbuches (Fünfter Teil: Obligationenrecht) vom 30. März 1911.

  4. 4.

    See General Introduction, III. A. 1 for a definition of securities in Germany.

  5. 5.

    The original text is “Wertpapier ist jede Urkunde, mit der ein Recht derart verknüpft ist, dass es ohne die Urkunde weder geltend gemacht noch auf andere übertragen werden kann.”

  6. 6.

    Schweizerisches Zivilgesetzbuch vom 10. Dezember 1907.

  7. 7.

    See Wolfgang Wiegand, in Heinrich Honsell, Nedim Peter Vogt & Thomas Geiser, eds., Basler Kommentar: Zivilgesetzbuch II, 3d ed. (Basel: Helbing Lichtenhahn Verlag, 2007) at 775~778; Robert Haab et al., Das Sachenrecht, Erst Abteilung: Das Eigentum (Zürich: Schulthess Polygraphischer Verlag, 1977) at 9~13; Bénédict Foëx & Sylvain Marchand, “National Report on the Transfer of Movables in Switzerland” in Wolfgang Faber & Brigitta Lurger, eds., Nathonal Reports on the Transfer of Movables in Europe, vol. 6 (Munich: Sellier, 2011) at 183~184 for discussion concerning the definition of a thing in Swiss civil law.

  8. 8.

    For more details of the Swiss intermediated system before the legal reform, see the Explanatory Report at 9326~9327; Martin Hess & Alain Friedrich, “Das neue Bucheffektengesetz (BEG): Hinweise auf Grundlagen und praktische Auswirkungen” (2008) 2 GesKR 98 at 100~102; Hans Kuhn, “Preliminary Comments” in Hans Kuhn, Barbara Graham-Siegenthaler & Luc Thévenoz, eds., The Federal Intermediated Securities Act (FISA) and the Hague Securities Convention (HSC) (Berne: Stäpfli, 2010) (hereinafter, “BEG Commentary”) at 126~128, paras. 3~10; Barbara Graham-Siegenthaler, the BEG Commentary at 549~550, paras. 7~12.

  9. 9.

    Article 2(a) of the Federal Securities Exchange and Transaction Act (Bundesgesetz über die Bösen und den Effektenhandel, BEHG) defines Wertrecht as “an uncertificated right with the same function as securities certificates.” The provision does not, however, provide legal clarification of the concept. As explained below, Article 973c of SCO newly introduces a similar definition, and lays the legal foundation for the Wertrecht concept. Kuhn explains that the fundamental reason for introducing the concept of Wertrecht in the late 1990s lies in the fact that the notions of collective custody and global securities certificates could not be applied to registered shares in Switzerland (Hans Kuhn, the BEG Commentary at 127, para. 6).

  10. 10.

    See Christoph Brunner, Wertrecht—nicht verurkindete Rechte mit gleicher Funktion wie Wertpapiere: Ein Beitrag zur rechtlichen Erfassung des Effektengiroverkehrs (Bern: Stämpfli+Cie AG, 1996) at 121~172; Mattias Lehmann, supra note 2 at 84; Martin Hess & Alain Friedrich, ibid. at 102, nn. 42~43 for an history of the aufgeschoben Titeldruck concept, and the definitions of these concepts.

  11. 11.

    Jörg A Witmer, “New Law Cures Paperless Securities Headache” (2 June 2005) I.F.L.R., available at http://www.iflr.com/Article/1984815/New-law-cures-paperless-securities-headache.html.

  12. 12.

    Swiss National Bank, “Legal Certainty Group - Information about Non-EU Legal Systems” (25 January 2006) at 1~2, available at http://ec.europa.eu/internal_market/financial-markets/docs/certainty/swiss_law_letter_en.pdf.

  13. 13.

    In the old Swiss intermediated system, a book-entry did not have a constitutive effect, but rather a mere declarative effect (Martin Hess & Alain Friedrich, supra note 8 at 101).

  14. 14.

    The Explanatory Report at 9328; Martin Hess & Alain Friedrich, ibid.; Hans Kuhn, the BEG Commentary at 127, para. 8.

  15. 15.

    The Explanatory Report at 9328. There was a minority view that a book-entry of uncertificated securities should have a constitutive effect for transfer of uncertificated securities (the Explanatory Report at 9328; Hans Kuhn, the BEG Commentary at 127, para. 9).

  16. 16.

    See HCCH Permanent Bureau (Christophe Bernasconi). Prel. Doc. No 1 of November 2000 - Report on the Law Applicable to Dispositions of Securities Held through Indirect Holding Systems at 55~60; the Explanatory Report at 9330~9331 for prior legal problems in relation to private international law in Switzerland. It is, however, reported that there has been no case disputed in a Swiss court with regard to the issues of substantive law and private international law involved in intermediated securities.

  17. 17.

    SIX SIS AG has been part of SIX Group since 2008, and is the Swiss CSD.

  18. 18.

    The Explanatory Report at 9337. For more detailed legislative history of BEG, see Hans Kuhn, the BEG Commentary at 128~132, paras. 11~19.

  19. 19.

    Wertpapierverwahrungsgesetz (WVG). The draft and the commentary on the draft written by Hans Caspar von der Crone, Franz J. Kessler and Andreas Gersbach are downloadable at http://www.vondercrone.ch/Kommentar%20WVG%2006.01.2003.pdf.

  20. 20.

    The Explanatory Report at 9338; Swiss National Bank, supra note 12 at 2; Hans Caspar von der Crone & Eva Bilek, “Aktienrechtliche Querbezüge zum geplanten Bucheffektengesetz (BEG)” (2008) 2 SZW/RSDA 193 at 195.

  21. 21.

    The Explanatory Report at 9378; Luc Thévenoz, the BEG Commentary at 171~173, paras. 42~50.

  22. 22.

    Under BEG, the term insolvency refers to the case of a compulsory liquidation proceedings, which concerns winding-up of insolvent intermediaries’ assets; thus it excludes reorganisation or composition (Martin Hess & Heidi Sägesser, BEG Commentary at 302, para. 16).

  23. 23.

    Ibid. at 9349; Martin Hess & Alain Friedrich, supra note 8 at 104; Hans Caspar von der Crone & Eva Bilek, supra note 20 at 196.

  24. 24.

    The Explanatory Report at 9357.

  25. 25.

    The term account holder (Kontoinhaberin) is defined as a person or group of persons (Personengesamtheit) in whose name an intermediary maintains a securities account (Effektenkonto) (Art. 5(b) of BEG).

  26. 26.

    The term investor (Anlegerin) is defined as an intermediary holding Bucheffekten for its own account, or an account holder that is not an intermediary (Art. 5(c) of BEG).

  27. 27.

    See BEG Commentary at 292, para. 7 (hinting the legal relation presupposes a mandate).

  28. 28.

    See Article 13 of BEG. Articles 13 and 33(5) are the only provisions employing the term investor. In all other instances, BEG uses the term account holder.

  29. 29.

    However, as discussed below, it seems that BEG does not provide more reliable mechanisms for preventing excess credits and their effect vis-à-vis the issuer.

  30. 30.

    Kuhn clearly supports this interpretation (Hans Kuhn, the BEG Commentary at 236, para. 66, stating that credit book-entries of foreign securities held with an intermediary outside Switzerland to an account opened with an intermediary in Switzerland constitute Bucheffekten as defined in Article 3 of BEG, without regard to whether the legal position of the account holder acquired as a result of such credits is equivalent to the legal position that the account holder may enjoy in respect of Bucheffekten to which only Swiss law applies). For reference, foreign securities held with an intermediary outside Switzerland cannot be underlying assets in Article 6 of BEG; thus Article 6 is not applicable to them. However, foreign securities held with an intermediary in Switzerland can be underlying securities of Article 6. For details as to this issue, see further Subsection II. D of this Chapter; the BEG Commentary at 198~200, 235 (para. 62) and 571~572.

  31. 31.

    Martin Hess & Alain Friedrich, supra note 8 at 104; the Explanatory Report at 9348~9349.

  32. 32.

    See Art. 2(1) of BEG.

  33. 33.

    See Martin Hess & Alain Friedrich, supra note 8 at 104 (denying any rights from the co-ownership in the collective securities bulk); Hans Caspar von der Crone & Eva Bilek, supra note 20 at 196; the Explanatory Report at 9349; Barbara Graham-Siegenthaler, the BEG Commentary at 551, para. 15.

  34. 34.

    The Explanatory Report at 9351.

  35. 35.

    Martin Hess & Alain Friedrich, supra note 8 at 106; Frédérique Bensahel & Marco Villa, “Switzerland: New Federal Legislation on the Custody and Transfer of Securities Held by an Intermediary” (December 2009) Securities Law Newsletter at 38. According to a survey of the Swiss financial market, more than 80 percent of intermediated securities held with Swiss intermediaries are foreign securities, and around 50 percent of securities are held on behalf of foreign account holders (Hans Kuhn, the BEG Commentary at 133, para. 22).

  36. 36.

    See Martin Hess & Alain Friedrich, ibid. at 107; Hans Kuhn, the BEG Commentary at 236, paras. 64~66.

  37. 37.

    Martin Hess & Alain Friedrich, ibid. at 106~107. Dalla Torre and Germann also agree with this opinion (Luca Dalla Torre & Martin Germann, “12 Antworten zum neuen Bucheffektengesetz” (2009) 4 GesKR 573 at 573, n. 4).

  38. 38.

    Under Article 4, only enumerated financial firms may be an intermediary in BEG. A CSD, CCP, and the Swiss central bank are also intermediaries.

  39. 39.

    Dalla Torre and Germann also mention that there is no medium other than the certification under Article 16 by which one can be identified as a bearer shareholder (Luca Dalla Torre & Martin Germann, supra note 34 at 574, n. 15).

  40. 40.

    In accordance with Article 16, an intermediary may issue a certification to any of its account holder whether an investor or not, because Article 16 adopts the term account holder, and there is no other restriction as to the issuance in BEG, unlike Article 12(2), which prohibits disposition of investors’ Bucheffekten. It goes without saying that issuance of the certification itself is not a disposition of Bucheffekten at all, but can be related to a disposition.

  41. 41.

    See UCC S. 8-501 cmt. 3; Chapter 4. IV. A. 1.

  42. 42.

    In the definition of a financial asset, a security entitlement is included; thus a security entitlement can be created based on a security entitlement in the U.S. intermediated system.

  43. 43.

    The Explanatory Report at 9345; Martin Hess & Alain Friedrich, supra note 8 at 103~104; Hans Caspar von der Crone & Eva Bilek, supra note 20 at 194.

  44. 44.

    The Explanatory Report at 9368; Martin Hess & Alain Friedrich, ibid. at 103 & 117; Hans Caspar von der Crone & Eva Bilek, ibid. at 197.

  45. 45.

    Luca Dalla Torre & Martin Germann, supra note 34 at 573. As mentioned in Subsection II. A, Article 6 of BEG does not directly apply to foreign securities held with a foreign intermediary outside Switzerland, but other provisions of BEG can still be applicable to the credit entries of foreign securities to accounts of investors and their intermediary in Switzerland, even if the relationship between the intermediary in Switzerland and the foreign intermediary is governed by a foreign law (see Hans Kuhn, the BEG Commentary at 233~236, paras. 54~67).

  46. 46.

    Luca Dalla Torre & Martin Germann, ibid. at 574 & n. 5.

  47. 47.

    Martin Hess & Alain Friedrich, supra note 8 at 113; Hans Caspar von der Crone & Eva Bilek, supra note 20 at 206~207; Martin Hess & Katja Stöckli, “Das Bucheffektengesetz: Grundzüge und Missverständnisse” (2010) 3 Anwaltsrevue 115 at 115.

  48. 48.

    The Explanatory Report at 9342~9343; Barbara Graham-Siegenthaler, the BEG Commentary at 143, para. 14.

  49. 49.

    See Arts. 973a (collective custody); 973b (global securities certificates); 973c (uncertificated securities); Barbara Graham-Siegenthaler, the BEG Commentary at 554~578 for details of these notions under SCO.

  50. 50.

    Cf. Arts. 5 and 9a of Depotgesetz. For reference, uncertificated securities (Wertrechte) are defined as rights with the same function as securities certificates, and the issuer may convert fungible securities certificates or global certificates into uncertificated securities, insofar as the issuance condition or Articles of Incorporation so provide, or the investor who deposits the securities certificates or global certificates agrees (Art. 973c(1)). The issuer of uncertificated securities is required to maintain the uncertificated securities book which is not public (Art. 973c(2)). In addition, uncertificated securities are created by registration, and exist only in accordance with the registration (Art. 973c(3)). Transfer or pledge of uncertificated securities are the same as with claims, requiring a written agreement (Art. 973c(4)). The issuer of uncertificated registered shares, therefore, maintains the shareholders’ book and the uncertificated securities book. Since the intermediary which registered the uncertificated securities maintains the main register, three books may exist in relation to uncertificated registered shares. Uncertificated securities are registered in a public main register maintained by a single intermediary for each issue (Art. 6(2) of BEG). See Martin Hess & Alain Friedrich, supra note 8 at 108~112; Martin Hess & Katja Stöckli, supra note 44 at 115~116 for comparison of the three books. See also Barbara Graham-Siegenthaler, the BEG Commentary at 565~578; Christoph Steiner & Raffael Büchi, “Vom Wertrecht zur Bucheffekte - Kristallisation aus dem Nichts” (2007) 1 GesKR 1 for more detailed discussions regarding uncertificated securities in Switzerland.

  51. 51.

    Martin Hess & Alain Friedrich, supra note 8 at 105.

  52. 52.

    Although Article 8 of BEG uses the term account holder, the right to return securities certificates also seems to be given to investors; thus the investors’ intermediary has no right to return any of its customers’ securities. Article 12(2) of BEG prohibits an intermediary from disposing of its account holders’ Bucheffekten.

  53. 53.

    See the Explanatory Report at 9335 and 9396~9397.

  54. 54.

    In fact, Korean and Japanese registered shares have a similar character.

  55. 55.

    The Explanatory Report at 9358.

  56. 56.

    In practice, occurrence of the above assumption is unlikely, but if Intermediary X is the CSD, it is possible, because upon deposit of individual or global securities certificates in the Swiss intermediated system, it appears that there is no separate legal ledger which can be collated with the account book of the CSD, to which inflated Bucheffekten are credited.

  57. 57.

    It seems highly likely that the meeting itself may be challenged due to the lack of majority representation.

  58. 58.

    See Chapter 4. IV. C & D.

  59. 59.

    See Chapter 6. V. A.

  60. 60.

    The text of Article 11(2) reads that “should the number of the available Bucheffekten be less than the sum of the credits of the intermediated securities (Bucheffektenguthaben, or titres disponibles (available securities) in French), the intermediary must, without delay, acquire Bucheffekten to the extent of the shortfall.” The original German text reads that “[i]st die Menge der verfügbaren Bucheffekten kleiner als die Summe der Effektenguthaben, so muss die Verwahrungsstelle ohne Verzug Bucheffekten im Umfang des Unterbestandes erwerben.”

  61. 61.

    The Explanatory Report at 9367 (disposition is defined as “any juristic act changing the transferor’s holdings of intermediated securities.”). See Antoine Eigenmann, the BEG Commentary at 364~365, paras. 8~10 for detailed explanation of the notion of disposition under BEG.

  62. 62.

    Article 24 itself does not specifies the requirement of agreement for transfer, and in fact the causality principle is not required under BEG (Antoine Eigenmann, the BEG Commentary at 367).

  63. 63.

    The Explanatory Report at 9368.

  64. 64.

    Ibid. at 9359; Antoine Eigenmann, the BEG Commentary at 376, para. 10. An instruction is also a juristic act requiring a receipt (empfangsbedürftig). According to Article 15 of BEG, the intermediary is required to perform an instruction by its account holder in accordance with the agreement with the account holder (Art. 15(1)), and has neither rights nor obligation to verify the legal ground of the instruction (Art. 15(2)). Further, the account holder may cancel the instruction until the moment designated by the agreement with the intermediary, or by the applicable rules and regulations for a securities clearing and settlement system (Art. 15(3)(s.1)). However, the instruction becomes irrevocable, in any case where the intermediary has made a debit entry to the account holder’s account (Art. 15(3)(s.2)). With regard to instructions, BEG requires no formality (Antoine Eigenmann, the BEG Commentary at 377, para. 11).

  65. 65.

    As a result, the transferor does not lose her legal status regarding the Bucheffekten debited from her account, until the transferee receives a credit entry to her account (Antoine Eigenmann, the BEG Commentary at 380, para. 22). In addition, the Swiss intermediated system does not, however, theoretically preclude temporally discrepant entries, especially in cross-border settlements (the Explanatory Report at 9369). It seems that this theoretical possibility of temporal discrepancy with respect to cross-border settlements is not a unique phenomenon in the Swiss intermediated system, but is found in almost all intermediated systems adopting a matching system.

  66. 66.

    The Explanatory Report at 9349.

  67. 67.

    Dalla Torre and Germann also maintain that the admission of an assignment method is diametrically against the concept and purposes of BEG’s arrangement (Luca Dalla Torre & Martin Germann, supra note 34 at 577).

  68. 68.

    The Explanatory Report at 9369.

  69. 69.

    In French, the term extourne is used. Stornierung may be translated as cancellation, but the term reversal is employed, in accordance with the term used in the Geneva Securities Convention and the French term extourne.

  70. 70.

    The Explanatory Report at 9374.

  71. 71.

    Qualified investors are intermediaries, insurance firms under supervision, public institutions, pension funds, or firms with a professional treasury (Art. 5(d)).

  72. 72.

    The Explanatory Report at 9375.

  73. 73.

    See Luca Dalla Torre et al., “Sicherheiten nach Bucheffektengesetz - theoretische und praktische Aspekte” (2010) 1 Recht 16 for a more detailed discussion of collateralisation of Bucheffekten in BEG.

  74. 74.

    The Explanatory Report at 9370.

  75. 75.

    See Articles 31 and 32 of BEG.

  76. 76.

    The Explanatory Report at 9367; Martin Hess & Katja Stöckli, supra note 44 at 117; Luca Dalla Torre et al., supra note 69 at 17; Luca Dalla Torre & Martin Germann, supra note 34 at 577~578. Thus, the term acquirer in Article 24 includes a secured party.

  77. 77.

    Luca Dalla Torre et al., ibid. at 17~19 & n. 9; Martin Hess & Katja Stöckli, ibid.

  78. 78.

    The Explanatory Report at 9367.

  79. 79.

    Security interests created by a control agreement are interpreted to cover any types of security interests intended in Swiss law, such as regular and irregular pledge, fiduciary transfer, repo agreement, etc. In addition, it is commented that despite the term security interest, Article 25 envisages that it is possible to make a conceptual, fiduciary outright transfer of full rights to Bucheffekten through a control agreement, although unlikely in practice (Antoine Eigenmann, the BEG Commentary at 390, paras. 13~14).

  80. 80.

    Luca Dalla Torre et al., supra note 69 at 21.

  81. 81.

    See the Draft Official Commentary at para. 1-47 for more explanation of negative and positive control in the Geneva Securities Convention.

  82. 82.

    Under UCC Section 8-106(d)(2), a control agreement means an agreement that the intermediary will follow the purchaser’s entitlement orders without further consent by the entitlement holder. The only requirement in UCC Section 8-106(d)(2) for an effective control agreement is that the collateral taker must be conferred with control.

  83. 83.

    See Chapter 4. IV. B. and n. 185; UCC S. 8-106 cmt. 4.

  84. 84.

    Luca Dalla Torre et al., supra note 69 at 21; Martin Hess & Katja Stöckli, supra note 44 at 117. In the U.S., it is explained that a control agreement between the collateral taker and the intermediary of the collateral provider, without the collateral provider, is also possible. (see William D. Hawkland, James S. Rogers & Carl S. Bjerre, 7A Hawkland’s Uniform Commercial Code Series (Database updated in Oct. 2010) at S. 8-106:4). According to the BEG Commentary, it is not permissible to enter into a control agreement only between the collateral provider and the collateral taker of which the collateral provider’s intermediary must receive notice, unlike Article 1(k) of the Geneva Securities Convention (Antoine Eigenmann, the BEG Commentary at 391, para. 16). Accordingly, it seems that a control agreement between the collateral taker and the collateral provider’s intermediary is also not allowed under BEG, even if the collateral provider consents to the agreement at a later time (cf. Chapter 1. II. B. 1. c. & n. 69 and Chapter 4. IV. B. & n. 186).

  85. 85.

    This is the same in the interpretation of Section 8-106(d)(2) of UCC (see William D. Hawkland, James S. Rogers & Carl S. Bjerre, ibid.).

  86. 86.

    The Explanatory Report at 9370.

  87. 87.

    Ibid.; Luca Dalla Torre & Martin Germann, supra note 34 at 579.

  88. 88.

    This is one of the reasons that a tri-party control agreement is recommended (Luca Dalla Torre & Martin Germann, ibid. at 579, n. 61).

  89. 89.

    See Luca Dalla Torre et al., supra note 69 at 22 for more detailed discussion of this issue.

  90. 90.

    Martin Hess & Alain Friedrich, supra note 8 at 116; Luca Dalla Torre et al., ibid.

  91. 91.

    Under Swiss law, a usufruct is a kind of limited right in rem (easement) to use and/or possess tangible or intangible things without a right to dispose of them (Antoine Eigenmann, the BEG Commentary at 397, para. 40).

  92. 92.

    Article 895(1) of SCC provides that when tangible things and securities certificates are in possession of the creditor through the debtor’s consent, the creditor has the right to retain them until her claim is satisfied, insofar as such claim is due, and its nature is connected with the objects retained. For the relationship between Article 21 of BEG and other relevant provisions for rights of retention under SCC, SCO, and BEG, see Bénédict Foëx, the BEG Commentary at 338~340, paras. 7~12.

  93. 93.

    Although Bucheffekten are not tangibles, BEG still employs the term custody. This should have been worded administration, instead of custody.

  94. 94.

    Bénédict Foëx, the BEG Commentary at 343, para. 30; Hans Kuhn, the BEG Commentary at 472, para. 15 & 473, para. 19.

  95. 95.

    Luca Dalla Torre et al., supra note 69 at 25.

  96. 96.

    Article 23 adopts the term account holder, but this should be read as an investor, because an intermediary-account holder has, in principle, no right to dispose of its customers’ securities, pursuant to Article 12(2) of BEG.

  97. 97.

    Again, although Article 26 uses the term account holder, this should be read as an investor, as the same reason of the above footnote.

  98. 98.

    Luca Dalla Torre et al., supra note 69 at 23.

  99. 99.

    Martin Hess & Katja Stöckli, supra note 44 at 118; Antoine Eigenmann, the BEG Commentary at 403, para. 18.

  100. 100.

    Luca Dalla Torre et al., supra note 69 at 23.

  101. 101.

    Article 26(3) of the 2006 draft BEG; the Explanatory Report at 9372.

  102. 102.

    Despite the fact that Article 22 adopts the term account holder, this should be read as an investor for the same reason pointed out in footnote 92 of this Chapter.

  103. 103.

    Luca Dalla Torre et al., supra note 69 at 24.

  104. 104.

    Ibid.

  105. 105.

    The original text is that “[h]at die Kontoinhaberin oder der Kontoinhaber der Verwahrungsstelle Bucheffekten als Sicherheit übertragen.”

  106. 106.

    The original text is that “[s]i le titulaire d’un compte a conféré au dépositaire une sûreté sur des titres intermédiés.”

  107. 107.

    This conclusion may vary depending on the opinion recognising that a limited interest can also be created by transferring Bucheffekten to the secured party’s account. This author holds the opinion that a security interest created by Article 24, i.e. book-entry transfer is always a title transfer of full rights for a security purpose (Sicherungsübertragung). In this position, if the transferee is an innocent acquirer, the original holder of the Bucheffekten, i.e. the debtor-relevant intermediary’s customer loses all her rights to the Bucheffekten.

  108. 108.

    The Explanatory Report at 9376.

  109. 109.

    Ibid.

  110. 110.

    Ibid. at 9377.

  111. 111.

    Ibid. However, even in the case of the transferor-intermediary’s insolvency, some dispositions of participants in the securities clearing and settlement system are protected, based on Article 20(2).

  112. 112.

    Swiss National Bank, supra note 12 at 11. For more details concerning the meaning of good faith under Article 29(1), see Bénédict Foëx, the BEG Commentary at 458~461.

  113. 113.

    The Explanatory Report at 9377.

  114. 114.

    Ibid.

  115. 115.

    Cf. ibid. at 9379.

  116. 116.

    It is explained that this is because Bucheffekten are not tangibles; thus no property law rule is applicable (ibid. at 9378).

  117. 117.

    Ibid.

  118. 118.

    See Art. 24(2).

  119. 119.

    The Explanatory Report at 9379.

  120. 120.

    The underlying situation of Article 30(2) is similar to that in Article 19(4) of the Geneva Securities Convention, and both rules in Article 30(2) and 19(4) are identical. For reference, in the U.S., when an intermediary grants security interests, a pledge agreement or HIC Repo agreement which requires no book-entry transfer is usually employed, instead of a control agreement (see Chapter 4. IV. B.).

  121. 121.

    Hans Kuhn, the BEG Commentary at 473, para. 19.

  122. 122.

    In the French version, the term titres disponibles (available securities) is used.

  123. 123.

    See Articles 12(1) and 17(2).

  124. 124.

    This is a rebuttable statutory presumption (the Explanatory Report at 9362).

  125. 125.

    From the fact that the reform was initiated and performed mainly by majority members from the financial industry, it is no wonder that in the new Swiss intermediated system, there is no new scheme to protect investors, in the event of the intermediary’s insolvency.

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  1. Korea Capital Market Institute, Seoul, Republic of Korea (South Korea)

    Dr. iur. Changmin Chun LL.M.

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  1. Dr. iur. Changmin Chun LL.M.
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© 2012 Springer-Verlag Berlin Heidelberg

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Chun, C. (2012). Chapter 7. The Intermediated System in Switzerland. In: Cross-border Transactions of Intermediated Securities. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-27853-2_8

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