# The Moveable Transactions (Scotland) Act 2023 (Financial Collateral Arrangements and Financial Instruments) (Consequential Provisions and Modifications) Order 2025, Note: Explanatory note


(This note is not part of the Order)
This Order makes provision in consequence of the Moveable Transactions (Scotland) Act 2023 (asp 3) (“the Act”) in relation to—
the assignation of claims as part of a financial collateral arrangement (pursuant to the Financial Collateral Arrangements (No. 2) Regulations 2003 (S.I. 2003/3226) (“the FCARs”));
incorporeal moveable property in the form of financial instruments pursuant to the FCARs being capable of being used as collateral for a loan and therefore subject to a new form of security created under the Act called the statutory pledge.
The Order extends to Scotland only.
Article 2 defines many of the terms used throughout the Order. A number of defined terms are taken directly from the FCARs.
Article 4 provides for an alternative method for the transfer of a claim where the assignation evidences a financial collateral arrangement. Such a claim can transfer via either registration or intimation, or alternatively when all the conditions in paragraph (3) are met. Paragraph (4) removes the need for formality in relation to the execution or authentication of an assignation document in order to comply with the FCARs.
Article 5 makes it competent to create a statutory pledge over a financial instrument and additionally article 6 makes it competent for an individual to act as a provider of such a pledge.
Article 7 provides for statutory pledges over financial instruments in respect of a security financial collateral arrangement for the purposes of the FCARs. Such a statutory pledge can be created by registration, as like any other statutory pledge, or by the encumbered financial instrument coming into the possession or control of the collateral-taker. Paragraph (4) removes the need for formality in relation to the execution or authentication of a constitutive or amendment document in order to comply with the FCARs.
Article 8 provides for the circumstances where a financial instrument would be acquired unencumbered by a statutory pledge when so acquired in a protected transaction on the CREST settlement system.
Articles 9 and 10 make provision respectively in relation to the assignation and amendment of an unregistered statutory pledge over a financial instrument.
Article 11 makes provision in relation to the restriction, discharge or extinction of an unregistered statutory pledge. It has the effect that the statutory pledge is extinguished should the collateral-taker give up possession or control of the instrument and that a pledge may be restricted or discharged by means of an evidenced statement by the collateral-taker.
Article 12 provides that the use of evidenced agreements or statements for the purposes of the Order comply with the requirement of the FCARs that all formalities as to execution and authentication do not apply to such agreements.
Article 13 makes provision as to the ranking of multiple statutory pledges, whether they be created via registration or under article 7(2), over the same financial instrument that is not the property of the provider at the time the pledges are granted. The effect is the ranking is determined by which pledge is perfected first, with the earlier having priority over the later.
Article 14 provides that a court order will only be required to enforce a statutory pledge over a financial instrument where the provider is either an individual or where steps are taken towards taking possession of a certificated instrument in accordance with article 15.
Article 16 provides for the limited circumstances in which a secured creditor is entitled to sell the instrument for market value.
Article 17 provides that the secured creditor can take additional steps to those noted in the inexhaustive list in section 72(1) of the Act to manage and protect the instrument and its value.
Article 18 provides that a secured creditor cannot appropriate a financial instrument payable to the bearer unless already in their possession.
Article 19 provides for appropriation of a financial instrument with prior agreement. This has the effect that the instrument can be appropriated in accordance with said agreement and accordingly valued in line with the agreement’s valuation methodology. This ensures compliance with regulation 18(1) of the FCARs and the requirement to value the instrument in a commercially reasonable manner.
Article 21 makes minor consequential amendments to Part 1 of the Act that signpost the application of the Order.
Article 22 makes minor consequential amendments to Part 2 of the Act that signpost the application of the Order.
A full Impact Assessment has not been prepared for this Order because the impacts were assessed and set out in a Business Regulatory Impact Assessment prepared by the Scottish Law Commission in relation to the draft Bill contained in their Scottish Law Commission Report on Moveable Transactions 2017, which was implemented through the Act and this Order.

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Source: https://www.legislation.gov.uk/uksi/2025/275/note (the official version)
Page: https://openlegislation.uk/moveable-transactions-scotland-act-2023-financial-collateral-arrangements-and-financial-instruments-consequential-provisions-and-modifications-order-2025/note
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.