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No Agency - ISDA Provision: Difference between revisions
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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. | 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. | ||
===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 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. | |||
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. | |||
Now whether such a representation undermines the fantastical aspirations of your [[tax attorney]], on the other hand, is a question only he can answer. | |||
{{seealso}} | {{seealso}} | ||