Sunday 3rd March 2024 - 2:30pm GMT

Top Tips for the ISDA Master Agreement

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Top 3 Hidden ISDA Pitfalls and How to Avoid Them

  1. Which Party Are You?

It is customary for a dealer to act as “Party A” to the ISDA Master Agreement (“ISDA”). Nonetheless, I have come across a few buy-side entities who have the need and ambition to be designated as a “Party A” instead. This is a significant change, one that can have a rather dramatic impact on the rest of the agreement if not handled with care. Therefore, before agreeing to “the switch”, consider why this is needed (if at all) and how would the rest of the contract have to be updated.

  1. Who is Authorised to Sign?

Getting your post-execution documents ready in advance is going to save you a lot of time and hassle! This is not too big of a challenge if you’re on the sell-side, as you would have your signing authority handy. If you’re on the buy-side however, you need to get your signing authorities in order, especially if it is the fund’s directors that will be signing. Although their authority would come from the fund’s constitutionals, the brokers often require board minutes to be produced to confirm the directors’ authority not only to bind the fund, but also to enter into the ISDA. It is customary for brokers to request specimen signatures, which can be found on a certificate of incumbency - the sooner you can procure this internally the better!

  1. Is Registration Required?

If you have entered into a New York Law CSA or an English Law Credit Support Deed with your ISDA, you have created a security interest. Depending on the jurisdiction of the fund, it may be required to either register the security interest with the relevant authority or for it to be entered in the company’s register of mortgages and charges to ensure its validity. The latter is required under companies law in the Cayman Islands. The former applies to companies domiciled in Ireland, for example, where security created over certain types of assets must be registered in the Irish Company Registration Office within 21 days of creation. To be on the safe side, do check if any of these requirements apply in your circumstances in advance!

If you have a question about this blog or any topic discussed on this website, please feel free to email me at hello@derivativescourses.com

Best regards,

©2021 FIT Legal. All Rights Reserved.

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I’m Edyta Knizewska

I’m an award winning derivatives lawyer that wants to share her secrets with you. Welcome to my office! Why don’t you take a seat?

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Hello!

I’m Edyta Knizewska

I’m an award winning derivatives lawyer that wants to share her secrets with you. Welcome to my office! Why don’t you take a seat?
ISDA® is a registered trademark of the International Swaps and Derivatives Association, Inc. The documents or courses provided by us are neither sponsored by nor affiliated with the International Swaps and Derivatives Association, Inc
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