Ontario’s Securities Transfer Act, 2006: New Rules For Securities As Collateral

Originally published in Business Beat, December 2006.

The new Securities Transfer Act, 2006 (Ontario) (the STA) has been proclaimed to come into force on January 1, 2007. It creates a complex set of rules relating to the transfer of securities that govern the rights and obligations of issuers of securities, securities intermediaries, investors and secured parties. Despite this complexity, the STA and related amendments to the Personal Property Security Act (Ontario) (the PPSA), which also come into force on January 1, 2007, will greatly facilitate the use of securities as collateral.

This article provides a brief summary of the important rules.¹ To understand these rules, the reader must bear in mind that securities are held in North America under two systems: the direct holding system and the indirect holding system. The direct holding system applies where a direct relationship exists between an issuer and an investor. For example, the direct holding system applies to the