Editing Uniform Commercial Code (section)

==Article 8==
[[File:Matchmaker-Com Stock Certificate.jpg|thumb|300px |A stock certificate, as distinct from a dematerialized interest in a security]]
The ownership of [[securities]] is governed by Article 8 of the Uniform Commercial Code (UCC). This Article 8, a text of about 30 pages,<ref>''See'' an online access to UCC Article 8 on [https://www.law.cornell.edu/ucc/8/ Cornell.edu]</ref> underwent important recasting in 1994. That update of the UCC treats the majority of the transfers of  interests in securities as transfers of interests in securities entitlements in issues held primarily by two American [[Central securities depository|central securities depositories]], respectively [[The Depository Trust Company]] (DTC) primarily for securities issued by corporations and the [[Federal Reserve]] for securities issued by the [[United States Department of the Treasury|U.S. Treasury Department]]. In this centralised intermediated system, the title transfer of the interests in the securities to the investor does not take place at the time of the registration of shares in the issue with the issuer's registrar for the investor, but rather within the intermediated systems custodied and managed by DTC or by the Federal Reserve.

This centralization is not accompanied by a centralized register of the beneficial owner investors/owners of the securities, such as in the systems established in Sweden and in Finland (so-called "transparent systems"). Neither DTC nor the Federal Reserve hold an individual register of the transfers of interests in securities entitlements reflecting beneficial owners. The consequence is that there is an intermediated holding system for the holding of interests in the securities entitlements. Each link in the chain is composed respectively of an account provider (or intermediary) and of an account holder.

The rights created through these links are contractual claims: these rights are of two kinds:

# For the links where the account holder is itself an account provider at a lower tier, the right on the security during the time where it is credited there is characterized as a "securities entitlement", which is an "ad hoc" concept invented in 1994: ''e.g.,'' designating a claim that will enable the account holder to take part to a prorate distribution.
# For each link of the chain, in which the final account holder is at the same time the final investor, its "[[security entitlement]]" is enriched by the "substantial" rights defined by the issuer: the right to receive, ultimately, as passed down from those holding above it,  dividends or interests and, possibly, the right to take part in the general meetings, when that was laid down in the account agreement concluded with the account provider. This is characterised by article 8 of the UCC as a "[[beneficial interest]]".

This decomposition of the rights organized by Article 8 of the UCC results in preventing the investor to [[wikt:revindicate|revindicate]] the security in case of bankruptcy of the account provider, that is to say the possibility to claim the security as its own asset, without being obliged to share it at its prorate value with the other creditors of the account provider. As a consequence, it also prevents the investor from asserting its securities at the upper level of the holding chain, either up to DTC or up to a sub-custodian. Such a "security entitlement," unlike a normal ownership right, is no longer enforceable "[[wikt:erga omnes|erga omnes]]" to any person supposed to have the security in its custody. The "security entitlement" is a relative right, therefore a contractual right.{{fact|date=March 2025}}

This re-characterization of the proprietary right into a simple contractual right may enable the account provider to "re-use" the security without having to ask for the authorization of the investor. This is especially possible within the framework of temporary operations such as [[security lending]], [[option to repurchase]], [[buy to sell back]] or [[repurchase agreement]]. This system the distinction between the downward holding chain which traces the way in which the security was subscribed by the investor and the horizontal and ascending chains which trace the way in which the security has been transferred or sub-deposited.<ref>A further analysis of UCC article 8 can be found in an academic  paper from Sandra Rocks on [http://files.ali-aba.org/thumbs/datastorage/skoobesruoc/pdf/Ck090-ch08_thumb.pdf Ali-Aba.org] {{Webarchive|url=https://web.archive.org/web/20110724233630/http://files.ali-aba.org/thumbs/datastorage/skoobesruoc/pdf/Ck090-ch08_thumb.pdf |date=July 24, 2011 }}</ref>

Contrary to claims suggesting that Article 8 denies American investors their security rights held through intermediaries such as banks, Article 8 has also helped US negotiators during the negotiations of the [[Geneva Securities Convention]], also known as the [[Unidroit Convention on Substantive Rules for Intermediated Securities]].