Template:M summ 2002 ISDA Specified Entity

Specified Entity is so (~ cough ~) important that it is literally the first thing you see when you regard an ISDA Schedule.

Painstakingly set out, separately for Events of Default (namely DUST (Section 5(a)(v)), Cross Default (Section 5(a)(vi)) and Bankruptcy (Section 5(a)(vii)) and the one Termination Event (Credit Event Upon Merger (Section 5(b)(v) — as if you would want different Affiliates to trigger this event depending on precisely how they cork-screwed into the side of a hill), and jointly for the “Absence of Litigation” representation in Section 3(c) of the 2002 ISDA.

A Specified Entity is any affiliate (or, in theory at any rate, even a non-affiliate, if your risk officer is a total cretin) 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.

Nominating Specified Entities for yourself has its upsides

Specified Entity widens the scope of those provisions also to include defaults by the other side (and its Specified Entities) under their contracts with your Specified Entities — so there is some benefit to naming your affiliates, friends and relations as Specified Entities. But given how unlikely you are to be actually monitoring how a counterparty performs with an affiliate, it’s more of a false comfort than a real one.