Securities Account Control Agreement Template for South Africa
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What is a Securities Account Control Agreement?
The Securities Account Control Agreement is a crucial document in South African secured financing transactions, used when a lender requires security over financial assets held in a securities account. This agreement creates and perfects the security interest by establishing control over the account, which is essential under South African law for the secured party's rights to be effectively protected. The agreement complies with the Financial Markets Act 19 of 2012 and related regulations, detailing the mechanisms for control, the roles and responsibilities of each party, and the procedures for exercising rights over the account. It is particularly important in corporate lending, asset management, and investment scenarios where securities accounts serve as collateral. The document typically includes detailed provisions for account management, instruction protocols, and default scenarios, ensuring clarity and enforceability under South African jurisdiction.
About the Securities Account Control Agreement
A Securities Account Control Agreement is a specialised legal document that gives a secured party (typically a lender) control over securities held in an account managed by a securities intermediary. Under South African law, this control mechanism is crucial for perfecting security interests in financial assets, ensuring that your rights as a lender are legally protected and enforceable against third parties.
When do you need this document?
You need a Securities Account Control Agreement when extending credit secured by securities held in brokerage or custodial accounts. This document is essential in corporate lending arrangements where companies pledge their investment portfolios as collateral, syndicated loan facilities involving multiple lenders, asset-based financing transactions, and margin lending agreements. Investment managers and wealth advisors also use these agreements when managing client portfolios that serve as security for loans. The agreement becomes particularly important when the debtor's securities are held by third-party intermediaries rather than directly by the secured party.
Key legal considerations
The agreement must clearly establish the method of control, whether through authenticated instructions, control agreements, or becoming the customer of record. You should ensure that the securities intermediary acknowledges its obligations and agrees to comply with instructions from the secured party without further consent from the debtor. The document should specify priority rights, particularly important when multiple parties claim interests in the same securities account. Include detailed default provisions outlining when and how the secured party can exercise control, liquidate securities, and apply proceeds to outstanding obligations. Consider the treatment of dividends, interest payments, and voting rights during the term of the agreement, as these can significantly impact the debtor's business operations.
Legal requirements in South Africa
Under the Financial Markets Act 19 of 2012, securities control agreements must comply with specific regulatory requirements for perfection and enforceability. The agreement must satisfy the control requirements set out in the Act, which may include the secured party becoming the customer of record or obtaining an authenticated agreement from the securities intermediary. Compliance with the Financial Sector Regulation Act 9 of 2017 is necessary when dealing with regulated financial institutions as intermediaries. The Companies Act 71 of 2008 governs the transfer and registration requirements for company shares included in the securities account. You must ensure that the securities intermediary is properly licensed and regulated under South African law, and that the agreement includes appropriate governing law and jurisdiction clauses. The National Payment System Act 78 of 1998 may apply to settlement and payment obligations arising from the agreement.
GOVERNING LAW
Applicable law
This Securities Account Control Agreement is drafted to comply with South Africa law. Key legislation includes:
Financial Sector Regulation Act 9 of 2017: Establishes the framework for financial sector regulation and supervision, including the powers of financial sector regulators relevant to securities control agreements.
Companies Act 71 of 2008: Relevant for understanding the requirements regarding the transfer and registration of securities, especially when dealing with company shares.
National Payment System Act 78 of 1998: Important for understanding the settlement system and payment obligations related to securities transactions.
Financial Intelligence Centre Act 38 of 2001: Necessary for compliance with anti-money laundering requirements when dealing with securities accounts and transfers.
Consumer Protection Act 68 of 2008: Relevant when one of the parties qualifies as a consumer, ensuring fair treatment and transparent terms in the agreement.
Protection of Personal Information Act 4 of 2013: Essential for handling personal information of parties involved in the agreement and ensuring data protection compliance.
Securities Services Act 36 of 2004: Though largely replaced by the Financial Markets Act, some provisions may still be relevant for historical context and interpretation.
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