Loaned Securities - 2000 GMSLA Provision: Difference between revisions

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Loaned Securities - 2000 GMSLA Provision (view source)

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Does the [[adjective]] “outstanding” mean anything? It is true, I suppose, that once the {{gmsla2000prov|Loan}} has terminated, the {{gmsla2000prov|Securities}} aren’t ''{{gmsla2000prov|Loaned Securities}}'' any more, but there are some oddities here.  
Does the [[adjective]] “outstanding” mean anything? It is true, I suppose, that once the {{gmsla2000prov|Loan}} has terminated, the {{gmsla2000prov|Securities}} aren’t ''{{gmsla2000prov|Loaned Securities}}'' any more, but there are some oddities here.  


For example: Paragraph {{gmsla2000prov|6.1}} says, of manufactured income:
{{2000 gmsla Loaned Securities}}
:''Where {{gmsla2000prov|Income}} is paid ''in relation to any {{gmsla2000prov|Loaned Securities}}''  [...] on or by reference to an {{gmsla2000prov|Income Payment Date}} ...''
 
Say I hold {{gmsla2000prov|Securities}} on their {{gmsla2000prov|Income Payment Date}} (NB: this is {{2000gmsla}} speak for the {{gmslaprov|Income Record Date}}<ref>That this is sloppily expressed is another whole conversation — in any case it was (partially) fixed in the 2010 {{gmsla}}.</ref>), being the date by reference to which the Income was payable, but I redeliver them before the date on which relevant {{gmsla2000prov|Income}} is actually paid, then must I manufacture the dividend?
 
A common sense economic analysis would say yes: the {{gmsla2000prov|Lender}} was not the holder of record on the record date, by reason of the {{gmsla2000prov|Borrower}} having borrowed the shares. So the {{gmsla2000prov|Borrower}} should manufacture the payment. But when the {{gmsla2000prov|Income}} is paid, the {{gmsla2000prov|Securities}} are not  “{{gmsla2000prov|Securities}} which are” — present tense — “the subject of an outstanding {{gmsla2000prov|Loan}}.”
 
Also, this is an easy end-run for a nefarious Borrower: once an Income record date passes, as long as it can deliver the shares back to the Lender before the actual payment date, on a literal reading of this clause it can avoid ever having to manufacture a dividend.
 
The 2010 {{gmsla}} deals with this by using the same expression, {{gmslaprov|Loaned Securities}}<ref>Defined exactly the same way as Loaned Securities in the {{2000gmsla}}</ref> in a subtly different way in Paragraph {{gmslaprov|6.1}}:
:''Where the term of a {{gmslaprov|Loan}} extends over an {{gmslaprov|Income Record Date}} in respect of any {{gmslaprov|Loaned Securities}},  {{gmslaprov|Borrower}} shall, on the date such {{gmslaprov|Income}} is paid by the [[issuer]] [...] pay or deliver to {{gmslaprov|Lender}}...''


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