Securities Lending Agreement for Hong Kong

Securities Lending Agreement Template for Hong Kong

A comprehensive legal agreement governed by Hong Kong law that establishes the terms and conditions under which one party (the lender) will lend securities to another party (the borrower) in exchange for collateral. The agreement complies with Hong Kong's Securities and Futures Ordinance and related regulations, addressing key aspects such as transfer mechanisms, collateral requirements, margin maintenance, corporate actions, fees, and default provisions. It includes specific provisions for regulatory compliance in the Hong Kong market while incorporating international best practices for securities lending transactions.

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What is a Securities Lending Agreement?

The Securities Lending Agreement serves as the primary contractual framework for securities lending transactions in the Hong Kong market. It is essential for financial institutions seeking to generate additional revenue from their securities holdings or obtain specific securities for trading strategies. The agreement encompasses detailed provisions for the transfer of securities, collateral management, risk mitigation, and regulatory compliance under Hong Kong's Securities and Futures Ordinance and related regulations. It is particularly relevant for institutions operating in Hong Kong's financial markets and typically follows market standard documentation while incorporating specific requirements of Hong Kong law and regulatory framework. The agreement is designed to protect both lender and borrower interests while ensuring operational efficiency and regulatory compliance.

What sections should be included in a Securities Lending Agreement?

1. Parties: Identification of the lender and borrower, including regulatory status and capacity

2. Background: Context of the agreement and general intention of the parties

3. Definitions and Interpretation: Defined terms, interpretation rules, and references to market standard definitions

4. Loans of Securities: Core provisions governing the lending of securities, including loan procedures and terms

5. Transfer of Securities: Mechanics and requirements for transferring securities between parties

6. Collateral Requirements: Provisions regarding posting, maintaining, and returning collateral

7. Margin Maintenance: Requirements for maintaining margin levels and making margin calls

8. Income and Corporate Actions: Treatment of dividends, interest, and corporate actions affecting loaned securities

9. Fees and Charges: Lending fees, rebate rates, and other charges

10. Tax: Tax obligations, withholding requirements, and gross-up provisions

11. Events of Default: Default triggers and consequences

12. Set-off Rights: Rights of set-off and close-out netting provisions

13. Representations and Warranties: Standard and specific representations by each party

14. Regulatory Compliance: Compliance with Hong Kong securities regulations and other applicable laws

15. Termination: Termination events and procedures

16. General Provisions: Standard boilerplate clauses including notices, amendments, and governing law

What sections are optional to include in a Securities Lending Agreement?

1. Agency Lending Provisions: Additional provisions when either party acts as agent for underlying principals

2. Tri-party Arrangements: Provisions for when a tri-party agent is used for collateral management

3. Electronic Trading Platform: Terms for using electronic platforms for trading and settlement

4. Central Counterparty Provisions: Additional terms when trades are cleared through a CCP

5. Force Majeure: Provisions dealing with extraordinary events affecting performance

6. Market Disruption: Provisions for handling market disruption events

7. Additional Tax Provisions: Specific tax provisions for complex cross-border arrangements

8. Non-standard Collateral Terms: Special provisions for non-standard collateral types

What schedules should be included in a Securities Lending Agreement?

1. Schedule 1 - Eligible Securities: List and characteristics of securities eligible for lending

2. Schedule 2 - Eligible Collateral: Acceptable forms of collateral and associated haircuts

3. Schedule 3 - Fee Schedule: Detailed fee calculations and rates

4. Schedule 4 - Operating Procedures: Detailed operational procedures including settlement instructions

5. Schedule 5 - Forms and Notices: Standard forms for borrowing requests, recalls, and other notices

6. Schedule 6 - Agency Terms: Detailed terms for agency lending if applicable

7. Schedule 7 - Jurisdictional Requirements: Specific requirements under Hong Kong law and other applicable jurisdictions

8. Appendix A - Contact Details: Contact information for notices and operational matters

9. Appendix B - Tax Documentation: Required tax forms and documentation

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

Jurisdiction

Hong Kong

Publisher

Genie AI

Document Type

Purchase Agreement

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Financial Services

Banking

Investment Management

Insurance

Securities Trading

Asset Management

Fund Management

Capital Markets

Wealth Management

Institutional Investment

Relevant Teams

Legal

Compliance

Trading

Risk Management

Operations

Portfolio Management

Securities Lending

Collateral Management

Settlement

Investment

Treasury

Regulatory Affairs

Documentation

Middle Office

Back Office

Relevant Roles

Legal Counsel

Compliance Officer

Securities Trading Manager

Risk Manager

Operations Manager

Portfolio Manager

Securities Lending Trader

Collateral Manager

Settlement Officer

Investment Director

Chief Investment Officer

Head of Trading

Legal Director

Regulatory Compliance Manager

Treasury Manager

Industries
Securities and Futures Ordinance (Cap. 571): Primary legislation governing securities markets in Hong Kong, including licensing requirements, market misconduct provisions, and investor protection measures
Securities and Futures (Financial Resources) Rules: Regulations specifying capital requirements and financial resources that intermediaries must maintain when engaging in securities lending
Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission: Guidelines on conduct requirements for securities lending activities and general business operations
Securities and Futures (Client Securities) Rules: Specific rules governing how intermediaries should handle and protect client securities, including in lending arrangements
Hong Kong Monetary Authority Guidelines: Regulatory guidelines for banks engaging in securities lending activities
Companies Ordinance (Cap. 622): Relevant for corporate governance and company law aspects of securities lending transactions
Inland Revenue Ordinance (Cap. 112): Tax implications for securities lending transactions, including stamp duty considerations
Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615): Requirements for customer due diligence and transaction monitoring in securities lending
Personal Data (Privacy) Ordinance (Cap. 486): Requirements for handling personal data in the context of securities lending transactions
Securities and Futures (Contract Notes, Statements of Account and Receipts) Rules: Requirements for documentation and record-keeping in securities transactions
Teams

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