USA Law and Practice Contributed by: Bjorn Bjerke, Corey Reis and Joshua Kopel, A&O Shearman
3.3 Principal Perfection Provisions Typical perfection provisions include: • a requirement on filing financing statements; • provisions requiring notification and potential - ly opinions prior to any changes in the name or jurisdiction of the organisation; • control over securities accounts, deposit accounts and electronic chattel paper; • delivery or custody of chattel paper, securities and instruments; and • representations that the secured party has a perfected security interest. There may also be additional representations relating to the nature and characteristics of the relevant assets. In some instances, the perfec - tion representations relating to chattel paper may also call for the original being marked as pledged to the trustee, to reduce the risk that a third-party acquirer obtains possession without actual knowledge of the prior security interest. 3.4 Principal Covenants The principal covenants in a securitisation trans - action vary, based on the relevant document and the type of securitisation. The covenants will typically address payment obligations, collateral maintenance and perfection obligations, rights and related procedures concerning adding and removing underlying assets, reporting obliga - tions, and various negative covenants intended to maintain the integrity of the securitisation. In addition, there will typically be separate cov - enants relating to the trustees’ obligations to act, and rights not to act, in accordance with instructions. Enforcement is usually a combination of events of default under the indenture, which gives the noteholders the right to direct the indenture trus - tee to take enforcement actions, and servicer
defaults, which give the specified class or class - es of noteholders rights to replace the servicer. 3.5 Principal Servicing Provisions The servicing provisions generally relate to con - tinued collection and servicing of the relevant asset, and typically include a number of provi - sions relating to reporting, notice and turnover of collections. In securitisations with revolving periods, during which there is a constant replen - ishment period, the servicer will also typically be required to ensure compliance with applica - ble pool criteria and provide relevant reports in connection with any collateral removal, additions or substitutions. In addition, for some securiti - sations, there will often be certain obligations around the delivery of reports and other relevant information to a back-up servicer. The agreement will also often contain provisions that define the servicing standard and further address the rel - evant role and any additional obligations of the servicer. Where the securitisation involves securities with - in the meaning of the Investment Advisers Act of 1940, as amended (“Advisers Act”), such as CLOs, and it involves more active or discretion - ary management of the collateral, the agreement would also typically address requirements and prohibitions under the Advisers Act and rules promulgated thereunder. In CLOs, the servicing agreement is typically referred to as a Portfolio Management Agreement, Collateral Manage - ment Agreement or Investment Management Agreement (or similar term). 3.6 Principal Defaults Securitisation transactions often have three types of default provisions: • early amortisation events that cause acceler - ated pay-downs of principal, and terminate
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