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The Security Lending Agreement serves as the primary legal framework for securities lending transactions in Pakistan's financial markets. This document is essential when financial institutions engage in temporary transfers of securities, typically for purposes such as short selling, coverage of settlement failures, or market making activities. The agreement must comply with Pakistani regulatory requirements, including those set by the Securities and Exchange Commission of Pakistan (SECP) and the State Bank of Pakistan. It covers comprehensive provisions for the lending process, collateral management, corporate actions, default scenarios, and settlement procedures. The document is structured to accommodate both conventional and Islamic financial institutions operating in Pakistan, incorporating necessary safeguards and risk management provisions while ensuring alignment with local market practices and regulatory frameworks.

1. Parties: Identification of the lender and borrower, including their legal status and registered addresses

2. Background: Context of the agreement and relationship between the parties

3. Definitions: Detailed definitions of terms used throughout the agreement

4. Loans of Securities: Core provisions governing the lending of securities, including initiation process and confirmation requirements

5. Transfer of Securities and Collateral: Procedures and requirements for transferring securities and posting collateral

6. Collateral Requirements: Specifications for acceptable collateral, maintenance margins, and mark-to-market requirements

7. Income and Corporate Actions: Treatment of dividends, interest, and other corporate actions affecting loaned securities

8. Fees and Charges: Lending fees, rates, and other charges applicable to the arrangement

9. Tax Provisions: Treatment of taxes and withholding requirements

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

11. Close-out and Set-off Rights: Procedures for terminating loans and settling obligations

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

13. Indemnification: Mutual indemnification obligations and limitations

14. Governing Law and Jurisdiction: Specification of Pakistani law as governing law and jurisdiction for disputes

15. Notices: Communication procedures and contact details

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