Home  Journals  Finance and Credit  38(614) - 2014 October

The status of a cheque

Available online: 12 October 2014

Subject Heading: Financial system

JEL Classification: 

Pages: 41-47

Assigning cheques (checks) to the securities category is a disputable question. The author emphasizes that it is possible to consider a classical cheque (by economic canons) as a security. However such cheques are of settlement nature and nowadays they are not available in circulation due to various reasons. At the same time there are pay checks, traveler's checks and other types of checks, which are not considered as securities. Assigning a cheque to the securities category is important in the economic science, in particular, in the securities market and banking theory, and even in the criminal legal proceedings while determining the components of a crime in the event of check forgery. Those economists and lawyers who consider a check as a security mainly refer to the fact that Article 142 of the Russian Civil Code defines a check as a security, and that there is a coincidence of the details of a pay check and those of a check defined by Article 878 of the said Code. However from an economic perspective a security represents a financial instrument implying incurrence and interrelation of claims and liabilities. So, after securities issue and sale, a person with security-related obligations has liabilities payable to the owner of the security, and the owner has rights of claim of property and non-property nature. As a check issuer draws a check "in his or her favor", the assumption of the availability of the check issuer's claims against himself or herself sounds absurd. The author argues in favor of the hypothesis considering a pay check as a cash payment document rather than a security. The grounds of the statement include the lack of abstractness and unconditionality attributes, issuing a check by a check issuer in his favor, and accounting and reporting specifics. The author concludes on the need to amend the Russian laws on checks.

Keywords: security, cheque, check, settlement, classical, privatization, traveler's check, abstractness, Geneva Conventions, cash payment document

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