Loaned Securities - 2000 GMSLA Provision
|2000 GMSLA Anatomy™|
Must the Loan be outstanding on the Income payment date??
- “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), 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?
- 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...