Lender’s Warranties - Pledge GMSLA Provision

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2018 Global Master Securities Lending Agreement (Pledge Version)
A Jolly Contrarian owner’s manual

Clause 13 in a Nutshell
Use at your own risk, campers!

13. Lender’s Warranties
Each Party warrants on a continuing basis that when it is a Lender:

(a) it has capacity and authority to perform its obligations;
(b) there are no restrictions on it lending Securities or performing its obligations under this Agreement;
(c) it is able to pass legal and beneficial ownership of Securities lent under this Agreement to Borrower free from encumbrances; and
(d) it is acts as a principal (except under Agency Loans).

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Clause 13 in full

13 Lender’s Warranties
Lender hereby warrants and undertakes to Borrower on a continuing basis to the intent that such warranties shall survive the completion of any transaction contemplated herein that:

13.1(a) it is duly authorised and empowered to perform its duties and obligations under this Agreement, the Security Agreement and the Control Agreement;
13.1(b) it is not restricted under the terms of its constitution or in any other manner from lending Securities in accordance with this Agreement or from otherwise performing its obligations hereunder and under the Security Agreement and the Control Agreement;
13.1(c) it is absolutely entitled to pass full legal and beneficial ownership of all Securities provided by it hereunder to Borrower free from all liens, charges and encumbrances; and
13.1(d) it is acting as principal in respect of this Agreement, other than in respect of an Agency Loan.

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Related agreements and comparisons

Related agreements: Click here for the same clause in the 2010 GMSLA
Comparison: Click to compare the 2010 GMSLA and 2018 Pledge GMSLA versions of this clause.

Resources and navigation

2010 GMSLA: Full wikitext · Nutshell wikitext | GMLSA legal code
Pledge GMSLA: Hard copy (ISLA) · Full wikitext · Nutshell wikitext |
1995 OSLA: Full wikitext · Nutshell wikitext | GMSLA Netting
Let me Google that for you: Guide to equity finance | ISLA’s guide to securities lending for regulators and policy makers
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Content and comparisons

The 2010 GMSLA and 2018 Pledge GMSLA versions are identical.
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Summary

No Representations in the 2010 GMSLA

Enthusiastic minds might have noticed that, unlike the Global Master Repurchase Agreement and the ISDA Master Agreement, there are no “Representations” as such in the 2010 GMSLA.

But there are Warranties, and these — except in one arcane and theoretically[1] important way — amount to the same thing.

Precis: A representation is a pre-contractual statement which induces your entry into a contract but is not part of the contract. One’s remedy for misrepresentation is thus not damages, but the avoidance of the contract altogether. You are put in the place you would have been in had you never entered the contract at all.

A warranty is a contractual term, the remedy for breach of which is damages under the contract.

The potential value of these two remedies may be different, which is why one sees “representations and warranties”: this gives an innocent party maximum optionality to stick the naughty party with whatever is the worse measure of loss. As to why the 2010 GMSLA did away with this option — who can say? Perhaps the nature of stock lending contracts are such that there is no real difference in remedy.
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See also

Template:M sa Pledge GMSLA 13
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References

  1. But not practically, unless you are some kind of super spod. See ouur disquisition on the differences in the representations and warranties section.