Security Lending Agreement for Philippines

Security Lending Agreement Template for Philippines

A comprehensive legal agreement governed by Philippine law that establishes the terms and conditions under which one party (the lender) will temporarily transfer securities to another party (the borrower) in exchange for collateral. The agreement details the obligations of both parties, collateral requirements, fee structures, and risk management procedures while ensuring compliance with Philippine securities regulations, particularly the Securities Regulation Code and relevant SEC guidelines. It includes provisions for corporate actions, voting rights, default scenarios, and termination procedures, all within the context of the Philippine financial market framework.

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What is a Security Lending Agreement?

The Security Lending Agreement serves as the primary legal framework for securities lending transactions in the Philippines, enabling financial institutions to temporarily transfer securities while managing associated risks and ensuring regulatory compliance. This document is essential when parties wish to engage in securities lending activities, whether for trading strategies, settlement coverage, or market making purposes. It must comply with the Securities Regulation Code (Republic Act No. 8799), SEC regulations, and other relevant Philippine financial laws. The agreement covers crucial aspects such as collateral management, corporate actions, voting rights, and default procedures, while incorporating specific requirements of the Philippine market. It's particularly important for financial institutions seeking to optimize their portfolio returns or facilitate market liquidity through securities lending programs.

What sections should be included in a Security Lending Agreement?

1. Parties: Identification of the lender and borrower, including their complete legal names, addresses, and registration details

2. Background: Context of the agreement, including the parties' authority to enter into securities lending transactions

3. Definitions: Comprehensive definitions of technical terms used in the agreement, including 'Securities', 'Collateral', 'Distribution', 'Income', etc.

4. Loans of Securities: Core provisions governing the lending and borrowing of securities, including initiation and settlement procedures

5. Collateral Requirements: Details of acceptable collateral, maintenance margins, and valuation methodologies

6. Fees and Payments: Lending fees, payment schedules, and calculation methods

7. Rights and Obligations: Detailed responsibilities of each party, including maintenance of records and regulatory compliance

8. Corporate Actions: Handling of dividends, rights issues, and other corporate actions affecting borrowed securities

9. Events of Default: Definition of default events and consequences

10. Termination: Provisions for ending the agreement and individual loans, including close-out procedures

11. Representations and Warranties: Standard legal assurances from both parties

12. Indemnification: Provisions for compensating parties for losses

13. Governing Law and Jurisdiction: Specification of Philippine law as governing law and jurisdiction details

14. Notices: Communication procedures and contact details

15. General Provisions: Standard boilerplate clauses including amendments, assignments, and severability

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

1. Tri-Party Arrangements: Required when using a tri-party agent for collateral management

2. Foreign Securities: Include when the agreement covers cross-border lending of foreign securities

3. Electronic Trading Platform: Required when transactions will be conducted through specific electronic platforms

4. Tax Provisions: Detailed tax procedures when dealing with international parties or complex tax situations

5. Agency Lending: Required when the lender acts as an agent for multiple principals

6. Voting Rights: Specific arrangements for exercising voting rights on borrowed securities

7. Market Making Activities: Special provisions for borrowers engaging in market making

8. Regulatory Reporting: Additional reporting requirements for regulated entities

What schedules should be included in a Security Lending Agreement?

1. Schedule A - Eligible Securities: List of securities eligible for lending under the agreement

2. Schedule B - Eligible Collateral: Detailed list of acceptable collateral types and applicable haircuts

3. Schedule C - Fee Schedule: Detailed fee structure and calculation methodologies

4. Schedule D - Operating Procedures: Detailed procedures for borrowing/lending, returns, and corporate actions

5. Schedule E - Forms: Standard forms for borrowing requests, returns, and other notices

6. Schedule F - Authorized Persons: List of authorized signatories and traders

7. Schedule G - Market Practice: Specific Philippine market practices and requirements

8. Appendix 1 - Tax Documentation: Required tax forms and procedures

9. Appendix 2 - Regulatory Compliance: Compliance requirements under Philippine regulations

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

Philippines

Publisher

Genie AI

Document Type

Security Agreement

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Banking

Financial Services

Investment Management

Securities Trading

Asset Management

Brokerage Services

Investment Banking

Wealth Management

Insurance

Pension Fund Management

Relevant Teams

Legal

Compliance

Risk Management

Trading

Operations

Settlement

Custody

Portfolio Management

Treasury

Regulatory Affairs

Credit Risk

Investment Management

Collateral Management

Relevant Roles

Securities Lending Manager

Compliance Officer

Legal Counsel

Risk Manager

Trading Director

Portfolio Manager

Operations Manager

Custody Manager

Chief Investment Officer

Regulatory Affairs Director

Settlement Officer

Collateral Manager

Treasury Manager

Investment Officer

Credit Risk Analyst

Industries
Securities Regulation Code (Republic Act No. 8799): Primary legislation governing securities market, transactions, and trading in the Philippines. Sets forth requirements for securities lending arrangements and broker-dealer obligations.
New Central Bank Act (Republic Act No. 7653): Establishes regulatory framework for financial institutions and transactions, including requirements for lending operations and financial market activities.
Investment Company Act (Republic Act No. 2629): Regulates investment companies and their activities, including their participation in securities lending arrangements.
Civil Code of the Philippines (Republic Act No. 386): Provides the fundamental principles of contracts and obligations that would apply to the security lending agreement.
National Internal Revenue Code: Covers tax implications and requirements for securities lending transactions, including documentary stamp tax and income tax considerations.
Anti-Money Laundering Act (Republic Act No. 9160): Sets requirements for customer due diligence and reporting of suspicious transactions in financial dealings.
Securities and Exchange Commission (SEC) Rules on Securities Borrowing and Lending: Specific regulations and guidelines issued by SEC governing securities lending transactions, including reporting requirements and operational procedures.
Financial Consumer Protection Framework (BSP Circular No. 1048): Establishes standards for consumer protection in financial transactions, including disclosure requirements and fair treatment principles.
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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