Securities Account Control Agreement Template for the United States
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What is a Securities Account Control Agreement?
The Securities Account Control Agreement (SACA) is a critical document in secured financing transactions under U.S. law where securities accounts serve as collateral. It is required to perfect a security interest in a securities account under the UCC by establishing 'control,' which provides the secured party with priority over other creditors. The agreement defines the rights and obligations of all parties, including the securities intermediary's agreement to comply with the secured party's instructions without further consent from the debtor. SACAs are commonly used in lending transactions, margin accounts, and other financial arrangements where securities serve as collateral.
Frequently Asked Questions
Is a Securities Account Control Agreement legally binding in the United States?
Yes, a Securities Account Control Agreement is legally binding in the United States when properly executed and meets UCC requirements. The agreement creates enforceable rights and obligations between the secured party, debtor, and securities intermediary. It must comply with UCC Articles 8 and 9 to be valid and enforceable in court.
How does a Securities Account Control Agreement differ from a Security Agreement?
A Securities Account Control Agreement specifically establishes control over securities accounts under UCC Article 8, while a Security Agreement creates a broader security interest in various types of collateral under UCC Article 9. The control agreement provides a specific method of perfection for securities accounts, giving the secured party priority and immediate access to the account upon default.
Can I lose my security interest if the Securities Account Control Agreement is incomplete?
Yes, an incomplete or improperly executed Securities Account Control Agreement can result in loss of your security interest or priority position. Missing required elements like proper identification of the securities account, clear control provisions, or lack of securities intermediary acknowledgment can render the agreement ineffective. This could leave you as an unsecured creditor with significantly reduced recovery rights.
How long does it typically take to execute a Securities Account Control Agreement?
Execution typically takes 1-3 weeks, depending on the complexity of the securities accounts and coordination between parties. The process involves drafting the agreement, obtaining securities intermediary cooperation, and ensuring all parties sign. Delays often occur when securities intermediaries require additional documentation or internal approvals before acknowledging the control arrangement.
Must the securities intermediary sign the Securities Account Control Agreement under UCC law?
Under UCC Article 8, the securities intermediary must acknowledge the control agreement or enter into a control arrangement for the secured party to obtain control. This can be through signing the agreement, providing a separate acknowledgment, or agreeing to comply with the secured party's entitlement orders. Without intermediary participation, control cannot be established and the security interest may not be properly perfected.
Which states have different requirements for Securities Account Control Agreements?
All U.S. states have adopted versions of UCC Articles 8 and 9, creating substantially uniform requirements for Securities Account Control Agreements nationwide. However, some states have minor variations in filing requirements, notice provisions, or enforcement procedures. Louisiana, which follows a civil law system, has the most significant differences and may require consultation with local counsel familiar with Louisiana Commercial Code provisions.
Common mistakes people make when drafting Securities Account Control Agreements include which issues?
The most common mistakes include failing to properly identify the specific securities account, not obtaining securities intermediary acknowledgment, and inadequate description of the secured obligations. Other frequent errors include missing priority provisions, unclear default remedies, and failing to address ongoing account management responsibilities. These mistakes can result in unenforceable agreements or loss of security interest priority.
About the Securities Account Control Agreement
A Securities Account Control Agreement is a fundamental document in secured financing that establishes your legal control over securities accounts serving as collateral. Under the Uniform Commercial Code, particularly Articles 8 and 9, this agreement is the primary method for perfecting a security interest in securities accounts, giving you priority over other creditors and ensuring your collateral rights are legally enforceable.
When do you need this document?
You need a Securities Account Control Agreement whenever you're entering a secured transaction where securities accounts serve as collateral. This includes commercial lending arrangements where borrowers pledge their brokerage accounts, margin lending facilities provided by broker-dealers, asset-based lending transactions involving investment portfolios, and structured finance deals where securities accounts back the financing. The agreement is also essential in repo transactions, securities lending arrangements, and prime brokerage relationships where multiple parties have interests in the same securities account.
Key legal considerations
The most critical aspect of your agreement is establishing "control" as defined under UCC Section 8-106, which requires the securities intermediary to comply with your instructions without further consent from the debtor. You must carefully define the scope of control, specifying which securities and cash equivalents are subject to the agreement and under what circumstances you can exercise control rights. The agreement should address priority issues, particularly if multiple secured parties claim interests in the same account, and establish clear procedures for giving instructions to the intermediary. Consider including provisions for account monitoring, reporting requirements, and procedures for liquidating securities upon default. You should also address the intermediary's liability limitations and ensure the agreement complies with applicable broker-dealer regulations and securities laws.
Legal requirements in United States
Under the UCC, your Securities Account Control Agreement must satisfy specific control requirements to perfect your security interest effectively. The agreement must be signed by the securities intermediary and include their explicit commitment to comply with your instructions regarding the securities account. Federal regulations under the Securities Exchange Act of 1934 may impose additional requirements, particularly if the intermediary is a registered broker-dealer subject to customer protection rules and net capital requirements. The Federal Reserve's Regulation T governs margin requirements and may affect control arrangements in margin accounts. If any party is an investment company, the Investment Company Act of 1940 imposes custody and segregation requirements that your agreement must address. State law variations may apply, particularly regarding enforceability and remedies, so you should ensure your agreement complies with the specific state's UCC implementation and any additional commercial law requirements.
GOVERNING LAW
Applicable law
This Securities Account Control Agreement is drafted to comply with United States law. Key legislation includes:
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