What were they thinking

Anti hybrid rules: related parties in s 832-200

The anti hybrid rules broadly apply to payments between related entities. For most mismatches, whether entities are related is worked out by reference to their participation interest in section 350 of the 1936 Act but excluding any rights to vote or participate in decision-making (section 832-205). However, such rights are not excluded for the purpose of determining participation interest (and therefore whether the parties are related) for the financial instrument mismatch (section 832-200(4)). What is the rationale for the different approach? This imposes a greater compliance burden for one particular type of mismatch.

Legislative reference (if available) Sections 832-200 and 832-205

Suggested solution (Optional)

Also exclude rights to vote or participate in certain decision-making from determining the participation interest for the purpose of the hybrid financial instrument mismatch.


Idea No. 93