Securities Lending Agreement Template for New Zealand

A Securities Lending Agreement is a crucial legal document that establishes the framework for securities lending transactions between financial institutions in New Zealand. This agreement allows you to lend or borrow securities while maintaining clear legal protections and regulatory compliance under New Zealand's Financial Markets Conduct Act 2013.

When do you need this document?

You need a Securities Lending Agreement when your financial institution wants to establish an ongoing relationship for lending or borrowing securities. This includes situations where you're looking to generate additional revenue from your securities portfolio, need to cover short positions, or require specific securities to meet settlement obligations. Investment managers use these agreements to enhance portfolio returns, while broker-dealers rely on them to facilitate client trading strategies. Pension fund trustees also utilise these agreements through custodian banks to optimise fund performance while maintaining fiduciary responsibilities.

Key legal considerations

The agreement must clearly define the roles and responsibilities of all parties, including securities lenders, borrowers, custodian banks, and any tri-party collateral agents. Collateral requirements are critical - you need to specify acceptable collateral types, valuation methods, and margin requirements to protect against counterparty risk. The document should address corporate actions procedures, ensuring that dividends, voting rights, and other benefits are properly handled during the loan period. Termination and default provisions must be carefully drafted to protect your interests, including rights to recall securities and liquidate collateral. You should also consider indemnification clauses that protect against losses arising from the lending arrangement.

Legal requirements in New Zealand

Under the Financial Markets Conduct Act 2013, securities lending arrangements must comply with fair dealing obligations and disclosure requirements. The Financial Markets Conduct Regulations 2014 provide specific requirements for transaction documentation and market conduct that your agreement must address. You must ensure compliance with the Personal Property Securities Act 1999 regarding security interests in collateral and securities. The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 requires proper customer due diligence and reporting procedures to be incorporated into your agreement. Additionally, the Companies Act 1993 governs aspects related to company securities and voting rights during the lending period. Your agreement should include appropriate dispute resolution mechanisms and specify New Zealand law as the governing jurisdiction to ensure enforceability in local courts.