Security Sharing Agreement Template for Switzerland

A Security Sharing Agreement is a specialized legal document that establishes formal arrangements between financial institutions for sharing securities under Swiss jurisdiction. This agreement creates a binding framework that governs how parties can lend, borrow, or jointly manage securities while ensuring compliance with Switzerland's comprehensive financial regulatory environment.

When do you need this document?

You need a Security Sharing Agreement when your financial institution engages in securities lending programs, requires collateral management solutions, or participates in joint investment structures. Investment banks commonly use these agreements to optimize their balance sheets through temporary securities transfers, while asset management companies rely on them for efficient portfolio management. Custodian banks require these agreements to facilitate securities lending services for their clients, and pension funds use them to generate additional income from their securities holdings. The agreement is also essential when establishing repo transactions, margin financing arrangements, or when participating in securities financing transactions that require temporary transfer of ownership rights.

Key legal considerations

Your Security Sharing Agreement must address several critical legal elements to ensure enforceability and compliance. The scope of securities covered must be clearly defined, including eligibility criteria and valuation methods. You need detailed provisions for transfer mechanics, including delivery procedures, settlement requirements, and timing obligations. Risk management clauses are essential, covering margin requirements, collateral calls, and default procedures. The agreement must specify each party's representations and warranties regarding their legal capacity, regulatory status, and the quality of securities being shared. Indemnification provisions should protect parties from losses arising from breaches or regulatory violations. Additionally, you need clear termination procedures, including mandatory return obligations and close-out netting arrangements to minimize counterparty risk.

Legal requirements in Switzerland

Under Swiss law, your Security Sharing Agreement must comply with the Financial Market Infrastructure Act (FMIA), which regulates securities trading conduct and market infrastructure operations. The Swiss Banking Act imposes specific requirements regarding banking secrecy and information sharing, particularly when personal data or client information is involved. You must ensure compliance with the Federal Act on Data Protection (FADP) when the agreement involves processing or sharing personal data related to securities transactions. The Financial Services Act (FinSA) governs the provision of financial services and may impact how you structure your securities sharing arrangements. Your agreement should include specific clauses addressing Swiss regulatory reporting requirements, anti-money laundering obligations, and compliance with FINMA supervisory standards. Additionally, the Swiss Code of Obligations provides the fundamental contract law framework, requiring clear terms regarding performance, liability, and dispute resolution mechanisms.