International Securities Lending Association

January 21, 2010

Below is the text from the ISLA website. ISLA has published amendments to the Global Master Securities Lending Agreement. Nobody really wants to spend time reviewing their documentation and updating their agreements with counterparties. Nobody, until an event like the Lehman default occurs and some people are caught with out of date documentation that disadvantages them or their clients.

The ISLA Board has approved some minor amendments to the GMSLA 2009 originally published in July. The new version was agreed in response to a small but consistent number of concerns being voiced in the market and we know that these have been slowing down adoption of the new document. The two main changes made are summarised below and do not alter or affect the Set Off or Events of Default provisions in either the GMSLA 2009 or the ISLA Securities Lending Set Off Protocol 2009. In addition the new agreement contains some minor drafting corrections to the original version. The new version of the agreement will be known as the GMSLA 2010 and is available, together with a red-lined version showing changes made to the July 2009 version, on our website at www.isla.co.uk. We expect to publish Guidance Notes to the agreement in the next two weeks and the new version of the agreement will be included in the current SLRC netting opinions gathering exercise. Summary of main changes to the July 2009 version. Manufactured Income Payments (Clause 6). The July version contained a provision that in the event that the borrower and lender do not agree the rate for a manufactured income payment on lent securities, the borrower would pay an amount equivalent to the gross amount of the income. It was recognised that this may result in the lender receiving more than it would ordinarily be entitled to receive. The new agreement provides that where a rate is not agreed the borrower must pay what the lender would have been entitled to receive had it not lent the securities. Clause 6 also includes an optional indemnity from the lender to the borrower which is designed to protect the borrower from potential losses incurred when it tries to substitute collateral over record date but is prevented from doing so by the lender. The new version includes a requirement for the lender to act reasonably. Collateral in respect of income due but not yet payable (Clauses 5.5 and 5.6). The July version included provisions that required a borrower to provide collateral for the value of manufactured income payments on loaned securities due in the future but not yet payable. It is accepted that this is not common practice in the market but that lenders may, and do from time to time seek to obtain collateral for these amounts. The new version of the agreement gives the parties the option to agree to do this if they wish.

via www.isla.co.uk

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The ISLA Board has approved some minor amendments to the GMSLA 2009 originally published in July. The new version was agreed in response to a small but consistent number of concerns being voiced in the market and we know that these have been slowing down adoption of the new document. The two main changes made are summarised below and do not alter or affect the Set Off or Events of Default provisions in either the GMSLA 2009 or the ISLA Securities Lending Set Off Protocol 2009. In addition the new agreement contains some minor drafting corrections to the original version. The new version of the agreement will be known as the GMSLA 2010 and is available, together with a red-lined version showing changes made to the July 2009 version, on our website at www.isla.co.uk. We expect to publish Guidance Notes to the agreement in the next two weeks and the new version of the agreement will be included in the current SLRC netting opinions gathering exercise. Summary of main changes to the July 2009 version. Manufactured Income Payments (Clause 6). The July version contained a provision that in the event that the borrower and lender do not agree the rate for a manufactured income payment on lent securities, the borrower would pay an amount equivalent to the gross amount of the income. It was recognised that this may result in the lender receiving more than it would ordinarily be entitled to receive. The new agreement provides that where a rate is not agreed the borrower must pay what the lender would have been entitled to receive had it not lent the securities. Clause 6 also includes an optional indemnity from the lender to the borrower which is designed to protect the borrower from potential losses incurred when it tries to substitute collateral over record date but is prevented from doing so by the lender. The new version includes a requirement for the lender to act reasonably. Collateral in respect of income due but not yet payable (Clauses 5.5 and 5.6). The July version included provisions that required a borrower to provide collateral for the value of manufactured income payments on loaned securities due in the future but not yet payable. It is accepted that this is not common practice in the market but that lenders may, and do from time to time seek to obtain collateral for these amounts. The new version of the agreement gives the parties the option to agree to do this if they wish.

via www.isla.co.uk