Erica johansson

INTEREST IN SECURITIES UNDER SWEDISH LAW <*>

--------------------------------

<*> Редакция и издательство "Статут" благодарят автора и издательство "Springer" за любезное разрешение опубликовать данный текст. - Примеч. ред.

Dr Erica Johansson is a Partner at Advokatfirman Delphi in Stockholm, Sweden. An earlier version of this article has been published in: Johansson E. Property Rights in Investment Securities and the Doctrine of Specificity. Springer, 2009.

1. Introduction

This article discusses the question of interests in securities that are unallocated in relation to their entitlement holders. It also examines reuse of financial collateral under Swedish law, characterisation of repurchase agreements (repos) and the implementation of the Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements (Financial Collateral Directive) that came into effect on 1 May 2005. These questions are examined from the perspective of the doctrine of specificity, which requires the object of a property right to be identifiable on a continuous basis for the property right to remain.

2. Interest in securities

In Sweden securities are generally issued in either registered or bearer format. All Swedish securities registered in Euroclear Sweden's VPC-system are dematerialised and, from a legal perspective, held either on owner or nominee accounts <1>. Under the Financial Instruments Accounts Act (1998:1479) (FIAA), registration has been compared with possession of bearer documents. This means that the registration confers similar legal effects as possession of a bearer document <2>. A registration on an owner account gives the account holder the legitimate capacity to act as the owner of the securities on the account <3>. As for nominee accounts, a custodian - which normally is an authorised bank or a broker - holds the securities on behalf of the owner. The owner's holdings are registered in the books of the custodian who keeps the account with Euroclear Sweden <4>.

--------------------------------

<1> Foreign securities can however be immobilised (cf.: Ch. 4, § 4 - 5 FIAA).

<2> Cf.: Ch. 6 and Ch. 3, § 10 FIAA; L. Afrell, H. Klahr & P. Samuelsson, i ( ed., Norstedts Juridik AB, 1998). P. 92 - 93.

<3> Cf.: Ch. 6, §§ 1 - 4 FIAA; L. Afrell & K. Wallin-Norman, Direct or Indirect Holdings: A Nordic Perspective, Unif. L. Rev. (2005-1/2). P. 279.

<4> Cf. Ch. 3, § 10 FIAA; L. Afrell & K. Wallin-Norman, Direct. P. 279. Only authorised institutions are permitted to act as account keeping institutions and to book transactions on accounts (Ch. 3, §§ 1 - 6 FIAA). If a nominee is not authorised to act as an account keeping institution, it will have to have an arrangement with such institution or with Euroclear Sweden that performs the registrations on the account.

Securities held on nominee accounts can belong to different owners. In other words, it is possible for the account holder to mix the securities and hold them on an unallocated basis. However, also in relation to securities held on owner accounts, the securities are held on a fungible basis. The International Securities Identification Number (ISIN) assigned by Euroclear Sweden that identifies securities does so only in relation to name, type and series of the securities. Even if the securities are registered on an owner account they do not exist on the account as such and can therefore not be located. Identification is therefore only possible in relation to a certain quantity.

A security interest in securities is regardless if the securities are in registered or bearer form foremost created by using the pledge. Another method is to use title transfer structures. For securities registered in the VPC-system, transfers and pledges take place via book entry on the register <1>. A pledge is created by designating the collateral to the collateral-taker on the securities account of the collateral-provider <2>. Title transfers involve the transfer of the collateral to the account of the collateral-taker.

--------------------------------

<1> Ch. 6, § 1 - 4 and 7 FIAA.

<2> Euroclear Sweden General Terms: Account Keeping and Clearing (2009-02-07). P. 50.

For the agreement between the collateral-provider and the collateral-taker to be effective in relation to third parties, the security interest must be perfected. The method of perfection is determined by the type of assets that the security is taken over and the type of transaction. Generally, the same type of measure applies to both security and title transfer arrangements <1>. For securities registered on owner accounts in the VPC-system, transfers and pledges become effective when registered <2>. Perfection is thus achieved through registration, which protects the collateral-taker from the creditors of the collateral-provider and other third parties <3>. As for nominee accounts, notification to the custodian has the same effect as registration on the account; the notification provides the collateral-taker protection in relation to third parties <4>. A security interest in bearer instruments is perfected by taking the documents into possession <5>. Should the instruments be in the possession of a third party, perfection is achieved by notifying the third party <6>.

--------------------------------

<1> In contrast to many other jurisdictions, outright transfers must generally be perfected to be effective.

<2> Ch. 6, § 1 - 4 and 7 FIAA.

<3> Cf. Ch. 6 FIAA.

<4> Ibid., ch. 3, § 10.

<5> Cf. § 10 and 22 Promissory Notes Act (1936:81).

<6> Cf.: NJA, 1949. P. 164; NJA, 1980. P. 197; §§ 10 and 31 Promissory Notes Act; Act (1936:88) on Pledge of Chattels Held by a Third Party.