Deliveries of Income - GMSLA Provision
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GMSLA Anatomy™
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Freshfields’ 2010 GMSLA guidance notes helpfully provide that “Paragraph 4.4 provides for the mechanism for the delivery of income payments.”
Well, gee, fellas — thanks for writing in. What these customary and appropriate endorsements or assignments might be, and why the manufacturer has to grant them, even where the actual securities issuer didn’t, we can only speculate. Perhaps — speculation here — it is because the Borrower is most likely to have immediately sold the Loaned Securities into the market — the major purpose of a 2010 GMSLA being short serlling, after all — and so won’t get any Income under the shares, much less any “customary endorsements” relating to it, whatever in this day and age that might mean.
The same goes — with less certainty, perhaps[1] — for the Lender of Collateral that is has received by title transfer. So it would be interesting to contrast this with the equivalent provision in the 2018 Pledge GMSLA, wouldn’t it.
Let’s therefore go and do that. Back in a minute.
- ↑ The Lender isn’t acquiring the Collateral with the express purpose of selling it, although it does acquire it by title transfer and absolutely is entitled to sell it.