immeasurable blow to anz reputation, page-45

This is under "What is securities borrowing and lending?"
Looks like they even suggest beneficial ownership is retained here? Not just in 'equity financing'?


Opes Prime can answer many of your questions about this specialised area. Below is a brief introduction:

Definition
A Securities Loan is a method by which the owner of securities can make them available to others whilst retaining the benefits of ownership. To this extent it is somewhat like a car lease agreement. However, there are important differences. The features of a Securities Loan are:
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>The Lender retains the right to repurchase ("recall") the securities from the Borrower at any stage at the same price - including the margin. The Lender returns the payment and the Borrower returns the securities.

>The Borrower retains the right to resell ("return") the securities to the Lender at any stage at the same price - including the margin. The Borrower returns the securities and the Lender returns the payment.

>The margin can subsequently be ’marked to the market’ by either party to maintain the same margin level, until such time as the securities are resold ("returned") to the Lender.

>Because the securities are not physical items, but are rather just entitlements registered in CHESS, the securities repurchased/resold are simply the same number and type.

>The Lender retains the benefits of ownership of the securities because the Borrower must also compensate the Lender for any dividends, franking credits, capital returns or any other corporate actions. This is also a requirement of the Income Tax Assessment Act; see below,
What about Tax?

>The Lender retains economic exposure to the lent securities because the Borrower resells the securities at their original price, plus the ’marked to the market’ margin. No capital gain or loss is made by either party on the securities loan.

>The maximum term before the Borrower must resell the borrowed securities to the Lender is 11 months and 20 days. See What about tax?

>The Securities Lending Agreement therefore provides for the off market sale and purchase of securities at an agreed price and imposes a mutual obligation on both Lender and Borrower to subsequently reverse the transaction on original terms, and compensate the Lender for all financial benefits of ownership during the borrowing period. There is no profit or loss to either party other than the fees charged by the Lender.