Legal Consequences of Being Intangible
An important legal consequence of the intangible nature of interests in securities is that they, as choses in action, are incapable of possession at common law.
Interests in securities cannot be the subject of bailment, since the essence of bailment is the delivery of possession without the delivery of title. The rise of interests in securities therefore requires the traditional custodial relationship to be reappraised.
A pledge cannot take effect in relation to interests in securities. A purported pledge may be recharacterised as a floating charge in some circumstances, which in turn may be void for want of registration.
Intangible assets such as interests in securities also cannot be negotiable instrument, and there is an issue of whether this reduces security of transfer in securities markets. he "holder in due course" of a traditional negotiable instrument (very broadly, the good faith purchaser) takes the instrument free from prior claims, and can get good title from a thief.
Read more about this topic: Interest In Securities
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