the assets of a general insurer regulated under the Insurance Act in Australia are subject to a priority regime which would prefer other creditors ahead of a secured party; a secured party is restricted from enforcing its security interest over an Australian company’s property during the company’s administration and an administrator is given certain rights in respect of dealing with property subject to circulating security interests; certain may apply in respect of an entity due to the recognition of a foreign insolvency proceeding under the (CrossBorder Insolvency CrossBorder Insolvency Act 2008 Act); client money and client property rules may affect the way in which a secured party must hold, and enforce rights against, collateral provided to it; the PPSA imposes additional requirements governing the enforceability, validity and perfection of security interests; the PPSA and Corporations Act set out priority rules which may result in a secured party losing priority in respect of secured assets and those Acts set out circumstances in which property secured by a security interest may vest in the grantor; other security interests may arise in respect of the property of a grantor by operation of law; security agreements may need to be stamped to be admissible in proceedings; and the PPSA sets out rules governing the enforcement of security interests (including procedural requirements and duties). These legacy Australian law issues could prevent entities subject to Australian law from being able to grant, or enforce rights in, margin provided by way of security in the manner contemplated by the BCBSIOSCO Margin Requirements. The PSN Act is amended by this Bill to ensure that a party to a closeout netting contract can enforce security in respect of certain financial property, subject to safeguards to protect against abuse and limit the unintended consequences of such a powerful protection. The PSN Act is the preferred vehicle to make the proposed amendment because it covers the widest possible range of external administration proceedings conducted under Australian or foreign law and has the required authority to override provisions in any other legislation. The application of the PSN Act’s protective framework any other law’ (subject to clarifying ‘despite the matters described in part 2 below and the existing carveouts in
the assets of a general insurer regulated under the Insurance Act in Australia are subject to a priority regime which would prefer other creditors ahead of a secured party; a secured party is restricted from enforcing its security interest over an Australian company’s property during the company’s administration and an administrator is given certain rights in respect of dealing with property subject to circulating security interests; certain may apply in respect of an entity due to the recognition of a foreign insolvency proceeding under the CrossBorder Insolvency Act 2008 (CrossBorder Insolvency Act); client money and client property rules may affect the way in which a secured party must hold, and enforce rights against, collateral provided to it; the PPSA imposes additional requirements governing the enforceability, validity and perfection of security interests; the PPSA and Corporations Act set out priority rules which may result in a secured party losing priority in respect of secured assets and those Acts set out circumstances in which property secured by a security interest may vest in the grantor; other security interests may arise in respect of the property of a grantor by operation of law; security agreements may need to be stamped to be admissible in proceedings; and the PPSA sets out rules governing the enforcement of security interests (including procedural requirements and duties). These legacy Australian law issues could prevent entities subject to Australian law from being able to grant, or enforce rights in, margin provided by way of security in the manner contemplated by the BCBSIOSCO Margin Requirements. The PSN Act is amended by this Bill to ensure that a party to a closeout netting contract can enforce security in respect of certain financial property, subject to safeguards to protect against abuse and limit the unintended consequences of such a powerful protection. The PSN Act is the preferred vehicle to make the proposed amendment because it covers the widest possible range of external administration proceedings conducted under Australian or foreign law and has the required authority to override provisions in any other legislation. The application of the PSN Act’s protective framework ‘despite any other law’ (subject to clarifying the matters described in part 2 below and the existing carveouts in
C2015-052_Explanatory-Memorandum.docx