Lien

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It was common ground between counsel that rights properly classified in English law as a general lien were incapable of application to anything other than tangibles and old-fashioned certificated securities. — Briggs J in Re Lehman Brothers International

Liens are Security interests that usually arise by operation of the cold hard facts of life and without the need for any formal documentation. A banker has a lien over your assets. A mechanic has a lien over your car, in that if you don’t pay your bill, you can’t have the car back. A custodian has a lien over your assets. You get the idea.

Liens can be creatures of common law or statute (in which case they’re forms of legal security) or they can be equitable.

to have a legal lien you must have possession over your asset. To have an equitable lien, not so much.

No lien letters

In the context of CASS you will see a requirement that sub custodians provide a no lien letter to confirm they are not taking anything other than customary charges over assets.

Customary charges include the custodian's fees for holding assets and incidental expenses arising from its safe custody, but do not include liabilities arising from margin finance or other transactions between the custodian and the end client.

This is because a sub custodian will generally be holding assets in an omnibus account in the name of a main custodian, therefore will not know the identity of the end clients, much less have a relationship with them, and should not have any direct liabilities against them (at least that have anything to do with the subcustodian relationship). This is in contrast to the main custodian, who necessarily knows who the individual clients are and, if it is a [[prime broker], is likely to have lent money to those individual end clients to purchase those specific securities against the security over securities held in custody. Because it will have individual custody records it will be able to take security directly over an individual's securities and not over the general omnibus pool.