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| You might like our articles about [[principal]]s and [[agent|agents]], [[undisclosed agent]]s, [[undisclosed principal]]s and all that good stuff.
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| ===Investment managers as agents===
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| In practice, many {{isdama}}s ''are'' entered by agents — [[investment manager]]s and [[asset manager]]s — on behalf of underlying principals — [[investment fund]]s, and institutional clients who have appointed them as discretionary [[investment adviser]]s.
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| These [[manager]]s often enter transactions in aggregate and only allocate them to their underlying [[principal]]s later in the day. This means that the [[broker]] will have a nervous few hours before it knows whom it is allowed to sue, though general principles of [[agency]] — in particular liability for an [[undisclosed principal]] —mean the [[agent]] is not quite so footloose and fancy-free as many seem to believe they are.
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| In a nutshell 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.
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| ===Internal agency model===
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| 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 it its affiliates for certain purposes — you know, tax purposes — even though the affiliate is not mentioned in the {{t|contract}} and the other side has not the first clue that this affiliate even exists.
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| How does this bear on your Section {{isdaprov|3(g)}} 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 {{isdaprov|3(g)}} [[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 whom you suddenly claim to be representing. I can therefore 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 really exists: 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.
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| Now whether such a representation undermines the fantastical aspirations of your [[tax attorney]], on the other hand, is a question only he can answer.
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| {{seealso}}
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| *[[Undisclosed principal]]
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| *[[Agent lender]]
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| *{{Cobsprov|Agent as client}}
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| {{ref}}
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Latest revision as of 16:38, 30 December 2023
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2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™
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The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack.
| ISDA Text: 3(g)
Related agreements and comparisons
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Click here for the text of Section 3(g) in the 1992 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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Resources and Navigation
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Overview
Section 3(g) is the spiritual successor to Section 3(a)(vi), the added representation that parties habitually tack on to the end of Section 3(a). ISDA’s crack drafting squad™ kind of made an honest clause out of it in the 2002 ISDA.
Summary
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 agents — investment managers and asset managers (so-called “real money” managers) — on behalf of underlying principals — investment 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.
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See also
Template:Isda 3(g) sa
References