Section 50 Investments and Securities Act 2025

Section 50 of the Investments and Securities Act 2025 is about Disapplication of avoidances, fraudulent preference, and priority of payments. It is under Part V (Registration and Regulation of Securities Exchanges, Financial Market Infrastructures and other Self Regulatory Organisations) of the Act. It provides as follows:

(1) The avoidance of, or the principle in relation to property dispositions, fraudulent preferences and the priority of payments under any law of insolvency does not apply to —
(a) a market contract;
(b) margin provided in relation to a market contract;

(c) a default fund contribution to a financial market infrastructure;
(d) a contract made by the financial market infrastructure for realising that margin or contribution or any disposition of property in accordance with the financial market infrastructure’s rules applicable to margin;

(e) any disposition of property in accordance with the rules of the financial market infrastructure as to the application of property provided as margin or as default fund contribution;
(f) a collateral arrangement under which collateral is provided by a clearing member to a financial market infrastructure;

(g) a transfer of a clearing member client contract, a client trade or a collateral arrangement; or
(h) a qualifying property transfer:

Provided that, where the non-defaulter had notice of a winding up petition when entering into a market contract or taking margin or contribution, any resulting profit is recoverable from the non-defaulter unless the court otherwise directs, and this proviso does not apply to market contracts where the person entering into the contract is a financial market infrastructure acting in accordance with its rules, or where the contract is effected under the default rules of a financial market infrastructure.

(2) The following may not be challenged as a transaction at an undervalue, a preference or a transaction defrauding the general body of creditors —
(a) a market contract to which a securities exchange or financial market infrastructure is a party or which is entered into under its default rules;

(b) a disposition of property under that market contract;
(c) margin provided in relation to a market contract, a collateral arrangement, any contract effected by a financial market infrastructure for the purpose of realising the property provided as margin, or any disposition of property in accordance with the rules of the financial market infrastructure as to the application of property provided as margin;

(d) a default fund contribution made to a financial market infrastructure, any contract effected by a financial market infrastructure for the purpose of realising the property provided as a default fund contribution, or any disposition of property in accordance with the rules of the financial market infrastructure as to the application of property provided as default fund contribution;
(e) a transfer of a clearing member client contract, a client trade or a collateral arrangement; or
(f ) a qualifying property transfer.

(3) The power to disclaim onerous property or to rescind contracts shall not apply to a —
(a) market contract;
(b) collateral arrangement;
(c) transfer of a clearing member client contract, a client trade or a collateral arrangement;

(d) qualifying property transfer; or
(e) contract effected by the financial market infrastructure for the purpose of realising property provided as margin in relation to a market contract or as default fund contribution.

(4) Where property, other than land, is held by the financial market infrastructure as margin for a market contract or as default fund contribution —
(a) the property may be applied in accordance with the financial market infrastructure’s rules notwithstanding any prior equitable interest or right, or any right or remedy arising from a breach of fiduciary duty, unless the financial market infrastructure had notice of the interest, right or breach of duty at the time the property was provided as margin or default fund contribution; and

(b) no execution or other legal process for the enforcement of a judgment or court order may be commenced or continued, and no distress may be levied against the property by a third party, except, in the case of margin or default fund contribution, with the financial market infrastructure’s written consent.