14AEffectiveness of security given in respect of obligations under close‑out netting contracts

#### 14A Effectiveness of security given in respect of obligations under close‑out netting contracts (1) Paragraphs 14(1)(ca) and 14(2)(fa) apply to the enforcement of security over financial property, in respect of obligations of a party to a close‑out netting contract, only to the extent that: (a) the obligations secured by the financial property, and discharged through the enforcement, are: (i) eligible obligations in relation to the contract; or (ii) obligations under the contract of a party to the contract to pay interest on an eligible obligation; or (iii) obligations of a party to the contract to pay costs and expenses incurred in connection with enforcing security given in respect of an eligible obligation; and (b) before the enforcement, the financial property is transferred or otherwise dealt with so as to be in the possession or under the control of: (i) the secured person; or (ii) another person (who is not the grantor) on behalf of the secured person, under the terms of an arrangement evidenced in writing; and (c) the enforcement is carried out in a manner that complies with section 420A of the Corporations Act 2001 (if it applies) and any applicable general law duties that are not inconsistent with the terms of the security. > Note: Section 5 defines financial property. (2) For the purposes of paragraph (1)(b), financial property is taken not to be in the possession or control of a person mentioned in that paragraph if, under the security, the grantor is free to deal with the financial property in the ordinary course of business until the secured person’s interest in the financial property becomes fixed and enforceable. (3) Subsection (2) applies even if the secured person’s interest in the financial property becomes fixed and enforceable before the enforcement of the security over that property mentioned in subsection (1). (4) Without limiting paragraph (1)(b), financial property is taken to be in the possession of a person for the purposes of that paragraph if: (a) in a case where there is an issuer of the financial property—the person is registered by, or on behalf of, the issuer as the registered owner of the financial property; or (b) in a case where the financial property is intermediated financial property—the person is the person in whose name the intermediary maintains the account. (5) Without limiting paragraph (1)(b), financial property is taken to be under the control of a person for the purposes of that paragraph if: (a) the financial property is intermediated financial property; and (b) the intermediary is not the grantor (but may be the secured person or any other person); and (c) there is an agreement in force between the intermediary and one or more other persons, one of which is the secured person or the grantor; and (d) the agreement has one or more of the following effects: (i) the person in whose name the intermediary maintains the account is not able to transfer or otherwise deal with the financial property; (ii) the intermediary must not comply with instructions given by the grantor in relation to the financial property without seeking the consent of the secured person (or a person who has agreed to act on the instructions of the secured person); (iii) the intermediary must comply, or must comply in one or more specified circumstances, with instructions (including instructions to debit the account) given by the secured person in relation to the intermediated financial property without seeking the consent of the grantor (or any person who has agreed to act on the instructions of the grantor). (6) Without limiting paragraph (1)(b), the fact that a grantor retains a right of one or more of the following kinds does not of itself stop that paragraph from being satisfied: (a) right to receive and withdraw income in relation to the financial property; (b) right to receive notices in relation to the financial property; (c) right to vote in relation to the financial property; (d) right to substitute other financial property that the parties agree is of equivalent value for the financial property; (e) right to withdraw excess financial property; (f) right to determine value of financial property. (7) The regulations may prescribe circumstances in which financial property is, or is not, transferred or dealt with so as to be in the possession or under the control of a person for the purposes of paragraph (1)(b). (8) An obligation is an eligible obligation in relation to a close‑out netting contract if the obligation is any of the following: (a) an obligation under the contract of a party to the contract that relates to a derivative or foreign exchange contract or is of another prescribed kind; (b) an obligation that results from the netting of 2 or more obligations that are created under the contract that: (i) must include at least one obligation covered by paragraph (a); and (ii) may include one or more incidental obligations that, taken together, do not form a material part of the net obligation; (c) an obligation declared by the regulations to be an eligible obligation in relation to a close‑out netting contract. (9) However, an obligation is not an eligible obligation in relation to a close‑out netting contract if it is declared by the regulations not to be an eligible obligation in relation to the contract for the purposes of this Act.