Securities Registration and Transfer All profit companies are required to maintain a securities register, which is a register reflecting

the names of all current holders of shares. What is a security? Shares, stocks and depository receipts in public companies and other equivalents equities other than shares in share block company Notes Derivatives Debentures Participatory interests in a collective scheme Instruments based on an index

Definition is much broader than that of a share; a share is a form of a security. (Contrast this with the definition of share from earlier unit) Securities can be either listed or unlisted Listed means that they are listed on a securities exchange, a securities exchange is a marketplace for buying and selling securities. Listed securities means that the public being both local and foreign investors are able to acquire and dispose of securities. The JSE used to be an open outcry system, but now everything is electronic. The benefit of it being Electronic: everything is instant, i.e. instant trading There is quick recording and transparency and accuracy in market dealings Reduces costs SA now competes with other markets, not just the emerging markets

Certificated vs. uncertificated securities: A certificated security is one that is evidenced by a certificate i.e. a paper document that can be seen and held Uncertificated security is a security that is not evidenced by a certificate or a written instrument, it is transferable without entry of a written documents. E.g. electronic securities. All securities must be either electronic or written i.e. certificated or uncertificated.

Only uncertificated securities are traded on the JSE. Nature of a Certificate: Certificate is not a negotiable instrument Serves as evidence of ownership No value in itself Evidence of a right

If ownership is transferred, it is not necessary to transfer the certificate, a new certificate is issued. This certificate is proof that the names securities holder owns the securities referred to in the certificate in the absence of evidence to the contrary. The requirements, the certificate must state: The name of the issuing company The name of the person to whom the security is issued The number and the class of the shares/securities Any restrictions on the transfer of the securities Must be signed by 2 persons of the board

Securities register Every company must establish a securities register It must maintain this register The total number of securities held in a uncertificated form must be reflected All the information must be maintained in the securities register

Central securities depository A central securities depository is licensed to operate the electronic system for the holding and transfer of uncertificated securities. The current licensee is STRATE. A participant is a person who administers securities and who has been accepted as a participant by the central securities depository Only participants can liaise directly with STRATE. Persons trading in uncertificated securities and their brokers must therefore work through a participant There are 6 (six) participants: 1. ABSA 2. FNB 3. Nedbank 4. Standard Bank

5. Societe Generale 6. Computershare If a person wishes to inspect a companys uncertificated securities register, they may do so only through a relevant company and in accordance with the rules of the central securities depository Nominee A nominee is defined as a person that acts as the registered holder of securities or an interest in securities on behalf of other persons. The nominee is nominated by the owner of the securities on behalf of the other persons. The nominee holds the securities in name only. The true owner is referred to as the beneficial owner Beneficial Interest Defined as the person, usually the owner who is entitled to participate in any distribution; to exercise rights attached to securities e.g. to vote and to dispose of the security.

The company in practice recognises only the nominee as the registered holder of the securities so that the owner has to exercise his rights against the company through the nominee Which companies can use nominee arrangements? Any company unless the MOI prohibits it can have securities held by and registered in the name of one person for the beneficial interest of another. The Companies Act, 2008 clearly permits the use of nominee shareholders unless the MOI prohibits it. There are certain problems related to nominees: 1. Insider trading difficult to defect 2. Difficult for minority shareholders to establish when there is a change of control of the company 3. The company communicates with registered shareholders even if they are just nominees The nominee is required on a regular basis to disclose to the company the identity of the owners on whose behalf it holds securities and the extent of those holdings.

Transfer of shares: (Certificated) Agreement to transfer shares Drawing up of a document, showing that there is a transfer of shares Actual registration of change of ownership

Transfer of shares (Certificated) Only by a participant or central securities depository on receipt of either a properly authenticated instruction Debiting and crediting the relevant accounts Must be simultaneous with registration of ownership