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Bearer Bonds

bond, coupons, securities, delivery, instruments, safe and holder

BEARER BONDS. A bearer bond. that is a bond which is payable to the bearer. in contradistinction to a bond which is regis tered in the name of the holder, passes by mere delivery the full benefits conferred by the bond so long as the transferee takes it in good faith and for value and without notice of any defect in the transferor's title. If it should ultimately appear that the trans feror had stolen the bond, or had otherwise a defective title, the transferee's right to retain the bond would not he affected. A bearer bond belongs to the class of docu ments called negotiable instruments. (See NEGOTIABLE INSTRUMENTS.) Formerly, only bearer bonds which were issued in foreign countries and treated in this country by merchants as negotiable, were regarded by the Courts as negotiable instruments, but, within recent years. debentures to bearer of an English company have been recognised by the Courts as negotiable instruments.

In Edelstein v. Schuler (1902, 2 K.B. 144), Bigham, J., said : " In my opinion the time has passed when the negotiability of bearer bonds, whether Government bonds or trading bonds, foreign or English, can be called iii question in our Courts." Attached to the bond, or in a separate sheet, is a series of coupons, each one being dated, if the interest is payable half-yearly. for a different half-year, and forming the warrant. upon production of which, the holder will be paid the interest represented by that coupon. Some coupons are not dated, being payable according to advertise ment. A coupon sheet should not be de tached from the bond. Securities to bearer, without the current coupon, are not a good delivery on the Stock Exchange. The pos sessor of bearer bonds should never write his name upon them, as it might cause them to form a bad delivery.

Bankers are frequently requested by cus tomers to take charge of their bearer bonds and to collect the coupons as they fall due, and, in the case of bonds payable by periodi cal drawings. to watch the published lists of numbers which are drawn. All bearer bonds held by a hanker, whether for safe custody or security, should be entered in a register immediately upon receipt, and it is preferable that all bearer securities held in any office should be entered in a separate book, or at any rate in a special section of the ordinary safe custody or securities regis ter, so that any one can ascertain at once what bearer securities are held in that office.

The number of each bond or bearer security should be entered in the register, and, when any of them are given up to the customers, a proper receipt should be taken, either in the book or on a separate slip, setting forth the actual numbers and descriptions of the bonds. Bearer securities being, like cash, transferable by delivery, it is necessary that a banker should take the greatest care of them, and in many banks all bearer securities are kept continuously under the control of two persons. Coupons should be entered up in a diary on the due dates, so that they may be cut off and sent for collection in good time and not be overlooked.

Certain bonds are drawn as being payable to the bearer, or " when registered, to the registered holder." In such cases the name of the registered holder is entered in a place provided on the back of the bond.

Where bearer bonds are given as security, a banker usually takes a memorandum or agreement showing the purpose for which they are lodged. No deed of transfer is necessary, as they pass to the holder by simple delivery, and even if the bonds form part of a trust and the banker had no notice of the trust when he took them as security, his title will not be affected. (See NEGO TIABLE INSTRUMENTS.) An advance should not, of course, be made against coupons without the bond.

When bonds are left for safe custody in joint names. particularly when the parties are trustees, the banker should be most careful not to part with the bonds unless upon the signatures of all the parties. It has been held that trustees may give autho rity to one of their number to cut off coupons from bonds deposited for safe custody as they fall due. In such a case it is the banker's duty to see that nothing more is removed than the coupons which are falling due. (See SAFE CUSTODY.) As to Stamp Duties, see MARKETABLE SECURITY. (See AMERICAN RAILROAD CERTIFICATES. RUSSIAN BONDS.)