Abstract
In view of the current global meltdown and the recession in South Africa, the question arises whether the legal framework pertaining to finality of settlement of securities is sufficiently robust to cope with failure of a central securities participant. This article examines this question and highlights some of the problems that exist with regard to uncompleted contracts in the Strate (Share Transactions Totally Electronic) environment. The authors conclude with certain recommendations to overcome the identified problems.
Highlights
SUMMARYIn view of the current global meltdown and the recession in South Africa, the question arises whether the legal framework pertaining to finality of settlement of securities is sufficiently robust to cope with failure of a central securities participant
In the event of insolvency or liquidation on the ground that the company is unable to pay its debts the general common law rule is that the trustee or liquidator has the election to decide whether to abide by uncompleted contracts or whether to repudiate such agreements
A participant is defined in the SSA as a person that holds in custody and administers securities or an interest in securities and that has been accepted in terms of section 34 by a central securities depository (CSD) as a participant in that CSD.[13]
Summary
In view of the current global meltdown and the recession in South Africa, the question arises whether the legal framework pertaining to finality of settlement of securities is sufficiently robust to cope with failure of a central securities participant. This article examines this question and highlights some of the problems that exist with regard to uncompleted contracts in the Strate (Share Transactions Totally Electronic) environment. The authors conclude with certain recommendations to overcome the identified problems
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