Lien

A “lien” is a legal claim or legal right against assets.  Liens are typically asserted against assets that are pledged as collateral in relation to a loan or other debt.  The holder of the lien has the right to retain the assets in question for so long as the debt remains outstanding.

The concepts of a “lien” is relevant to the GMRA.  Paragraph 6(e) of the 2011 GMRA states that the parties will execute any documents and do any other thing that is necessary in order to ensure that the full legal title to any securities is transferred with the securities themselves and that the securities vest in the recipient free and clear of any lien (other than a lien granted to the operator of the clearance system through which the securities are transferred).  This applies irrespective of whether we are talking about “Purchased Securities”, “Equivalent Securities” or “Margin Securities”.

In addition, each party to the GMRA is required to represent to its counterparty that it has the full and unqualified right to transfer securities to its counterparty, free and clear of any lien (other than a lien granted to the operator of the clearance system through which the securities were actually transferred).

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