Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Bill

  • enacted
19 New section 103B and cross-heading inserted

After section 103A, insert:

Priority of interests under qualifying derivatives

103B Priority of interests under qualifying derivatives

(1)

The security interest of a person (the enforcing counterparty) in collateral that is personal property, to the extent that the security interest secures payment or performance of an obligation under or in relation to a qualifying derivative, has priority over any security interest (including a purchase money security interest) in the same personal property if—

(a)

the counterparties to the derivative are—

(i)

2 qualifying counterparties; or

(ii)

a qualifying counterparty and an overseas person; and

(b)

before the enforcement of the security interest, the collateral is transferred or otherwise dealt with so as to be in the possession or under the control of—

(i)

the enforcing counterparty; or

(ii)

another person (who is not the debtor that granted the security interest) on behalf of the enforcing counterparty, under the terms of an arrangement evidenced in writing.

(3)

Terms and expressions defined in section 122A of the Reserve Bank of New Zealand Act 1989 and used in this section (including the definitions of collateral and possession) have in this section the same meanings as in section 122A.

(3A)

Section 122AB of the Reserve Bank of New Zealand Act 1989 applies with all necessary modifications for the purposes of this section (and those modifications include treating references to section 122(9A)(ab) of that Act as references to subsection (1)(b) of this section and treating references to the grantor as references to the debtor that granted the security interest).

(4)

This section overrides anything in this Act to the contrary (other than section 103A).