Are the Assets in Custody?

March 22, 2017

by: Matthew D'Amico

Lender Beware: The custody assets you are lending against may not actually be held in custody.

Lenders to funds and other borrowers often extend credit based on a security interest over assets that are held in custody.  The lender is granted a security interest in the relevant custody account and all of the cash, securities and other assets therein, and then perfects the security interest by entering into a “control agreement” with the custodian.  The lender may have made two big

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