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Security Loan Agreement for Indonesia

Security Loan Agreement Template for Indonesia

A legally binding agreement governed by Indonesian law that facilitates the temporary transfer of securities from a lender to a borrower in exchange for collateral. The agreement complies with OJK regulations and Indonesian capital market laws, detailing the terms and conditions of the securities loan, including loan duration, collateral requirements, fees, rights and obligations of parties, and procedures for default scenarios. It incorporates specific provisions required under Indonesian financial regulations and provides mechanisms for protecting both lender and borrower interests in accordance with local market practices.

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What is a Security Loan Agreement?

The Security Loan Agreement serves as a crucial document in Indonesia's financial markets, enabling institutions to temporarily transfer securities while maintaining legal protection for all parties involved. This agreement type is commonly used by financial institutions, investment managers, and broker-dealers operating under Indonesian jurisdiction when they need to facilitate short-selling, cover settlement failures, or support market-making activities. The document must comply with OJK Regulation No. 45/POJK.04/2014 and related Indonesian financial regulations, incorporating specific local market requirements and practices. It includes comprehensive details about the securities being lent, collateral arrangements, fee structures, and risk management provisions, while ensuring alignment with Indonesian civil law principles and financial market regulations.

What sections should be included in a Security Loan Agreement?

1. Parties: Identification of the lender and borrower, including their complete legal names, registration numbers, and addresses

2. Background: Context of the agreement, including the purpose of the security loan and the parties' authority to enter into the transaction

3. Definitions and Interpretation: Definitions of key terms used in the agreement and rules for interpreting the agreement

4. Loan of Securities: Core provisions describing the securities to be lent, loan terms, and delivery mechanisms

5. Collateral Requirements: Details of required collateral, including type, value, maintenance, and margin requirements

6. Loan Fee and Other Payments: Specifications for lending fees, payment schedules, and any other financial considerations

7. Rights and Obligations: Detailed responsibilities of both parties during the loan period

8. Representations and Warranties: Standard declarations by both parties regarding their capacity and authority

9. Events of Default: Circumstances constituting default and consequences thereof

10. Termination: Conditions and procedures for early termination or maturity of the loan

11. Tax Provisions: Treatment of taxes and other duties related to the securities loan

12. Notices: Communication procedures between parties

13. Governing Law and Jurisdiction: Confirmation of Indonesian law as governing law and jurisdiction for disputes

14. General Provisions: Standard boilerplate clauses including amendments, assignments, and severability

What sections are optional to include in a Security Loan Agreement?

1. Market Disruption: Provisions dealing with market disruption events - include when lending securities traded on volatile markets

2. Corporate Actions: Handling of corporate actions affecting the loaned securities - include when lending equities

3. Intermediary Provisions: Additional provisions when a broker or agent is involved in the transaction

4. Cross-Border Provisions: Additional requirements for international transactions - include when either party is foreign

5. Electronic Trading Platform: Provisions for using electronic platforms for loan transactions - include when using automated trading systems

6. Sharia Compliance: Additional provisions ensuring compliance with Islamic law - include when either party requires Sharia compliance

What schedules should be included in a Security Loan Agreement?

1. Schedule 1 - Eligible Securities: List of securities eligible for lending under the agreement

2. Schedule 2 - Collateral Requirements: Detailed specifications of acceptable collateral and haircut calculations

3. Schedule 3 - Fee Schedule: Detailed breakdown of fees, charges, and calculation methodologies

4. Schedule 4 - Operating Procedures: Detailed procedures for loan initiation, maintenance, and termination

5. Schedule 5 - Form of Loan Confirmation: Template for confirming individual loan transactions

6. Schedule 6 - Contact Details: List of authorized personnel and contact information for both parties

7. Appendix A - Required Documents: List of supporting documents required from each party

8. Appendix B - Regulatory Disclosures: Required disclosures under Indonesian financial regulations

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Indonesia

Publisher

Ƶ

Document Type

Security Agreement

Cost

Free to use

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