Global Securities Markets: Navigating the World's Exchanges and OTC Markets

PHYSICAL SECURITIES

When securities take a physical form, possession of a certificate in bearer form (or possession of the certificate with a lawful assignment) is the key to establishing successful legal ownership. A quick review in this chapter of fundamental concepts establishes the context for the more complicated issues of perfected liens and electronic ownership through securities intermediaries discussed in Chapter 7. Examine this Hungarian governmental obligation (shown in Figure 1.3).

FIGURE 1.3 Bearer Bond and Coupon

This bond, of course, represents a promise by the government of Hungary, backed by the government's ability to collect taxes, to pay the principal amount owed and the stated interest amount. In this case, the government's agent, a bank, pays the interest due upon presentation of a coupon that has been clipped from the bond and delivered to the bank for payment (a coupon is shown under the bond). Ownership is evidenced by possession of the bond and coupon.

FIGURE 1.4 Sample Stock Power