Intermediated securities

Current project status

  • Initiation: Could include discussing scope and terms of reference with lead Government Department
  • Pre-consultation: Could include approaching interest groups and specialists, producing scoping and issues papers, finalising terms of project
  • Consultation: Likely to include consultation events and paper, making provisional proposals for comment
  • Policy development: Will include analysis of consultation responses. Could include further issues papers and consultation on draft Bill
  • Reported: Usually recommendations for law reform but can be advice to government, scoping report or other recommendations

We published our scoping paper on intermediated securities on 11 November 2020, identifying issues concerning investors and businesses for potential future review.

Download the scoping paper on intermediated securities here

Download the summary of the scoping paper on intermediated securities here

The problem

In the modern era, when you decide to invest in shares or bonds, you are unlikely to receive a paper certificate. Instead, most investors “own” securities through  computerised credit entries in a register called CREST, through a chain of financial institutions, such as banks, investment platforms and brokers (“intermediaries”).

This system of intermediated securities has made trading significantly quicker, cheaper and more convenient. It is now possible for individuals to buy shares in a matter of minutes, and to see all their holdings on a single electronic “platform”.

However, the system has been the subject of criticism from academics and practitioners over issues of corporate governance and transparency. There is also legal uncertainty as to the legal redress available to the investor, including upon the insolvency of an issuer of securities or an intermediary.

The project

This project forms part of the Law Commission’s Thirteenth Programme of Law Reform. We were asked by the Department for Business, Energy & Industrial Strategy to produce a scoping study, providing an accessible account of the law and identifying issues in the current system of intermediation. The purpose of the scoping paper is to inform public debate, develop a broad understanding of potential options for reform and develop a consensus about issues to be addressed in the future. We were not asked to produce a full report with detailed recommendations for reform.

Scoping paper

We published our scoping paper on intermediated securities on 11 November 2020. It was informed by the detailed responses we received to our call for evidence, published in 2019. Our paper analyses the law underlying intermediated securities, together with the concerns of market participants, and possible solutions to those concerns. Overall, it identifies two broad categories of issues. First, there are problems surrounding the exercise of investor rights, such as the right to vote or be counted in a scheme of arrangement. Second, there are several areas where there is legal uncertainty, for example if an intermediary suffers financial difficulties and becomes insolvent. Potential solutions considered include:

  • Targeted legal intervention to address specific issues, such as creating a new obligation on intermediaries to arrange, upon request, for an investor to receive information, attend meetings and vote.
  • Systemic change, such as removing intermediation altogether, or retaining intermediation and providing a genuine avenue for investors to hold their investments directly.
  • Technological solutions such as distributed ledger technology.

At this stage, we are not making any formal recommendations for reform. The scoping paper provides a basis for further work, either by the Government or by the Law Commission, on identified issues.

You can read the scoping paper here.


To contact us please email


Documents and downloads

Project details

Area of law

Commercial and common law


Commercial and Common Law team


Professor Sarah Green