Uncertificated Securities Control Agreement Template for England and Wales

An Uncertificated Securities Control Agreement is a specialised legal document that establishes a secured party's control over electronic securities held in a securities account. In today's digital financial markets, most securities exist in electronic form rather than as physical certificates, making this agreement crucial for securing financial obligations and protecting lenders' interests under England and Wales law.

When do you need this document?

You need this agreement when taking security over uncertificated securities as collateral for loans, credit facilities, or other financial obligations. It's commonly used in commercial lending where the borrower's securities portfolio serves as collateral, in margin lending arrangements with brokers, and in complex financial transactions involving multiple parties. The agreement is also essential in structured finance transactions where securities held in custody accounts need to be pledged as security. Investment funds and asset managers frequently use these agreements when providing security over portfolio holdings to prime brokers or financing counterparties.

Key legal considerations

The agreement must clearly establish the secured party's control rights over the securities account to ensure the security interest is properly perfected under the Financial Collateral Arrangements (No. 2) Regulations 2003. Key provisions include the securities intermediary's agreement to comply with the secured party's instructions without further consent from the account holder, and clear definitions of when control rights become exercisable. The agreement should address priority arrangements between multiple secured parties and specify the circumstances under which the intermediary can act on instructions from different parties. You must also consider the implications of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999, which provide protection against insolvency proceedings affecting settlement systems.

Legal requirements in England and Wales

Under English law, the agreement must comply with the Financial Collateral Arrangements (No. 2) Regulations 2003, which transpose the EU Financial Collateral Directive into domestic law. The securities must be "book entry securities" as defined in the regulations, and the arrangement must constitute a "financial collateral arrangement" to benefit from the special insolvency protections. The Uncertificated Securities Regulations 2001 govern the transfer and holding of uncertificated securities, requiring compliance with CREST system rules where applicable. The agreement must also consider relevant provisions of the Companies Act 2006 regarding share transfers and the Financial Services and Markets Act 2000 concerning regulated activities. Proper documentation and execution are essential to ensure enforceability and to avoid challenges during insolvency proceedings.