Many of our prospective or current clients here at London Registrars will be aware of what a prime brokerage agreement is.
It is, in short, a contract between a prime broker – typically a large financial institution such as an investment bank – and a client, the latter often a hedge fund, institutional investor, or high-net-worth individual.
This type of legal contract defines the relationship between a prime broker and a client. It enables the latter party to access a suite of services through a single broker, while trading with multiple counterparties.
What is the purpose of a prime brokerage agreement?
The need for responsible risk management is one key reason why prime brokerage agreements exist. Such a contract establishes how risks are managed and liabilities assigned between the prime broker and the client.
The existence of a prime brokerage agreement also helps ensure the contractual services provided are compliant with regulatory requirements.
Then, there is the operational efficiency aspect; when various services are consolidated under a single provider, this can greatly help streamline the client’s operations.
What does a prime brokerage agreement normally include?
As one might expect, a prime brokerage agreement sets out the specific services the prime broker will provide to the client. These may encompass the likes of:
- Securities lending, enabling clients to borrow securities for short selling
- Trade execution and settlement, facilitating and clearing trades across multiple markets
- Custody services, for the safekeeping of the client’s assets
- Margin financing, whereby loans are provided to leverage investments
- Reporting and technology, including portfolio management tools, risk analytics, and reporting
- Capital introduction, connecting clients with potential investors.
A given prime brokerage agreement will typically include specific information on the types of client accounts to be maintained, such as those for margins and securities.
The contract will also outline the fee structure for the services rendered, as well as the agreement duration and the conditions under which either party can terminate the arrangement.
Moreover, the agreement will set out terms and conditions in relation to how disputes will be handled, such as through arbitration.
In what circumstances is a UK process agent needed for such agreements?
There are two broad conditions where, if both apply, a UK-based process agent service may become necessary in relation to a prime brokerage agreement.
These conditions include:
- The prime brokerage agreement is governed by English law or subject to the English courts’ jurisdiction, and
- One or both parties (e.g. the client or prime broker) do not have a presence in the UK.
A process agent is a designated representative in a particular jurisdiction, such as the UK, that is authorised to accept legal documents or notices on behalf of a party to an agreement (typically a party that does not have a physical presence in the given jurisdiction).
The appointment of a UK-based process agent, then, allows for legal documents to be served efficiently in the UK in the event of a dispute between the parties.
For example, a hedge fund in the United States that is looking to enter a prime brokerage agreement with a UK-based bank, under English law, may be required under the contract’s terms to appoint a UK process agent to receive legal notices.
Enquire to us now to learn more about our complete process agent service in the UK
It is important to emphasise that if a particular contract you are seeking to enter obliges you to appoint a process agent, this will not be an “optional extra”. In order for the agreement to go ahead, you will need to agree to and adhere to this condition.
If, then, you are on the lookout for a suitable process agent service in the UK, please don’t hesitate to reach out to our trustworthy team at London Registrars.
You can learn more about our process agency expertise by downloading and perusing our brochure for this service. This may then be followed by sending us an email or getting in touch over the phone, on 0044 20 7608 0011.