Hague Securities Convention goes into effect in the United States

Abstract

PurposeTo explain the Hague Securities Convention in the context of secured financing transactions in the US and to discuss the implications of the Convention on new and existing transactions, as well as on market practice going forward.Design/methodology/approachThis article provides a broad overview of the Hague Securities Convention and the impact of the Convention’s choice of law rules on secured financing transactions in the US involving intermediated securities, including how this deviates from previously applicable laws (such as the Uniform Commercial Code), and provides practical considerations with respect to secured financing transactions.FindingsWhile in most circumstances the Convention provides for the same choice of law as previously applicable laws, there are certain scenarios where the Convention will produce a different result. Market practice with respect to perfecting security interests will likely change to take account of the Convention and to provide the parties with certainty regarding the law applicable to secured transactions.Practical implicationsThe Convention calls for increased diligence with respect to the law governing the account agreement between the debtor and the securities intermediary and whether the securities intermediary has a qualifying office in that jurisdiction.Originality/valuePractical guidance from experienced finance lawyers.