A securities account control agreement (SACA) is a legal document that outlines the terms and conditions between a borrower and a lender that relates to a securities account. This agreement is essential in any situation where shares, bonds, and other investment securities are used as collateral for a loan.
SACAs are used by banks, financial institutions, and other lending entities to secure their investment in a borrower`s portfolio of securities. This agreement allows a lender to have full control over the securities in the account, so the borrower cannot sell or transfer them without the lender`s consent.
The primary objective of a securities account control agreement is to reduce the risk of loss to a lender. In the event of a default by the borrower, the lender can sell the securities in the borrower`s account to recover the outstanding loan amount.
The SACA, in essence, is an agreement between the borrower, the lender, and the securities intermediary. The securities intermediary is a third-party institution that ensures the safekeeping of the securities in the borrower`s account. The securities intermediary provides the lender with the necessary documentation and information that facilitates the movement of securities from the borrower`s account to that of the lender.
The SACA also outlines the responsibilities and obligations of the borrower, lender, and securities intermediary in the event of a default by the borrower. This agreement is legally binding, and each party must adhere to its terms and conditions.
In conclusion, a securities account control agreement is an essential legal document that protects the interests of both the borrower and lender. It ensures that the lender has full control over the securities account, which reduces the risk of loss in case of a default by the borrower. Every borrower who offers securities as collateral must sign an SACA to secure the loan. It is vital to understand the terms and conditions of the agreement before signing it.
