Documentation and Transactions

In response to recent client questions regarding the various considerations and options for holding short-term funds, we have prepared a reference chart comparing certain key characteristics of demand deposits with government securities, money market funds, and other short-term cash management instruments. Please note that this information is not provided as investment advice. 

Please contact your

In March 2020, we published a post entitled Master Agreements and Volatile Markets: Decline in Net Asset Value Provisions.

We believe that the March 2020 post is particularly relevant in light of the cascading nature of stock market declines over the past year, and on-going market commentary and debates about the likelihood and extent

In a previous post, we compared loan commitments, which re-proposed Rule 18f-4 would treat as “unfunded commitment agreements,” and “to be announced” (“TBA”) mortgage-backed securities (“MBS”) trades and put options, which Rule 18f-4 would treat as “derivative transactions,” to identify features that may be unique to loan commitments. Our last post showed how one

Having completed our detour into regulations and interpretations other than re-proposed Rule 18f-4, this post returns to considering possible justifications for carving out “unfunded commitment agreements” from the proposed Value at Risk limitations of Rule 18f-4. We have previously explained why the first two justification identified in the proposing release are ill-founded. Read

Not content with Steve’s detour into the relationship between Rule 2a-7 and re-proposed Rule 18f-4, we would also like to point out a set of rules under which the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) have wrestled with the distinctions between “swaps, security-based swaps and security-based swap agreements”

The Federal Deposit Insurance Corporation (FDIC) today issued an “FAQ” to financial institutions entitled, Frequently Asked Questions for Financial Institutions Affected by the Coronavirus Disease 2019 (Referred to as COVID-19).

The FDIC has highlighted the following items in respect of this FAQ:

  • The FDIC encourages financial institutions to work with customers affected by COVID-19 in a prudent manner, especially borrowers from industry sectors particularly vulnerable to the volatility in the current economic environment and small businesses and independent contractors that are reliant on affected industries.
  • A financial institution’s prudent efforts to modify the terms on existing loans for affected customers will not be subject to examiner criticism.


Continue Reading Payment Accommodations Under Commercial Loans by Banks to Borrowers: Remember the Related Interest Rate Hedge Documentation

This post is the second in a series that we are preparing in response to questions from clients, colleagues, and contacts.  Yesterday’s post, which addressed interest rate swaps in a zero or negative interest rate environment, is available here.

In today’s post, we address considerations related to Decline in Net Asset Value (NAV) provisions in agreements that govern the trading of over-the-counter (OTC) derivatives and other financial contracts. 

As we explore in greater detail, the recent volatility across financial markets makes it more important than ever for investment managers and their clients to understand – and focus on – these fairly common contractual provisions.

Continue Reading Master Agreements and Volatile Markets: Decline in Net Asset Value Provisions

This post will address a question that we have been receiving from many contacts, clients and colleagues in recent days (particularly in light of the rate cut announced yesterday afternoon by the Federal Reserve Board).

  • What will happen to an interest rate swap in a zero or negative interest rate environment?

We first addressed this question in a May 2015 post entitled, Dealing with “Deemed Zero Rates” in Loan Agreements and Related Interest Rate Swap Documentation.

Continue Reading Interest Rate Swaps in “Zero” and Negative Interest Rate Environments