Securities Lending Contracts Mean What They Say

And that - according to the Federal Court - is that the lender of securities loses all title and interest in the securities.

Accordingly, the borrower of securities is free to dispose of the securities to third parties - and, if the borrower is insolvent, the lender cannot demand the return of the securities from those third parties.

This decision, handed down this morning in Melbourne, confirms that the standard form securities lending contract used in Australia (and around the world) can continue to be employed by institutions and the market in general.

Background

There is much litigation about Opes Prime and its securities lending contracts. Generally speaking, the litigation has concentrated on the questions: