Investor Protection : Segregation of Assets

Abstract

The article is devoted to the contemporary problems of the ownership rights on intermediated securities and investor protection. Authors provide brief introduction to the major aspects of the Latvian securities law, then they study peculiarities of US approach to the ownership rights on intermediated securities as well US techniques of investor protection in the context of segregation and separation of assets of investors as well as briefly review the insolvency regimes and return of the financial assets to the investors, customers of insolvent US regulated firms. In conclusion authors provide brief comparative summarizing of Latvian and US approaches. Objectives: The study aims at continuing development of the securities law theory, while its task is to characterise the problematic of investor protection especially in insolvency proceedings on example of US as well as to discuss some peculiarities ownership rights on intermediated securities from the point of view of US law and practice. Methods/Approach Scientific research methods - both comparative and analytical - is used in the process of drawing up of this article. Results: Authors come to conclusion that US investor protection system is more complex than Latvian, it uses the separation and segregation approaches, while Latvian system only segregation approach. Both systems do not excluding situations of shortfall in customer assets. Both systems recognize the pro-rata distribution of damages, but US system recognises various pro-rata approaches to the distribution of damages (from the defined amount of assets; from all the assets; from all the assets belonging to a specific category of customers), while Latvian law stays silent regarding this topic. Authors believe that modernisation of the law is required for the better protection of the customers in case of insolvency of investment service providers and obtaining of the greater certainty of the legal outcomes. Author suggest should to determine the prohibition to meet the claims of one class of assets at the expense of another class of assets during insolvency proceedings of investment service providers in case of shortfall in assets