Reference no: EM133118156

SuperUni, a superannuation for universities employees, owns some Commonwealth Bank capital notes. SuperUni accepts to lend its capital notes to Killlinvest, an investment bank, for a 15 day loan. Killinvest puts a sale order for the capital notes the day after it found a lender. The buyer of the capital notes is Aussie, a managed fund.15 days after the settlement of the lending agreement, the capital notes need to be returned to the original owner and Killinvest needs to put a buy order for these capital notes during the last day of the loan. The original owner puts a sale order for the capital notes the day after the borrower has put the order to return them.

-Represent on a timeline the events described above. Include for each transaction the order and the delivery of the securities and clearly indicate which entities are involved in the transaction. Note that in order to not overcrowd the timeline we represent one entry for both the order and the match.

-Consider each sale involved in the story and conclude if it constitutes an ordinary sale, a covered short sale or a naked short sale. Give a precise justification for your choice. Conclude whether these sales are allowed under the current Australian legislation/regulation.

-Consider the reporting(s) required when Killinvest puts its sale order. Clearly indicate which information needs to be reported, which entity is in charge of reporting and to which entity the information is reported.

-A week after the lending agreement was established, a distribution is due on the Commonwealth capital notes. Describe all payments taking place on this occasion, clearly indicating which entities in our story pay and which entities in our story receive.

-Four days after the lending agreement was established, a capital trigger event takes place. Using your knowledge about capital notes and lending agreement, discuss what effects the capital trigger event is likely to have on the entities involved in our story.

-On the day the return of the capital notes is due, Killinvest decides that it does not want to buy back the capital notes. What are Killinvest alternative options?