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===[[Depositary receipt]]s and hostile governmental action=== | ===[[Depositary receipt]]s and hostile governmental action=== | ||
Now imagine that rather than [[Nationalization, Insolvency and Delisting - Equity Derivatives Provision|Nationalizing]], a national government announced some draconian law preventing corporations in its jurisdiction from accessing the international capital markets even through [[depositary receipt]] programmes — you know, something crazy like that.<ref>Attentive readers may wonder whether this is really a figment of the [[JC]]’s imagination, or something the Russian State ''Duma'' actually did, in April 2022.</ref> So say, ooh: the DRs must be converted into underlying shares within a stipulated period, failing which the underlying shares lose their dividend and voting rights | Now imagine that rather than [[Nationalization, Insolvency and Delisting - Equity Derivatives Provision|Nationalizing]], a national government announced some draconian law preventing corporations in its jurisdiction from accessing the international capital markets even through [[depositary receipt]] programmes — you know, something crazy like that.<ref>Attentive readers may wonder whether this is really a figment of the [[JC]]’s imagination, or something the Russian State ''Duma'' actually did, in April 2022.</ref> So say, ooh: the DRs must be converted into underlying shares within a stipulated period, failing which the underlying shares lose their dividend and voting rights<ref>And therefore become largely worthless: they entitle a holder to a pro-rata share of the {{eqderivprov|Issuer}}’s assets on a ''non-insolvent winding up'' or something like that — but who ever wound up a non-insolvent company?</ref> | ||
The common sense (and economically correct) answer is | The common sense (and economically correct) answer is “however it shakes out, this is all the customer’s risk” — remember the synthetic equity mantra: ''this is just equity brokerage done with swaps''. Imagine what would happen, dear customer, had your broker sold you the ADR outright, a year ago, and now it has been unwound by wartime governmental manoeuvre. Whose problem would that be? Not your [[equity broker]]’s, for sure. | ||
That said, the {{eqdefs}} don’t do a magnificent job of specifically dealing with what is undoubtedly an extremely far-fetched situation. For once, we should not be too exacting on {{icds}} | That said, the {{eqdefs}} don’t do a magnificent job of specifically dealing with what is undoubtedly an extremely far-fetched situation. For once, we should not be too exacting on {{icds}}. I mean, who ever heard of a government forcing local issuers to unwind their [[GDR]]s just to spite hostile foreign investors? | ||
So, anyway, you are a [[swap dealer]], everything is messy as hell, your customer is on the horn asking what the hell is going on. You, naturally, will be as accommodating and constructive as you can in looking for outcomes for your client, but would still like the peace of mind of knowing, should everything go ''[[titten hoch]]'', you can cancel the swap and walk away, paying a nugatory {{eqderivprov|Cancellation Amount}} based on the worthlessness of the underliers. How can you? | So, anyway, you are a [[swap dealer]], everything is messy as hell, tanks are unexpectedly rolling across foreign lands somewhere, and now your customer is on the horn asking what the hell is going on. You, naturally, will be as accommodating and constructive as you can in looking for outcomes for your client in such devilish times, but would still like the peace of mind of knowing, should everything go ''[[titten hoch]]'', you can cancel the swap and walk away, paying a nugatory {{eqderivprov|Cancellation Amount}} based on the worthlessness of the underliers. How can you? | ||
*'''{{eqderivprov|Nationalization, Insolvency and Delisting}}''': this probably: | *'''{{eqderivprov|Nationalization, Insolvency and Delisting}}''': this probably: |