Editing Direct holding system (section)

==Legal ramifications==
In a system that used paper certificates for securities, the doctrine of ''lex loci rei sitae'' (the law of the place of location of the securities) was applied to determine the validity of certain rights in or transfers of securities. In the case of bearer securities, this is taken to be the law of the jurisdiction where the certificates actually are (e.g., in a pledge, where the recipient of the collateral takes possession of the securities certificate at the time of transfer). In the case of registered securities, the ''lex loci rei sitae'' is either the law of the issuer's jurisdiction or the law of the jurisdiction where the securities records of the issuer or its official recordholder are located at the time of transfer.  In a system in which securities are mostly held indirectly through brokers and banks (as discussed above) or in which securities are evidenced mainly on accounts (referred to as "dematerialization") rather than by certificates, an alternative rule of "the law of the relevant intermediary" has come to be used.  According to this rule, the law chosen in the account agreement with the financial institution that holds the account in which the securities are evidenced or the place where the office of the intermediary with which the account holder normally deals is the law used. This is the technique used in the [[Hague Securities Convention|Hague Convention on The Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary]], and also used in the Article 8, "Investment Securities" of the [[United States]] [[Uniform Commercial Code]].  The advantages of this rule for international financial transactions is that wherever securities are located or regardless of how many offices and branches a financial institution has, persons dealing in the securities can know the law that will govern a transaction such as a sale, a pledge or a loan of securities.