Template:Gmsla income: Difference between revisions
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*“'''[[with respect to]]'''” is not the greatest choice of words: it is a mealy-mouthed [[prepositional phrase]] when one begs for a firm preposition. What it means — what it can ''only'' mean is “'''[[under]]'''”. In the context of [[securities lending]] this ''must'' mean ''payments made under the terms of the instruments themselves''. That is, payments made by the [[issuer]], and to shareholders ''[[qua]]'' shareholders as a pure function of their [[ownership]] of the {{gmslaprov|securities}}. Such payments are restricted to {{eqderivprov|dividend}}s and {{eqderivprov|dividend}}-like payments: rewards to the shareholder for the prudent management and healthy profitability of the company in general. | *“'''[[with respect to]]'''” is not the greatest choice of words: it is a mealy-mouthed [[prepositional phrase]] when one begs for a firm preposition. What it means — what it can ''only'' mean is “'''[[under]]'''”. In the context of [[securities lending]] this ''must'' mean ''payments made under the terms of the instruments themselves''. That is, payments made by the [[issuer]], and to shareholders ''[[qua]]'' shareholders as a pure function of their [[ownership]] of the {{gmslaprov|securities}}. Such payments are restricted to {{eqderivprov|dividend}}s and {{eqderivprov|dividend}}-like payments: rewards to the shareholder for the prudent management and healthy profitability of the company in general. | ||
*“'''any {{gmslaprov|Securities}}'''”: It is implicit also that the distributions contemplated by paragraph {{gmslaprov|6.2}} should be available [[pari passu]] to all shareholders of the same class that is subject to the [[stock loan]]. This we can derive from the expression “…with respect to ''any'' {{gmslaprov|Securities}}” . The distribution ''must'' be with respect to any {{gmslaprov|Securities}}, ''not just some of them''. The contract cannot function otherwise, for it would be impossible to determine ''which'' distribution would be required to be [[Manufactured payments in respect of Loaned Securities - GMSLA Provision|manufactured]] under the [[stock loan]]. The {{gmslaprov|Securities}} actually delivered to the {{gmslaprov|Borrower}} are no more determinative than any others, for, the basic premise of a stock loan is to facilitate a [[short sale]]: it should be in no-one’s contemplation that the {{gmslaprov|Borrower}} would hold any borrowed {{gmslaprov|Securities}} in [[inventory]]. | *“'''any {{gmslaprov|Securities}}'''”: It is implicit also that the distributions contemplated by paragraph {{gmslaprov|6.2}} should be available [[pari passu]] to all shareholders of the same class that is subject to the [[stock loan]]. This we can derive from the expression “…with respect to ''any'' {{gmslaprov|Securities}}” . The distribution ''must'' be with respect to any {{gmslaprov|Securities}}, ''not just some of them''. The contract cannot function otherwise, for it would be impossible to determine ''which'' distribution would be required to be [[Manufactured payments in respect of Loaned Securities - GMSLA Provision|manufactured]] under the [[stock loan]]. The {{gmslaprov|Securities}} actually delivered to the {{gmslaprov|Borrower}} are no more determinative than any others, for, the basic premise of a stock loan is to facilitate a [[short sale]]: it should be in no-one’s contemplation that the {{gmslaprov|Borrower}} would hold any borrowed {{gmslaprov|Securities}} in [[inventory]]. | ||
*“'''…other {{gmslaprov|distribution}}s [[Any type, kind or nature|of any kind whatsoever]]'''”: Under [[Ejusdem generis|general rules of contractual interpretation]] under English law, wherever general words follow specific words, the general words should be read to include only objects similar in nature to those specific words. So, “other distributions of any kind whatsoever” | *“'''…other {{gmslaprov|distribution}}s [[Any type, kind or nature|of any kind whatsoever]]'''”: Under [[Ejusdem generis|general rules of contractual interpretation]] under English law, wherever general words follow specific words, the general words should be read to include only objects similar in nature to those specific words. So, read “other distributions of any kind whatsoever” as being subject to preceding words “{{eqderivprov|dividend}}s, [[interest]]” to mean, effectively, “any ''dividend-like (for [[share]]s) or interest-like (for [[bond]]s)'' distributions of any kind whatsoever”. This interpretation is supported by the text of the {{gmslaprov|UK Tax Addendum}}, which relates exclusively to dividend withholding, refers to ''any'' payment made under Clause {{gmslaprov|6.2}}, not just dividend-like ones. Does this include '''[[principal]]''' repayments? Economically, it must: if your {{gmslaprov|Collateral}} is senior unsecured debt security, it will at some point redeem itself.<ref>Grandma Contrarian is expecting that I will, sometime, redeem ''myself''.</ref> At that point, the {{gmslaprov|Lender}} is paid its redemption value in full and the debt security disappears. This would be quite the windfall for the {{gmslaprov|Lender}} if it cojuld just keep the redemption proceeds and didn’t have to [[manufacture]] them back to the {{gmslaprov|Borrower}}, since the value of the {{gmslaprov|Collateral}}, as {{gmslaprov|Collateral}}, has just dropped to zero. | ||
Revision as of 10:25, 23 December 2020
Kinda wide, no?
Not so much.
- “Interest, dividends...”: Even this is not as wide as it looks at first glance. This does not suggest there might be interest payments on equities, but rather reflects that the Securities travelling back and forth under a stock loan might be debt securities: “Interest” refers to income payments on debt securities that you might use as Collateral; “dividends” as income payments of equity securities. To paraphrase: “interest payments on bonds, dividends on shares, and any similar distributions”.
- “with respect to” is not the greatest choice of words: it is a mealy-mouthed prepositional phrase when one begs for a firm preposition. What it means — what it can only mean is “under”. In the context of securities lending this must mean payments made under the terms of the instruments themselves. That is, payments made by the issuer, and to shareholders qua shareholders as a pure function of their ownership of the securities. Such payments are restricted to dividends and dividend-like payments: rewards to the shareholder for the prudent management and healthy profitability of the company in general.
- “any Securities”: It is implicit also that the distributions contemplated by paragraph 6.2 should be available pari passu to all shareholders of the same class that is subject to the stock loan. This we can derive from the expression “…with respect to any Securities” . The distribution must be with respect to any Securities, not just some of them. The contract cannot function otherwise, for it would be impossible to determine which distribution would be required to be manufactured under the stock loan. The Securities actually delivered to the Borrower are no more determinative than any others, for, the basic premise of a stock loan is to facilitate a short sale: it should be in no-one’s contemplation that the Borrower would hold any borrowed Securities in inventory.
- “…other distributions of any kind whatsoever”: Under general rules of contractual interpretation under English law, wherever general words follow specific words, the general words should be read to include only objects similar in nature to those specific words. So, read “other distributions of any kind whatsoever” as being subject to preceding words “dividends, interest” to mean, effectively, “any dividend-like (for shares) or interest-like (for bonds) distributions of any kind whatsoever”. This interpretation is supported by the text of the UK Tax Addendum, which relates exclusively to dividend withholding, refers to any payment made under Clause 6.2, not just dividend-like ones. Does this include principal repayments? Economically, it must: if your Collateral is senior unsecured debt security, it will at some point redeem itself.[1] At that point, the Lender is paid its redemption value in full and the debt security disappears. This would be quite the windfall for the Lender if it cojuld just keep the redemption proceeds and didn’t have to manufacture them back to the Borrower, since the value of the Collateral, as Collateral, has just dropped to zero.
- ↑ Grandma Contrarian is expecting that I will, sometime, redeem myself.