Chapter 15: TAKING AND PERFECTING SECURITY OVER FINANCIAL COLLATERAL
This chapter looks at the types of security that may be taken over cash, financial instruments and credit claims and how that security is perfected. The method selected will depend on the type of collateral. When taking security, it is necessary to consider: (a) what type of asset is available as security and whether it is held in the name of the collateral-provider or a custodian or other intermediary or nominee; (b) whether the asset is affected by rights in favour of a third party such as a secured creditor with a prior ranking mortgage or charge or a holder of a negative pledge; (c) where the asset consists of shares, whether they are subject to any options, pre-emption or other rights; (d) where the asset consists of securities, whether they are in registered or bearer form, certificated or uncertificated, and held in a direct or indirect depository system; (e) where the asset consists of some other chose in action (such as a bank deposit or credit claim), whether this is capable of being assigned by way of security or charged or whether a third party consent is required in order to assign or charge it. There are four types of consensual security under English law. These are: (i) a mortgage (such as an assignment by way of security); (ii) a charge; (iii) a pledge; and (iv) a lien. Mortgages and charges are non-possessory forms of security in the sense that they do not depend on the collateral-taker having possession of the relevant property.
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