Specified Entity - ISDA Provision
Content and comparisons
They got their over-engineering right in the first go round, and the “Specified Entity” concept is largely the same in the 2002 ISDA as it was in the 1992 ISDA. The Absence of Litigation clause got a makever on 2002 to include Specified Entities, too — in 1992 it only mentioned Affiliates. Good, huh?
Fun fact: in the 1992ma, it says “Specified Entity has the meanings” — plural — “specified in the Schedule.” By 2002, ISDA’s crack drafting squad™ had come back to its senses. JC mentions this only to demonstrate his own unfathomable attention to detail, and to point up a want of fastidiousness on the part of the fastidiousest cabal known to law.
Summary
A Specified Entity is any affiliate of a counterparty to an ISDA Master Agreement which is designated in the relevant Schedule.
It is relevant to the definition of Cross Default and Default under Specified Transaction in that it widens the effect of those provisions to include defaults by the parties specified.
It is so (~ cough ~) important that it is, literally, the first thing you see when you regard an ISDA Schedule.
The same concept in both versions of the ISDA Master Agreement only with different clause numberings. Specified Entity is relevant to:
And of course the Absence of Litigation representation. Let’s not forget that.
Each party designates its Specified Entities for each of these events in Part 1(a) of the Schedule, which gives the Schedule its familiar layout:
|
(a) “Specified Entity” means in relation to Party A for the purpose of:―
and in relation to Party B for the purpose of:― |
Now, why would anyone want different Affiliates to trigger this a Event of Default depending precisely upon how they cork-screwed into the side of a hill? Well, there is one reason where it might make a big difference when it comes to Bankruptcy, and we will pick that up in the premium section. But generally — and even in that case, really — in our time of variation margin it really ought not to be the thing that is bringing down your ISDA Master Agreement.
Note it also pops up as relevant in the “Absence of Litigation” representation in Section 3(c) of the 2002 ISDA.