The Stock Borrowing Agreement is essential for financial institutions operating in Saudi Arabia's securities market, providing a legally robust framework for securities lending transactions while ensuring compliance with both secular and Islamic law. This document is typically used when financial institutions need to facilitate short selling, cover settlement failures, or support market-making activities. The agreement must be structured to comply with the Capital Market Authority's regulations and Shariah principles, making it unique compared to conventional securities lending agreements in other jurisdictions. It includes comprehensive provisions for collateral management, corporate actions, default scenarios, and fee structures that are specifically designed to meet Islamic finance requirements. The document is particularly important given Saudi Arabia's growing role in global financial markets and the increasing sophistication of its domestic securities market.
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1. Parties: Identification of the Lender and Borrower, including their full legal names, registration details, and addresses
2. Background: Recitals explaining the context of the agreement, the parties' authority to enter into the agreement, and Shariah compliance declaration
3. Definitions and Interpretation: Comprehensive definitions of terms used in the agreement and rules of interpretation
4. Loans of Securities: Core provisions governing the borrowing mechanism, including loan procedures, delivery mechanisms, and confirmation requirements
5. Collateral Requirements: Provisions regarding the type, amount, and maintenance of collateral, including marking to market procedures
6. Fees and Compensation: Shariah-compliant fee structure and compensation mechanisms
7. Rights and Obligations: Detailed responsibilities of both parties, including corporate actions, voting rights, and dividend arrangements
8. Representations and Warranties: Standard and specific representations and warranties from both parties
9. Events of Default: Definition of events of default and their consequences
10. Remedies: Available remedies upon default, including close-out procedures
11. Taxation: Treatment of taxes and zakat obligations
12. Governing Law and Jurisdiction: Application of Saudi law and jurisdiction of Saudi courts
13. Notices: Communication procedures between parties
14. Term and Termination: Duration of agreement and termination provisions
1. Agency Provisions: Required when either party acts as an agent for underlying principals
2. Custody Arrangements: Needed when a third-party custodian is involved in holding collateral
3. Set-off Rights: Optional provisions for set-off rights, if agreed between parties
4. Electronic Trading Platform: Required when transactions will be conducted through specific electronic platforms
5. Multiple Branch Provisions: Needed when either party operates through multiple branches
6. Force Majeure: Optional provisions for extraordinary events affecting performance
7. Shariah Board Approval: Required when specific Shariah board approval is needed for certain aspects
1. Schedule 1 - Form of Loan Confirmation: Standard form for confirming individual loan transactions
2. Schedule 2 - Eligible Securities: List of securities eligible for borrowing under the agreement
3. Schedule 3 - Eligible Collateral: Approved types of collateral and applicable haircuts
4. Schedule 4 - Fee Schedule: Detailed Shariah-compliant fee calculation methodology
5. Schedule 5 - Operating Procedures: Detailed operational procedures for loans and returns
6. Schedule 6 - Contact Details: Contact information for notices and operations
7. Schedule 7 - Form of Power of Attorney: Standard form for any required powers of attorney
8. Appendix A - Shariah Compliance Certificate: Certificate confirming compliance with Shariah principles
9. Appendix B - Required Documents: List of supporting documents required for transactions
Relevant legal definitions
Clauses
Relevant Industries
Banking
Financial Services
Investment Management
Securities Trading
Islamic Finance
Asset Management
Brokerage Services
Investment Banking
Wealth Management
Relevant Teams
Legal
Compliance
Risk Management
Securities Operations
Trading
Islamic Finance Advisory
Settlement & Custody
Documentation
Credit
Treasury Operations
Regulatory Affairs
Portfolio Management
Relevant Roles
Securities Lending Manager
Islamic Finance Compliance Officer
Legal Counsel
Risk Manager
Operations Director
Trading Manager
Custody Operations Manager
Shariah Compliance Officer
Portfolio Manager
Settlement Officer
Chief Investment Officer
Regulatory Compliance Manager
Treasury Manager
Documentation Specialist
Credit Risk Officer
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