Short Sale Contract Template for England and Wales

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Key Requirements PROMPT example:

Short Sale Contract

I need a Short Sale Contract governed by English law for a hedge fund client planning to short sell FTSE 100 securities, with specific provisions for prime brokerage arrangements and daily margin maintenance requirements, to be effective from March 2025.

Document background
The Short Sale Contract is essential for parties engaging in short selling activities within the UK financial markets. This document is used when an investor wishes to sell securities they don't currently own, typically betting on a price decline. The contract ensures compliance with English and Welsh law, including the Financial Services and Markets Act 2000 and relevant FCA regulations. It details borrowing arrangements, settlement procedures, margin requirements, and regulatory obligations, providing a comprehensive framework for executing and managing short sale transactions.
Suggested Sections

1. Parties: Identification of parties entering into the short sale agreement

2. Background: Context and purpose of the short sale arrangement

3. Definitions: Key terms used throughout the agreement

4. Securities Subject to Sale: Identification of securities to be sold short

5. Borrowing Arrangements: Terms for borrowing securities for delivery

6. Settlement Terms: Timing and process for settlement

7. Margin Requirements: Collateral and margin maintenance obligations

8. Representations and Warranties: Standard declarations by both parties

Optional Sections

1. Corporate Actions: Handling of dividends and other corporate events - used when dealing with equity securities

2. Prime Broker Arrangements: Terms relating to prime broker involvement - used when prime brokerage services are involved

3. Rehypothecation Rights: Rights to reuse posted collateral - used when collateral reuse is permitted

Suggested Schedules

1. Schedule 1 - Eligible Securities: List of securities that may be sold short under the agreement

2. Schedule 2 - Margin Requirements: Detailed margin calculations and maintenance requirements

3. Schedule 3 - Standard Settlement Instructions: Account details and settlement procedures

4. Appendix A - Form of Trade Confirmation: Template for confirming individual short sale transactions

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Clauses
Industries

Financial Services and Markets Act 2000: Primary legislation governing financial services in the UK, providing the framework for regulation of financial activities including short selling

Financial Services Act 2012: Updates and amends FSMA 2000, particularly regarding market regulation and financial stability measures

Companies Act 2006: Relevant when corporate entities are involved in short selling transactions, covering company law requirements and corporate governance

Consumer Rights Act 2015: Applicable if retail investors are involved in short selling activities, ensuring consumer protection

FCA Regulations: Rules and guidelines set by the Financial Conduct Authority governing short selling practices and market conduct

Market Abuse Regulation (MAR): Regulations preventing market manipulation and insider dealing in relation to short selling

Short Selling Regulation (SSR): Retained EU law specifying rules on short selling, including disclosure requirements and restrictions

FSMA 2000 Short Selling Regulations 2012: Specific regulations implementing short selling rules in the UK, including notification requirements and enforcement provisions

Common Law Contract Principles: Fundamental principles of English contract law affecting formation and enforcement of short sale agreements

Misrepresentation Act 1967: Legislation governing false or misleading statements in contract formation, relevant to short sale agreements

Post-Brexit Financial Services Legislation: Modified UK-specific regulations and retained EU law affecting short selling after Brexit

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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