Exotic and Make whole clause: Difference between pages

From ACT Wiki
(Difference between pages)
Jump to navigationJump to search
imported>Doug Williamson
(Mend link.)
 
imported>Doug Williamson
(Layout.)
 
Line 1: Line 1:
1. ''Financial contracts.''
''Securities''.


'Exotic' is a description meaning that there are non-standard features in a financial contract.
A strong form of protection for lenders/investors in securities, designed to mitigate the adverse effects of call risk for investors.


Under a make whole clause the borrower/issuer has to value the cash flows beyond the date of the early call/redemption at the government bond yield.


2.


More broadly, 'exotic' structures and arrangements are any non-standard ones.
This potentially makes it prohibitively expensive for the issuer to take an early redemption.


The consequence of a make whole clause for the investor is that they can re-invest the redemption monies in government stock, thus preserving their originally expected cash inflows at lower risk.


:<span style="color:#4B0082">'''''Corporate criminal liability framework not fit for purpose'''''</span>
:"'Another area of concern,' the UK Treasury Committee stressed, 'is company formation, specifically the role of Companies House, which is not required to carry out any AML checks. This makes it a weakness in the UK's system for preventing economic crime.'
:Meanwhile, contributors to the Committee's research described the UK's corporate criminal liability framework as 'not fit for purpose'.
:Under the current arrangements, the Committee said it is 'typically more difficult to identify which people are the directing mind and will of a larger company than a smaller one, potentially encouraging more exotic management structures to avoid prosecutions'."
:''The Treasurer magazine, Cash Management Edition April 2019, p8.''


Make whole clauses are similar in their effect to Spens clauses.


Sometimes known as a make whole ''provision''.




== See also ==
== See also ==
* [[Anti money laundering]] (AML)
* [[Call risk]]
* [[Companies House]]
* [[Clause]]
* [[Exotic currencies]]
* [[Security]]
* [[Fit for purpose]]
* [[Spens clause]]
* [[Plain vanilla]]
* [[Treasury Committee]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:Manage_risks]]
[[Category:Corporate_financial_management]]

Latest revision as of 15:40, 10 December 2021

Securities.

A strong form of protection for lenders/investors in securities, designed to mitigate the adverse effects of call risk for investors.

Under a make whole clause the borrower/issuer has to value the cash flows beyond the date of the early call/redemption at the government bond yield.


This potentially makes it prohibitively expensive for the issuer to take an early redemption.

The consequence of a make whole clause for the investor is that they can re-invest the redemption monies in government stock, thus preserving their originally expected cash inflows at lower risk.


Make whole clauses are similar in their effect to Spens clauses.

Sometimes known as a make whole provision.


See also

Retrieved from ‘https://wiki.treasurers.org/w/index.php?title=Exotic&oldid=31689’