2022-10-04 Meeting notes
- Elisa Kendall
Date
Attendees
Agenda
1) Use Case reminder
2) Where we are on our road map.
3) Open Action Items
4) JIRA Issues Review - https://jira.edmcouncil.org/projects/DER/issues/DER-10?filter=allopenissues
5) Todays content discussion.
6) For next week.
Proceedings:
Today we completed work on SEC-131, which eliminated some redundancies in the definition of CollectionOfSecurityPrices and generalized the nature of the price included in a PriceStructure for ease of use. We also looked at where to add the notion of a variable interest entity for SEC-175.
From Wikipedia: Variable interest entity (VIE) is a term used by the Financial Accounting Standards Board (FASB) to refer to a legal entity with certain characteristics such that a public company with a financial interest in the entity is subject to certain financial reporting requirements. VIEs rose to prominence after the Enron scandal.[1][2] Some Chinese companies, such as Alibaba, use VIEs to get access to foreign capital that would otherwise not be available due to Chinese government regulations.[1] The use of VIEs by Chinese businesses has received criticism for its lack of transparency.[3]
A share of stock, or a stock certificate, certifies ownership of a portion of a company. In other words, it provides proof of a legal proprietary interest in company assets. In contrast, a VIE share (often mistakenly referred to as a share of stock) certifies ownership of a contractual right to a percentage of a company's profits.[4] Unlike a traditional stock certificate, the VIE share provides a legal proprietary interest in a completely separate company's assets, sometimes referred to as a shell company.[4] The contractual right certified by the VIE share is derived from a contract between (1) the company named on the VIE share and (2) the shell company. In other words, VIE shareholders only have a traditional stock certificate in the completely separate shell company, which is entitled to a percentage of the named company's profits via a private contract.
In order to address this, we (1) created a variable interest entity in BE (Legal Entities), (2) created the concept of a VIE share in SEC Equities. We will complete this on Friday by adding the Chinese ADR that references the VIE share.