The Fourth Workshop on the Holding of Securities through an Intermediary

The fourth workshop on the holding of securities through an intermediary was held at Harris Manchester College on 14 September 2017. This workshop focused on potential solutions to the issues posed by intermediation and followed on from the first three workshops, which covered the enforcement of intermediated debt securities, voting and governance issues in relation to intermediated equity securities and conflict of law issues.

Professor Louise Gullifer opened the workshop and welcomed attendees, noting the progress which had been made at the previous three workshops. Professor Jennifer Payne then chaired the main discussion session, which covered specific, legal solutions to particular issues relating to intermediated securities, before moving on to more general solutions which could potentially resolve the more fundamental issues posed by the structure of intermediation. 

Professors Jennifer Payne and Louise Gullifer and Mr Guy Morton led the discussion in relation to legal solutions. It was noted that there were specific legal issues which could be resolved in a ‘piecemeal’ fashion without introducing more wide-ranging reform in relation to the way in which intermediated securities are held. Professor Louise Gullifer outlined the issues to the group; examples included the rights of intermediated securities holders to sue on breaches other than payment obligations, debt buy-backs by issuers further down the ‘chain’ and whether intermediation removes the mutuality required for insolvency set-off. The group discussed specific solutions which could be implemented for each of these issues.

The discussion then moved on to more general solutions which could address issues with intermediation at a ‘structural’ level. Presentations were given by Dr Eva Micheler, Professor Charles Mooney and Professor Joanna Benjamin. Dr Eva Micheler discussed intermediary and investor perspectives, including the reasons why investors opt for intermediation, before noting various solutions to the opacity and risks posed by intermediation, including technology, disclosure and greater reconciliation along the ‘chain’. Professor Charles Mooney proposed a ‘new platform’ system, potentially using distributed ledger technology, to connect all relevant stakeholders with the minimum of intermediation. Professor Joanna Benjamin noted that increases in levels of securities financing were likely to continue in the near future due to the benefits it offers, and that this only increased the need to consider whether greater disclosure and tougher regulation were required, particularly for intermediaries dealing with ‘retail’ clients. 

The presentations were followed by extensive discussion among participants about the viability and desirability of potential solutions. In particular, the extent to which potential solutions would retain the benefits of intermediation was considered.