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Security Lending Agreement for the United Kingdom

Security Lending Agreement Template for England and Wales

A Security Lending Agreement under English and Welsh law is a legally binding contract that establishes the terms and conditions under which one party (the lender) temporarily transfers securities to another party (the borrower) in exchange for collateral. The agreement covers crucial aspects including delivery mechanisms, collateral requirements, rights and obligations of parties, corporate actions, income payments, and default provisions. It incorporates relevant regulatory requirements under UK financial services legislation and typically follows industry standard documentation such as the GMSLA.

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What is a Security Lending Agreement?

Security Lending Agreements are essential documents in financial markets, enabling efficient market-making, settlement coverage, and yield enhancement strategies. Under English and Welsh law, these agreements must comply with the Financial Services and Markets Act 2000 and related regulations. A Security Lending Agreement typically includes detailed provisions for the transfer of securities, collateral management, corporate actions, and default scenarios. It's particularly relevant in situations where institutional investors seek to generate additional returns from their securities holdings while maintaining economic ownership. The agreement provides legal certainty and risk management framework for both lenders and borrowers.

What sections should be included in a Security Lending Agreement?

1. Parties: Identification of the lender and borrower, including full legal names and addresses

2. Background: Context of the agreement and brief description of the transaction structure

3. Definitions: Key terms used throughout the agreement

4. Loans of Securities: Core provisions regarding the lending and borrowing of securities

5. Delivery of Securities: Procedures and timing for delivery of borrowed securities

6. Collateral Requirements: Details of required collateral, maintenance, and margin calls

7. Income and Corporate Actions: Treatment of dividends, interest, and corporate events

8. Events of Default: Circumstances constituting default and consequences

9. Termination Provisions: Circumstances and procedures for termination

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

1. Agency Provisions: Additional terms when one party acts as agent for underlying principals

2. Custody Arrangements: Specific provisions for when third-party custodians are involved in the transaction

3. Tax Provisions: Specific tax treatment and obligations for cross-border transactions or specific tax considerations

What schedules should be included in a Security Lending Agreement?

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

2. Schedule of Approved Markets: List of markets where securities can be traded

3. Form of Loan Confirmation: Standard form for confirming individual loans

4. Agency Annex: Additional terms and conditions for agency arrangements

5. Credit Support Annex: Detailed collateral arrangements and calculations

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Ƶ

Document Type

Security Agreement

Cost

Free to use
Relevant legal definitions


















































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Industries

Financial Services and Markets Act 2000 (FSMA): Primary legislation that regulates financial services and markets in the UK, establishes authorization requirements and regulatory framework for financial activities including securities lending

Companies Act 2006: Key legislation governing corporate authority provisions, registration of charges, and company documentation requirements relevant to securities lending agreements

Financial Collateral Arrangements (No. 2) Regulations 2003: UK implementation of EU Directive on financial collateral arrangements, providing rules on security interests and title transfer arrangements

FCA/PRA Regulations: Regulatory framework including CASS (Client Assets Sourcebook) rules and Conduct of Business Sourcebook (COBS) applicable to securities lending

Securities Financing Transactions Regulation (SFTR): Regulation establishing reporting requirements and transparency obligations for securities financing transactions

Insolvency Act 1986: Legislation governing close-out netting provisions and treatment of security interests in insolvency scenarios

Law of Property Act 1925: Foundational legislation establishing requirements for creating security interests and governing property rights and transfer

European Market Infrastructure Regulation (EMIR): Retained EU law in UK governing reporting and clearing obligations for securities transactions

Global Master Securities Lending Agreement (GMSLA): Industry standard documentation and market practice guidelines for securities lending transactions

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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