Business process language

Mark, following on from my note a few minutes ago I refer to point 2(b) in
Janine's note below. Edmund.

---------------------- Forwarded by Edmund Cooper/LON/ECT on 07/14/99 03:56
PM ---------------------------

Janine Juggins
07/13/99 07:53 PM
To: David Port/LON/ECT@ECT
cc: Edmund Cooper/LON/ECT@ECT, Stephen H Douglas/HOU/ECT@ECT, Louise
Kitchen/LON/ECT@ECT
Subject: Business process language

1. On line payee tax representation issues

The final generic payee tax representation language is being sent through by
Slaughter & May (tonight) and will be incorporated into the Generic Financial
GTC.

As we discussed earlier the approach taken will require two additional fields
in our Financial Confirmations. Since we are continuing to prepare these
written Financial confirmations the normal back office procedures will apply
to their issuance, and thus this requirement should not have any direct
impact on the on line systems. It does however introduce a requirement to
make a change to the confirmation templates which needs to be in place ready
for the first on line transactions in September. I believe there are
different templates in use for the different Financial businesses.

I suggest that the two new fields required in the Financial Confirmations are
included under the section outlining the general terms of the swap.These will
take the form of:

Counterparty Payor Jurisdiction: <<Insert country of incorporation of the
Counterparty<<

Counterparty Payee Jurisdiction(s): 1. <<Insert country in which the trading
office through which the Counterparty transacts is located<<
2. <<If different to 1, insert country in which the office through
which the Counterparty will make payment is located<<

Once new customers are established (and also for existing customer base -
would this be a good way of approaching dealing with the existing customer
base with the aim of eliminating Annex A which are different only because of
the tax reps ?) perhaps a good way of maintaining this data would be to set
it up on a spreadsheet [or the counterparty database ?] [direct link from the
New Customer Registration Form]. Thus the decision on which countries to
insert would only need to be made once on setting up a new counterparty. For
example the spreadsheet could look like this:

Counterparty Description Counterparty Payor Jurisdiction Counterparty
Payee Jurisdiction 1 Counterparty Payee Juris 2

Morgan Stanley Singapore Pte Ltd Singapore Singapore
Morgan Stanley London branch US UK
Morgan Stanley Paris branch US France

There will also need to be a clear statement on the Financial Confirmation
that it is the Counterparty's responsibility to notify Enron where the
Counterparty Payor or Payee Jurisdiction information is incorrect. This is
particularly important for the tax representations as Enron is using its
judgement to identify the relevant countries but this may not always be
correct (sometimes the place of management of the business is the relevant
factor and Enron is not in a position to know this). This actually is no
different to the situation we have today when it is Enron which determines
which variety of the Annex A gets sent out.

2. New Customer Registration Form

a) Please add an additional question under Legal Information required:

Country from which payment is to be made if different:
_____________________

b) The following has not yet been agreed by Steve Douglas but I wanted to
raise the subject to get comments on the issue of European counterparties
trading financials directly with US Enron entities.

Statement to be added under the heading of Tax Information Required (US new
customer registration form only):

Please submit to [ECTRC] IRS Form W9 and IRS Form 1001, or IRS Form W8 and
IRS Form 4224 (as applicable), indicating the authority under which payments
to be made to you are not subject to US Federal Income Tax withholding.

Since this statement is not required for ECTRI European counterparties this
leads to a New Counterparty Registration Form for US counterparties and a
separate New Counterparty Registration Form for European counterparties - is
this an issue ?

Also is it the intention to give to European counterparties the ability to
trade financial products which would be contracted for by US Enron entities
eg Pulp Financials and Plastics etc - in this case, it would make commercial
sense to send the European counterparty the correct IRS Forms in order to
eliminate this as an obstacle to the registration process [I have also asked
Edmund to confirm whether we would want to avoid European counterparties
contracting financials directly with US Enron entities for European financial
regulatory reasons].

3. Business Process

You asked for some language to include in the Business Process to describe
this procedure. Here's my suggestion:

" Tax Representations
The responses to the 3 Legal Information Requirements set out on the New
Customer Registration Form [will link directly to the Counterparty Payor
Jurisdiction and the Counterparty Payee Jurisdiction fields on the relevant
Financial confirmation] or [should be entered into the counterparty database]
or [should be entered into the spreadsheet for maintaing tax representation
data]. The response to question 1 is the Counterparty Payor Jurisdiction, the
responses to questions 2 and 3 (if any) are the Counterparty Payee
Jurisdiction(s).

Tax Department should review the New Customer Registration forms periodically
[frequency ? daily ? weekly ? currently we do this every time a new
counterparty is set up, but we do not want to introduce unnecessary delays to
the registration process when there is a window of time to make an adjustment
to the database/other medium feeding into the confirms before the first trade
has been done] to identify obvious inconsistencies in the responses [the onus
is on the customer to identify errors, but we should probably act in good
faith in assisting to identify obvious errors]."

Sorry this is so long

Regards
Janine