It is difficult to talk about the international securities lending market for very long, without referencing the contract that is most frequently used in this sector – the Global Master Securities Lending Agreement, or GMSLA.
Published and maintained by the International Securities Lending Association (ISLA), the GMSLA serves as a standard legal agreement used for the borrowing and lending of securities across various jurisdictions.
By putting in place a standardised framework for securities lending transactions around the globe, the GMSLA helps ensure consistency across the many agreements struck in the market.
This global relevance of the GMSLA raises the question for many potential parties to such agreements, of whether a process agent is always required for it.
Indeed, as a UK-based process agent ourselves at London Registrars, we are often asked to cover GMSLA agreements. So, below, we have sought to provide the clarity you might need.
The background of the GMSLA
The Global Master Securities Lending Agreement can trace its history back to 1994, when its precursor – the original Overseas Securities Lender’s Agreement (OSLA) – was published.
Various updates have been made to the GMSLA since then, including in 2010 and 2018.
The 2010 version is especially commonly used, and uses title transfer to transfer collateral from borrower to lender. This differs from the 2018 update, which transfers collateral by means of a pledge.
How is the GMSLA structured?
Sharing many of the same provisions as the Global Master Repurchase Agreement (GMRA) that we recently wrote about here at London Registrars, the GMSLA incorporates three levels:
- The Master agreement
- The Schedule attachment
- The confirmation or its automated equivalent
The general relationship between the counterparties is set out in the Schedule, with amendments standardised in annexes.
So, is there a need for a process agent appointment for the GMSLA?
There isn’t a single or simple answer to this question, as the agreement itself doesn’t explicitly stipulate that a process agent needs to be appointed.
Whether one looks at the 2010 or the 2018 versions of the GMSLA, it is silent on the topic of whether a process agent is needed. So, situation really comes down to the specifics of the particular transaction and its participants.
Ultimately, it is up to the parties’ own discretion whether a process agent appointment is necessary for a GMSLA transaction.
The circumstances that may call for a process agency to be put in place
It is worth reminding ourselves when a process agent does tend to be needed for agreements like these; when the given transaction is taking place between entities that are in different legal jurisdictions.
A process agent is an individual or organisation appointed to receive legal process on behalf of a party that might not otherwise have an address in the jurisdiction where the agreement is governed (for example, in England, if it is agreed between the parties that English law will apply to the transaction).
So, for the purposes of facilitating legal proceedings in the event of any disputes arising between the parties or if enforcement action against one of the parties becomes necessary, having a process agent in place from the beginning may be invaluable.
A classic example of a situation in which a UK process agent appointment becomes necessary, is if a UK firm lends securities to a US-based counterparty. In this case, the UK firm may require the US counterparty to agree that a UK-based process agent will be appointed, as a condition of the deal.
Get in touch now to receive advice on your process agency needs
To learn more about what a process agent appointment would look like for your organisation, and the circumstances in which it may be essential, please don’t wait any longer to contact the London Registrars team.