What Is A Collateral Control Agreement

The changes to the PPSA resulting from the STA introduce several important new concepts and concepts that are not fully advertised in this abbreviated version of the article, with the exception that „investment ownership“ is now a ppsa clause that defines a new class of security, including securities, securities rights, securities accounts, futures contracts and futures accounts. The main changes relate to the system of systemic holdings, in which the secured parties can restore their security through a tripartite „control agreement“ between the securities intermediary, the insured and the pawnbroker. The control agreement does not replace a guarantee agreement that continues to be concluded separately between the insured lender/party and the borrower/creditor in order to grant the necessary security shares on the securities. The new „control“ method for developing security interests in investment properties and the adoption of new rules for prioritizing insured, controlled-sophisticated creditors and those who simply registered against the deposit dictate good securities collateral practices. For secured creditors, control of securities mortgaged by the new priority rules is essential. In all but a few cases, registration alone will not be sufficient to obtain and maintain priority over other creditors. Under the new regime: (i) a controlling secured creditor has priority over a secured creditor who registers only against the pawnbroker; (ii) a secured creditor who obtains the first control has priority over a secured creditor, who then obtains control; and (iii) the securities intermediary itself (which, in many circumstances, is considered a supervisory authority) has priority over secured creditors. The changes made by the STA and the PPSA have strengthened the security of the law with respect to the seizure of securities and will greatly facilitate and strengthen the use of book-based securities as collateral, which would add value to borrowers and lenders and the market as a whole. However, the new regime has posed new challenges: lenders need to reassess their approach to securities security transactions and borrowers/issuers need to understand how best to respond to new requirements and considerations. As can be inferred from the new priority rules, control is not necessarily an exclusive regime. For certain types of real estate assets, such as accounting securities. B, more than one secured creditor (as well as the securities intermediary) may have control of the same securities.

Although the terminology used in the PPSA has changed slightly, the STA has not significantly changed the rules for guaranteed operations in the direct storage system. The main changes relate to the indirect participation system, in which the guaranteed parties can restore their security through a tripartite „control agreement“ between the securities intermediary, the insured party and the pawnbroker. The control agreement does not replace a guarantee agreement that continues to be concluded separately between the insured lender/party and the borrower/creditor, in order to grant the necessary security shares on the securities. On the contrary, the control agreement is a method of enhancing security interests and, in its most fundamental form, a contract between a secured creditor, a pfandgor and the securities intermediary of the loan, in which the intermediary gives the secured creditor the „control“ of the pawned securities. In essence, control means that the secured creditor has the right to assign „attribution orders“ to the securities intermediary in certain circumstances (for example. B in the event of a late payment by the borrower/pledgee) and the securities intermediary agreed that it would comply with these instructions from the secured creditor without further approval from the borrower/pledgor.