A Securities Account Control Agreement (SACA) is a legal contract that governs the relationship between a secured party and a securities intermediary. This agreement is usually used in situations where there is a need for a secured party to have control over a securities account that holds securities as collateral for a loan. A SACA is governed by the Uniform Commercial Code (UCC), which is a set of laws that govern commercial transactions in the United States.
The UCC provides guidelines and requirements for a SACA to be enforceable. The agreement must be in writing and must be signed by all parties involved. The agreement must also identify the securities account over which control is being established, and the rights and obligations of each party.
One of the key features of a SACA is the control provision. This provision gives the secured party control over the securities account, which means that they can direct the securities intermediary to take certain actions with regard to the account. For example, the secured party may be able to direct the securities intermediary to transfer securities out of the account or to sell securities held in the account.
Another important feature of a SACA is the default provision. This provision sets out the rights and obligations of the parties in the event of a default by the borrower. The default provision typically gives the secured party the right to take possession of the securities held in the account and to sell them to satisfy the debt owed.
It is important to note that a SACA is not the same as a pledge agreement. In a pledge agreement, the borrower retains control over the securities account, and the secured party has a security interest in the securities held in the account. In a SACA, the secured party has control over the securities account, which gives them the ability to take action with regard to the securities held in the account.
In conclusion, a Securities Account Control Agreement (SACA) is a legal contract that provides a secured party with control over a securities account that holds securities as collateral for a loan. The agreement is governed by the Uniform Commercial Code (UCC) and must be in writing and signed by all parties involved. The key features of a SACA are the control provision and the default provision, which set out the rights and obligations of the parties. It is important to understand the differences between a SACA and a pledge agreement when considering using securities as collateral for a loan.