1766.This section defines circumstances under which sale and repurchase arrangements (repos) are deemed, under section 602, to give rise to manufactured payments to which Chapter 2 applies. It is based on sections 231AA, 231AB, 737A, and 737B, of ICTA.
1767.If, as a matter of legal analysis, a transaction includes an amount which is a manufactured payment within Chapter 2 or, as the case may be, Schedule 23A to ICTA, then Chapter 2 (or, as the case may be, Schedule 23A) will apply to that amount. But if there is no separately identifiable amount then, as a matter of legal analysis, there may be no manufactured payment within Chapter 2 or Schedule 23A.
1768.Sale and repurchase arrangements could therefore be made under which no manufactured payment was payable and, instead, the pricing of the transaction reflected the fact that a payment of interest or dividend on the securities was receivable otherwise than by the seller. Such arrangements would be outside Chapter 2 and Schedule 23A. Chapter 4 plugs this gap by deeming the arrangement to include the making of a manufactured payment.
Commentary on Sections Overview Overview Section 601: Repo cases in which deeming rules apply