A Guide to the Law of Securitisation in Australia - Clayton Utz

More documents

Recommendations

Info

On settlement of a transfer of a Paper Security, title to itbecomes vested in the transferee. This occurs in accordance withthe general law and the transfer is not affected by theRegulations or the Operating Manual.While the Regulations and the Operating Manual provide aregime for transfer and settlements within the AustraclearSystem, Paper Securities are negotiable instruments. As such,they are also governed by the Bills of Exchange Act . PaperSecurities are bearer instruments for the purposes of the Bills ofExchange Act, either because they are expressed to be payable tobearer or their last endorsement is in blank (13(3) of the Bills ofExchange Act). Under s 36(2) of the Bills of Exchange Act, thetransfer of title in a bill payable to bearer occurs by delivery.Within the Austraclear System, this occurs constructively andarises by virtue of the change in the terms and status ofAustraclear’s bailment. It no longer holds the Paper Security asbailee for the transferor but instead for the transferee.The Regulations also seek to permit Members to have the benefitof the endorsement provisions of the Bills of Exchange Act.Regulation 12.3 provides that a transfer between Members of alodged Paper Security may be on terms that the Paper Security isindorsed by the transferring Member. If this occurs, it must beentered by the parties into the system and Austraclear mustrecord in the description of the Paper Security the name of theMember who has agreed to indorse it. Each indorsing Member isthen liable to other Members to the full extent as if the indorsingMember had actually signed the Paper Security as indorser.12.5.2 Non-Paper SecuritiesNon-Paper Securities are defined in regulation 1.1 as debtobligations of a government, government authority, anycorporation or other body corporate or any legal or equitableright or interest in such a debt obligation or in a pool of such debtobligations, where the debt obligation or the right or interest isof a kind prescribed in the Operating Manual. Paragraph 1.1(f) ofthe Operating Manual provides that, for a security to beacceptable for lodgement in the Austraclear System as a Non-Paper Security, the terms and conditions of issue must provide,amongst other things, that a register will be maintained by or onbehalf of the issuer to record the name of the legal owner of thatsecurity. The result is that Non-Paper Securities are registereddebt securities. These are not represented in physical form andinvestors do not receive written definitive evidence of their titleor the issuer’s indebtedness to them. Instead, the relevant debtobligation usually arises under a deed poll. The issuer’sindebtedness is noted in a register which is conclusive. Manydebt securities issued in securitisations are register-based Non-Paper Securities, traded through Austraclear.Lodgement and transfersNon-Paper Securities must be lodged with a valid marked andexecuted transfer and acceptance form, with the lodgingMember as transferor and Austraclear as transferee. Thesecurities are entered into the Security Record of the lodgingMember but they are transferred to Austraclear pursuant to thetransfer and acceptance form which is lodged with the issuer’sregistry.Regulation 8.1 provides that the legal title to a Non-PaperSecurity is held by Austraclear until it is uplifted from the system.The beneficial interest is retained by the lodging Member untilthe Non-Paper Security is uplifted or transferred to anotherMember. Regulation 8.4 also provides that Austraclear holds alodged Non-Paper Security as “nominee” for the Owner andmust deal with the security in accordance with its directions andinstructions.Non-Paper Securities can be transferred between Members ofAustraclear. Such a transfer operates to assign the beneficialtitle to the transferee Member on settlement. Austraclearthereafter holds the Non-Paper Security as “nominee” for thetransferee Member. Throughout the process of electronic tradingof a Non-Paper Security while it is lodged on the system, there isno change in the registered legal holder, which remainsAustraclear.12.5.3 EuroentitlementsEuroentitlements are securities which have been lodged withEuroclear or Clearstream. Under paragraph 1.1(e) of theOperating Manual the securities must be denominated, and allpayments must be made, in Australian currency. The securitiesmust be rated “investment grade” by S&P, Moodys, Fitch oranother rating agency acceptable to Austraclear and thesecurities must be approved by the Austraclear Committee.Lodgement and transfersIn order to lodge a Euroentitlement with Austraclear, a Membermust, amongst other things, direct Euroclear or Clearstream,in accordance with their rules, to transfer the relevanteurosecurities from the Member’s account to the account ofAustraclear on a “free of payment” basis. A financial institutionwhich is not a participant in Euroclear or Clearstream canarrange for such a person to do this on its behalf.67
When Austraclear receives notification from Euroclear orClearstream that the transfer has taken place, it then credits thenominated Security Record of the lodging Member with therelevant Euroentitlements.Once the lodgement procedure has been completed, transactionsin Euroentitlements are recorded in exactly the same way as forother types of securities lodged in Austraclear. Austraclear holdsthe Euroentitlement as nominee for the relevant Owner and mustdeal with it in accordance with the Owner’s instructions.12.5.4 Dematerialised SecuritiesDematerialised Securities are created electronically and are notrepresented by a physical instrument. They are intended to beequivalent to certain classes of Paper Securities.Dematerialisation has the advantage of removing one step in thetrading transaction – that of issuing and reissuing physicalcertificates. It permits a streamlining and simplification of theissue process, leading to savings in operating time and the costsof registration.The obligations of the issuer to holders under a DematerialisedSecurity are set out entirely in the Regulations and the OperatingManual and are effective by virtue of the contract between theMembers. It follows that an issuer of a Dematerialised Securitymust be a Member of Austraclear and that a DematerialisedSecurity while in this form can be traded and held only byMembers.Regulation 8B.2 provides as follows:“(b) the records of Austraclear prove the terms and the executionof a Dematerialised Security in the same way and with thesame effect as the Equivalent Paper Security;(c) the rights and obligations of a person who is deemed to bethe issuer, drawer, maker, acceptor, indorser or holder of aDematerialised Security are to be equivalent to those towhich that person would be entitled or subject if it were theissuer, drawer, maker, acceptor, indorser or holder (as thecase may be) of an Equivalent Paper Security,notwithstanding that the relevant rights and obligations havenot been embodied in a document which satisfies therequirements for formal validity of the Equivalent PaperSecurity.”In addition, under regulation 8B.2(e) each Member andParticipating Bank is estopped from asserting that the rights ofthe holder of a Dematerialised Security differ from those theholder would have if it held the Equivalent Paper Security.Lodgement and titleThe process for creating and lodging a Dematerialised Security iscontained in paragraph 8A.1 of the Operating Manual. In short, aMember enters into the system electronically all of the essentialqualities of the Dematerialised Security, such as the details of itscorresponding Equivalent Paper Security, its issue and maturitydates, the face value, the drawer, the acceptor/issuer or maker,the payee, the place at which it is payable and so forth. Once theDematerialised Security is accepted for lodgement, it becomes avalid debt security in accordance with its terms.Dematerialised Securities are intended to be equivalent in allrespects to their Equivalent Paper Securities. However, whilethey are in electronic form, the provisions of the Bills of ExchangeAct cannot apply to them. The Regulations seek, though, toreplicate the position.This is achieved, indirectly, through regulation 8B.2(c) (see above)which confers in respect of a Dematerialised Security all thequalities applying to its Equivalent Paper Security. These include,presumably, those under the Bills of Exchange Act. In thisrespect, perhaps the most interesting aspect is the attempt bythe Regulations to replicate the benefits of a holder in duecourse under the Bills of Exchange Act.Regulation 8B.1 provides that “the owner of a LodgedDematerialised Security has good title to it if the Member hastaken that Dematerialised Security in good faith for value andwithout notice at the time of taking title of any defect in the titleof its immediate predecessor in title.” In addition, regulation8B.2(f) provides:“where a Member acquires a Dematerialised Security by transferto the Member’s Security Record in good faith, for value andwithout notice of any defect in the title of the transferor ... theMember acquiring the Dematerialised Security will have rights inrelation to its equivalent to those of a holder in due course of theEquivalent Paper Securities and will accordingly acquire a title tothat Dematerialised Security which is free of equities.”Regulations 8B.1 and 8B.2 are binding on the Members. As suchthe Regulations should be effective in determining any disputesamongst them regarding the title to a Dematerialised Securityand for curing any defects to a Member’s title.68
Page 6:
12.7.3 Euroentitlements............
Page 9 and 10:
1 General overview of the nature of
Page 12:
An interest in a managed investment
Page 15 and 16:
142.3.4 Provision of a financial se
Page 17 and 18: 3 The disclosure and civil liabilit
Page 19 and 20: 18The statutory source for this ste
Page 21 and 22: The implication of this approach in
Page 23 and 24: Interestingly, the majority then we
Page 25 and 26: 4 Stamp duty and securitisation244.
Page 27 and 28: 264.8 Relief for mortgage-backed se
Page 29 and 30: 4.10 ConclusionStamp duty is a very
Page 31 and 32: Despite the absence of an express a
Page 33 and 34: 32share of the profits of the compa
Page 35 and 36: (d) before the issue:(i) the compan
Page 37 and 38: 365.4 Debt/equity rulesDivision 974
Page 39 and 40: Entities that make GST-free supplie
Page 41 and 42: • “ enterprise” is defined in
Page 43 and 44: 6 The Consumer Credit Code andsecur
Page 45 and 46: 7 The regulation of the participati
Page 47 and 48: inclusion within the ELE depends on
Page 49 and 50: 8 Set-off and securitisation8.1 Int
Page 51 and 52: 50However, this result and the prin
Page 53 and 54: 9 Insolvency and securitisation529.
Page 55 and 56: 54• if the trustee has not limite
Page 57 and 58: Section 588FG provides a measure of
Page 59 and 60: 10 Issues relating to debt securiti
Page 61 and 62: 60indemnity existed) and had no han
Page 63 and 64: The effect of the decision has been
Page 65 and 66: the ASX has discretion to ask the e
Page 67: • Public Trustee Members - for pr
Page 71 and 72: have been completed in relation to
Page 73 and 74: Some CMBS transactions allow the is
Page 75 and 76: 14.3 GamingIn the past, another con
Page 77 and 78: 16 Clayton UtzOur securitisation te
show all

A Guide to the Law of Securitisation in Australia - Clayton Utz

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?