The disposition of intermediated securities and the innocent acquirer rule: theory and reality--the Chilean case

Abstract

In this article, I will critically review the importance of the innocent acquirer rule of intermediated securities in the context of the interaction between the International Institute for the Unification of Private Law’s Convention on Substantive Rules for Intermediated Securities (Geneva Securities Convention) and Chilean domestic law.1 For this purpose, the article is divided in two parts. The first is a general overview of the connection among acquisitions, unauthorized dispositions, and innocent acquirer protection in the Convention. The second part is devoted to analysing the situation under Chilean law. Grosso modo, the Geneva Securities Convention articulates the acquisition and disposition of intermediated securities under three main rules. First, the Convention provides that a credit of securities in the account holder’s account is sufficient to render the acquisition effective against third parties.2 Second, the Geneva Securities Convention leaves to the non-Convention law the determination of whether and in what circumstances a debit, credit, or designation entry is invalid or liable to be reversed.3 Third, the Convention protects an innocent acquirer even if the credit or designation entry was invalid or ineffective under the non-Convention law.4