Unlike Article 9, the SPA does not provide for a control scheme for deposit accounts or other forms of collateral liquidity. On the contrary, the only method of developing the security interests of cash security, as recorded in the PPSA registry, is the only method. The PPSA registration system is similar to that introduced in Article 9. An insured party provides a funding statement containing basic information about a security agreement entered into or received by the insured party, including the names and addresses of the parties, a skeletal description of the security (often no more than an indication of the categories of security) and the duration of the registration10 From the point of view of an insured lender, the development by registration has several defects to obtain a security interest in cash in relation to the development control. The control of the article 9 cash guarantees provides a guaranteed lender with greater security as to the priority of its guarantees over these cash guarantees. Conversely, the PPSA`s priority rules for cash guarantees are complex and contain many exceptions, which means that perfection by registration with the PPSA, contrary to perfection by control under Article 9, does not guarantee the security of the guaranteed lender with respect to priority over competing secure parties. Take, for example, a situation in which an insured party (“guaranteed party A”) holds a security hold in a deposit account and the balance in that deposit account represents the proceeds of the sale of a security amount that has been subject to security interest to another insured party (“Guaranteed Party B”). Under the PPSA rules, Part B`s security interest in relation to the security interest of The Guaranteed Part A for the resulting debtor`s cash guarantees could be a priority.11 In other words, the priority rule where the guaranteed party, which will be the first to register its guarantees, , will prevail over all other guaranteed parties who would register at a later date (12), which generally regulates competition among the perfect security interests under PPSA11. 13 For this reason, guaranteed parties that hold cash guarantees cannot be assured by their sole priority under the PPSA by perfecting their security interests through registration. On the other hand, the control regime under Article 9 provides for much simpler priority rules for cash guarantees, which can give lenders control over such security, which prevails over other unchecked secured lenders. The Uniform Trade Code (UCC) defines a deposit account as a need, time, savings, passbook or similar account managed by a bank. This excludes investment real estate or accounts submitted by an instrument.
Unlike most types of guarantees, filing a UCC-1 financing return is not a perfect pledge to an account account. A lender can only upgrade a pledge to a borrower`s deposit account by obtaining “control” of the account, which requires one of the following provisions: 1) the borrower keeps his deposit account directly with the lender; 2. The lender becomes the effective owner of the borrower`s deposit accounts with the borrower`s custodian banks; or (3) the parties receive a deposit account control contract (DACA) with the borrower`s deposit bank. Alternative (3) is often the only viable option. This would be in addition to the guarantee agreement by which the borrower would grant the lender its cash deposit accounts as collateral for the loan.