Good morning. Hope you are well and enjoying a few days of rest. Phil asked me to chase down both attachments for you: the securities lending agreement and an extract ofQ1 board minutes from almost two years ago. Please let him know if you need anything else.
We’ll see you on Monday.
Best,
Nonie
Chase downis an interesting way of putting it. I shake my head as if trying to free myself from an annoying mosquito. I’ve gotten where I see conspiracy everywhere. She probably meant that neither of the documents was simply hanging out on her desktop ready to be sent off. But it did mean she probably had to ask someone for them, maybe Hardwin or someone on his staff?
I scan my inbox. No emails from Hardwin. That is suspicious in and of itself. On the two previous occasions I’ve been invited to board meetings, I’ve gotten flurries of emails from Hardwin, Dave, and Terrence prepping me for what to expect.
Everyone is so quiet.
I click on the first pdf, an electronically executed contract through our digital document management system, Remotesign. The agreement I had Alyssa and Temor review was just a few pages; this one is with our custodial bank and is over eighty with signature pages. It not only contains the lending agreement but all the custodial services for Garman Straub funds. This is what I expected.
The sound of Clint’s boots slapping the steps has me scanning the document for an understanding of the agreement and anything odd. The first thing that stands out is a reference to an appendix of funds. I scroll to the end, but the addendum doesn’t list the new ETFs. They must be catalogued somewhere else. I make a note and move forward. There is also language around the investor documents including the fund prospectus. Which all sounds appropriate. Investors need to beaware of both the risk and return. Another section is all the service agreements. This also sounds appropriate.
I check the date of the agreement. It was updated as we were launching. The ETFs should have been included, and we get regular reporting on the revenue we receive. I’ve seen the payments summarized in fund accounting. I continue scanning, and then I stop.
The room falls away. I no longer hear Clint and Erika moving around in the other room. Only the document exists. I lean closer and blink twice.
My name.
Clearly written into the management section of the contract. I’ve rarely seen a corporate contract at Garman Straub that names someone who is not an officer of the company. Maybe a title. But even more revealing is that there is no named counterparty at the custodial bank listed. Have I been hung out to dry alone? I send the file to my printer and open the other attachment. Although it’s quite easy to guess what it contains.
I find the text. They officially recorded my name in the management of contract. A contract I’ve never seen until now. Did no one think this was odd? And if the ETFs are not included in the master contract with the custodian, then the contract Alyssa and Temor analyzed could have been drafted to make unsanctioned side deals. That’s a bigif.
“Hey, Meredith, you almost ready?” Clint pauses in my doorway.
I smile. I should draw him over and show him, but I don’t. Ingrained habits die hard. “I need another ten minutes.”
He cocks his head at me. I see him trying to be supportive and not paranoid. “You got it. Anything else you need me to pack?”
“Maybe a couple of games or puzzles we got last Christmas that we haven’t cracked.”
He nods and turns away.
I only skim the words surrounding my name in the board minutes—minutes for a meeting I never attended. Pages begin to spit out of my printer.
Today is Friday, Betsey’s deadline for turning over the securities lending agreement. But beyond the obvious—the master document doesn’t include the ETFs—something else doesn’t sit right with what she’s asking.
If I do hand over the custodial contract, I’m incriminating myself.
She’s asking me to deliver documentation that names me responsible for excluding my ETFs from an ongoing lending program with our custodial bank. An agreement different from what is written into the investor prospectus documentation, which makes it a crime.
But wearelending our securities. We’re getting the income. I see the reports. We use it to offset our expenses. So, where is that money coming from?
I scrub the sides of my face with my hands. The recent income reports should tell us if the custodial bank is actually paying us. Alyssa and Temor can dissect them. I pinch the bridge of my nose. Maybe I have this all wrong, but something tells me someone is setting me and the ETFs up to take a big hit.
I quickly bang out another email.
From: Meredith Hansel (Meredith.Hansel@?garmanstraub.com)
To: Alyssa Grant ([email protected])
Hi Alyssa,
Can you track down recent investment income reports we have received from Compliance for our ETFs? I’m not sure what I’m looking for. Anything that looks odd or may be missing from what we report as an offset to expenses in the prospectus. And while you’re at it, see if you can locatethe dividend replacement confirmations. We sign off on these, but I think they run through fund accounting. Legal set up the fee split. Please don’t bother Hardwin or Terrence. If you have a friendly on their teams, maybe make some inquiries, but keep it quiet. Everyone is working hard, and I don’t want to call attention until I’m back in the office. Use Temor as needed.
