No Agency - 1992 ISDA Provision

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1992 ISDA Master Agreement
A Jolly Contrarian owner’s manual™

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Section 3(a)(vi) in a Nutshell

Use at your own risk, campers!
3(a)(vi) No Agency. It is a principal and not an agent under this Agreement.

Full text of Section 3(a)(vi)

Manual amendment required — this provision is not in the 1992 ISDA
3(a)(vi) No Agency. It is entering into this Agreement, including each Transaction, as principal and not as agent of any person or entity.

Related agreements and comparisons

Related Agreements
Click here for the text of Section 3(g) in the 2002 ISDA
There isn’t an equivalent to Section 3(g) in the 1992 ISDA but parties used to routinely crowbar one in as an additional representation under a new Section 3(a)(vi). In a spooky piece of anticipation (and since latter-day 2002 refuseniks just copy paste the 2002 clause into their 1992 ISDA), they’re the same, as this comparison will demonstrate.

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Content and comparisons

If you are looking for a Section 3(a)(vi) in a 2002 ISDA, call off the police dogs: there is no such location. It is where one might have put a No Agency rep in a 1992 ISDA — but you modern types don’t need one of those. It’s already printed in a 2002 ISDA, at Section 3(g).



If you like a bit of agency chat, you might like our articles about principals and agents, undisclosed agents, undisclosed principals and all that good stuff.

Investment managers as agents

In practice, many ISDA Master Agreements are entered by agentsinvestment managers and asset managers (so-called “real money” managers) — on behalf of underlying principalsinvestment funds, and institutional clients who have appointed them as discretionary investment advisers.

These managers often enter transactions in aggregate and only allocate them to their underlying principals later in the day. This means that the broker will have a nervous few hours before it knows whom it is expected to sue if the principal doesn’t pony up on time. General principles of agency — in particular liability for an undisclosed principal —mean agents are not quite so footloose and fancy-free as many of them seem to believe.

Look, it is not the end of the world if your counterpart refuses to renounce all agency, as long as you set up the accounts correctly with the underlying principals, and the firm has a robust approach to trade allocation. Ultimately — and notwithstanding the nervous few hours pending allocation — the person against whom you are, long term, booking the trade is the principal.


General discussion

Internal agency model

It is not beyond the paranoid fantasies of a US tax attorney — a rich, baroque tapestry indeed — to want to “deem” a swap counterparty to be an agent for one of its affiliates for certain — you know, tax — purposes, even though the affiliate is not mentioned in the contract and the other side has not the first clue that this affiliate even exists.

How does this bear on your Section no agency representation? As far as your counterparty is concerned, not at all: a fellow acting under an agency he has not disclosed to his counterpart is called a “principal”. This is all the no agency representation is meant to confirm: for the avoidance of doubt — of which there wasn’t much anyway — you are not acting on behalf of someone else. Therefore, should you not perform our contract, I can bring my claim against you; you cannot slip out of the tackle by pointing to some under-capitalised espievie in a banana republic I didn’t know about whom you suddenly claim to be representing. I can therefore safely instruct my credit officer that the only commercial bona fides she needs to have in mind, as she slips on her rubber gloves, are yours.

It doesn’t matter whether the agency arrangement exists or not: either way, you are liable, as a principal, to me, it is your problem to recover any money you may be owed by your man in Havana.

Now whether such a representation undermines the fantastical aspirations of your tax attorney, on the other hand, is a question only he can answer.


See also