The Attorney-General’s Department has released a consultation paper to examine the practical impact of the Personal Property Securities Act on the trading of financial products; including whether the current legislative provisions are fit for purpose or require clarification or amendment.

Examples of the types of activities in financial services that could be affected by the PPS Act includes buying or selling shares and other investment products or dealing in or lending on debts (book debts or account receivables).

Intermediated securities, while closely related to financial property, are treated separately under the PPS Act.

The PPS Act defines intermediated securities as the rights of a person in whose name an intermediary maintains a securities account.

The Paper asks:

• What should the definition of a financial product be?
• Should CHESS securities be intermediated securities or investment instruments?
• Should clearing and settlement facilities be treated as intermediaries under the PPS Act?
• Should the concept of an intermediary be limited to entities that hold an appropriate licence?
• Should the PPS Act clarify what is meant by an investor’s ‘rights’ in this context?
• Can the definition of an intermediated security be improved in other ways?

How financial property and intermediated securities are categorised under the PPS Act has implications for how they are perfected and therefore how effectively secured parties have notified others of their security interest and have protected themselves in cases of a grantor’s insolvency. Also, as these are mostly intangible types of property, there is an added risk to how types of financial property are perfected in cases where a security interest in them is perfected by control rather than being registered on the Register.

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