Securities in global form: Overview, definition, and example
What are securities in global form?
Securities in global form refer to securities that are issued and held in a central or global register rather than in physical certificates. These securities exist only electronically, and their ownership and transfer are recorded in a centralized system. Global form securities are commonly used for bonds, stocks, or other financial instruments that are traded on international markets.
The global form allows for easier trading and transferring of securities, as it eliminates the need for the physical transfer of certificates. Instead, the ownership of the security is represented by a book entry in the global register maintained by a clearinghouse, depositary, or other centralized entity. This system enhances efficiency, reduces paperwork, and lowers transaction costs.
Why are securities in global form important?
Securities in global form are important because they streamline the process of issuing, trading, and settling financial instruments. By eliminating physical certificates, they make transactions faster, more efficient, and secure. This is especially useful for international markets where investors from different countries need to buy and sell securities seamlessly.
For businesses, using global form securities can reduce administrative costs, minimize the risk of lost or stolen certificates, and simplify the transfer of ownership. For investors, it ensures a more efficient and transparent way to hold and transfer their investments. It also facilitates greater liquidity in the global market, allowing securities to be traded more easily across borders.
Understanding securities in global form through an example
Imagine a company issuing a bond to raise capital for a new project. Instead of issuing physical bond certificates to each investor, the company opts to issue the bonds in global form. These bonds are recorded electronically in a central depository, where the ownership details of each bondholder are stored.
When an investor buys the bond, the transaction is recorded in the global register, and ownership is transferred electronically. The investor does not receive a physical bond certificate but can view and manage their holdings through their brokerage account or financial platform. The ease of electronic transfers allows the bond to be traded in international markets with much greater efficiency.
In another example, a company may issue shares in global form to a global investor base. Rather than issuing paper stock certificates, the shares are held electronically by a global depository, and investors receive an electronic statement of their ownership. This system makes it easier for the company to handle shareholder communications, dividends, and trading activity.
An example of a securities in global form clause
Here’s how a securities in global form clause might look in a contract:
“The Securities issued under this Agreement shall be represented by a Global Security in electronic form, registered in the name of the nominee of the Depositary. Ownership of the Securities will be recorded through book-entry accounts maintained by the Depositary and will not involve physical certificates. Transfer of ownership and settlement of the Securities shall be conducted in accordance with the procedures set by the Depositary.”
Conclusion
Securities in global form represent a more modern and efficient way of managing financial instruments, eliminating the need for physical certificates. This system reduces administrative overhead, speeds up transactions, and enhances the liquidity of securities in global markets. For both companies and investors, securities in global form provide a secure, efficient, and cost-effective method of handling ownership and transfers, especially in international financial markets.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.