FAQs and glossary

A security is an issued instrument representing value and has a monetary value based, for example, on a company's share price. A precise, technical definition of securities is that they include all transferable rights to claim payment of money or its equivalent, as well as transferable documents evidencing ownership rights in property other than real estate or specific movable assets. In everyday usage, securities usually means shares or bonds.

Shares are proof of ownership issued to shareholders for their stake in a company. If the company in which a shareholder owns shares performs well, the shareholder benefits; if it performs poorly, the value of the shares falls and the shareholder loses money. Shares are therefore inherently a risky investment. Dividends are paid to shareholders from the company’s profits, distributed among them in proportion to their shareholdings.

A bond is a written statement in which the issuer unilaterally and unconditionally acknowledges its obligation to make a specified monetary payment. Bonds are generally issued by companies and public entities, and their terms, including repayment and interest, which may be fixed or variable, are set in advance. Various measures are used to ensure that the debtor honours their obligations, such as securing the bond against real estate or naming guarantors.

ISIN stands for The International Securities Identification Number (ISIN) and is a code used to identify securities. An ISIN consists of a 12-character sequence. The code has three parts: it begins with a two-letter country code in accordance with the ISO-6166 standard, followed by 9 alphanumeric characters, and finally a check digit, calculated from the first 11 characters using the so-called Luhn algorithm.

ISIN numbers are issued by The Association of National Numbering Agencies (ANNA), whose agent in Iceland is Nasdaq Securities Registration. VBM arranges ISIN numbers for its clients.

An LEI number is a 20-character code based on the ISO 17442 standard and administered by GLEIF (Global Legal Entity Identifier Foundation)

• A kind of international ID number for legal entities that trade on financial markets (shares, bonds, foreign exchange, etc.) and a prerequisite for trading
• Every contract entered into on the market will be linked to the other counterparty using an LEI number
• Used by regulators to oversee financial markets, as the LEI links financial markets, companies and regulators
• LEI numbers are issued by accredited Local Operating Units on behalf of GLEIF

Registration with a central securities depository provides the following benefits:

• Formal legal confirmation of ownership and rights.
• Ownership registration serves as proof of ownership.
• Registration in the securities depository system is equivalent to the legal transfer of rights.
• Security for investors.
• Simplifies management's work and enhances information security.
• Enhances the company's image and credibility.
• Shareholders can view their shares in online banking and on statements from the tax authorities.

VBM provides issuers of securities (shares, bonds and unit certificates) with electronic securities registration services. Registration with a central securities depository provides legal confirmation of ownership and rights. For example, investors can view their holdings in their online banking and on the tax authority’s website. Registration therefore increases investor security and ensures greater professionalism in investment matters. VBM’s system keeps the shareholder register up to date with the latest transactions, and all corporate actions, such as dividend payments, can be carried out through the system.

When securities are listed on a stock exchange, they are placed on a public market operated by the exchange. On this market, existing security holders can sell their securities and new investors can buy them. To list securities on a stock exchange, certain requirements must be met, including requirements concerning the size of the issue, distribution of ownership, etc. In addition, the securities issuer is required to inform the market of any changes in the company's circumstances, such as financing, increases or reductions in share capital, etc.

To list securities on a stock exchange, they must first be registered with a central securities depository.

No, investors cannot be direct participants in VBM. Under the Act on Central Securities Depositories, Settlement and Electronic Registration of Securities No. 17/2020, participants in central securities depositories may only be central banks, other central securities depositories, credit institutions, financial undertakings and management companies for UCITS, as defined in the relevant legislation. Investors must therefore hold their securities and settle transactions through a financial undertaking that has entered into a membership agreement with VBM.

In brief, the typical process is:

1. The company’s board decides to register securities with VBM.
2. An issuance agreement and issue description are concluded with VBM.
3. The issuer provides VBM with a shareholder list showing each shareholder’s holdings.
4. The effective date of the registration is determined.
5. VBM liaises with account-holding institutions (banks) regarding the registration.