Loaned Securities - 2000 GMSLA Provision

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2000 GMSLA Anatomy

In a Nutshell Clause Loaned Securities:

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2000 GMSLA full text of Clause Loaned Securities:

Loaned Securities” means Securities which are the subject of an outstanding Loan;
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Does the adjective “outstanding” mean anything? It is true, I suppose, that once the Loan has terminated, the Securities aren’t Loaned Securities any more, but there are some oddities here.

Must the Loan be outstanding on the Income payment date??

Paragraph 6.1 says, of manufactured income:

“Where Income is paid in relation to any Loaned Securities [...] on or by reference to an Income Payment Date ...”

Say I hold Securities on their Income Payment Date (NB: this is 2000 GMSLA speak for the Income Record Date[1]), being the date by reference to which the Income was payable, but then I artfully redeliver Equivalent Securities back to you before the date on which the relevant Income is actually paid, then must I manufacture the dividend?

A common sense economic analysis would say yes: the Lender was not the holder of record on the record date, by reason of the Borrower having borrowed the shares. So the Borrower should manufacture the payment.

Also, any other view would be an easy end-run for a nefarious Borrower: once the Income record date passes, it could redeliver the shares back to the Lender before the payment date, and avoid ever having to manufacture a dividend. that can’t be the intention, right?

Well, on a literal reading, maybe: when the Income is paid, the Securities are not “Securities which are ...” — present tense — “... the subject of an outstanding Loan.”

The 2010 2010 GMSLA deals with this by using the same expression, Loaned Securities[2] in a subtly different way in Paragraph 6.1:

Where the term of a Loan extends over an Income Record Date in respect of any Loaned Securities, Borrower shall, on the date such Income is paid by the issuer [...] pay or deliver to Lender...


  1. That this is sloppily expressed is another whole conversation — in any case it was (partially) fixed in the 2010 2010 GMSLA.
  2. Defined exactly the same way as Loaned Securities in the 2000 GMSLA