Securities Account Control Agreement Template for the United States

A Securities Account Control Agreement is a fundamental document in secured financing that establishes your legal control over securities accounts serving as collateral. Under the Uniform Commercial Code, particularly Articles 8 and 9, this agreement is the primary method for perfecting a security interest in securities accounts, giving you priority over other creditors and ensuring your collateral rights are legally enforceable.

When do you need this document?

You need a Securities Account Control Agreement whenever you're entering a secured transaction where securities accounts serve as collateral. This includes commercial lending arrangements where borrowers pledge their brokerage accounts, margin lending facilities provided by broker-dealers, asset-based lending transactions involving investment portfolios, and structured finance deals where securities accounts back the financing. The agreement is also essential in repo transactions, securities lending arrangements, and prime brokerage relationships where multiple parties have interests in the same securities account.

Key legal considerations

The most critical aspect of your agreement is establishing "control" as defined under UCC Section 8-106, which requires the securities intermediary to comply with your instructions without further consent from the debtor. You must carefully define the scope of control, specifying which securities and cash equivalents are subject to the agreement and under what circumstances you can exercise control rights. The agreement should address priority issues, particularly if multiple secured parties claim interests in the same account, and establish clear procedures for giving instructions to the intermediary. Consider including provisions for account monitoring, reporting requirements, and procedures for liquidating securities upon default. You should also address the intermediary's liability limitations and ensure the agreement complies with applicable broker-dealer regulations and securities laws.

Legal requirements in United States

Under the UCC, your Securities Account Control Agreement must satisfy specific control requirements to perfect your security interest effectively. The agreement must be signed by the securities intermediary and include their explicit commitment to comply with your instructions regarding the securities account. Federal regulations under the Securities Exchange Act of 1934 may impose additional requirements, particularly if the intermediary is a registered broker-dealer subject to customer protection rules and net capital requirements. The Federal Reserve's Regulation T governs margin requirements and may affect control arrangements in margin accounts. If any party is an investment company, the Investment Company Act of 1940 imposes custody and segregation requirements that your agreement must address. State law variations may apply, particularly regarding enforceability and remedies, so you should ensure your agreement complies with the specific state's UCC implementation and any additional commercial law requirements.