Selected Decisions and Selected Documents of the IMF, Thirty- Sixth Issue -- Misreporting and Noncomplying Purchases in the General Resources Account-Guidelines on Corrective ActionPrepared by the Legal Department of the IMF
As updated as of December 31, 2011
|ARTICLE V, SECTION 3(a), (b), AND (c)|
|Use of Fund Resources|
In some cases, it has been found that a member has made a purchase in the General Resources Account that it was not entitled to make under the terms of the arrangement or other decisions governing the purchase (a “noncomplying purchase”). The purchase was permitted because, on the basis of the information available to it at the time, the Fund was satisfied that all performance criteria or other conditions applicable to the purchase under the terms of the relevant decision had been observed, but this information later proved to be incorrect. When such a case arises in the future, the member will be called upon to take corrective action regarding a noncomplying purchase, to the extent that it is still outstanding, either by repurchase or by the use of its currency in transactions and operations of the Fund, unless the Fund decides that the circumstances justify the member’s continued use of the purchased resources. Steps should also be taken to improve the accuracy and completeness of the information to be reported to the Fund by the member in connection with its use of the Fund’s general resources, and to define performance criteria and other applicable conditions in a manner that would facilitate accurate reporting. The Fund adopts the following guidelines, which shall apply to purchases made after the date of this decision:
1. Whenever evidence comes to the attention of the staff indicating that a performance criterion or other condition applicable to an outstanding purchase made in the General Resources Account may not have been observed, the Managing Director shall promptly inform the member concerned.
2. If, after consultation with the member, the Managing Director finds that, in fact, the performance criterion or other condition was not observed, the Managing Director shall promptly notify the member of this finding. At the same time, the Managing Director shall submit a report to the Executive Board together with recommendations.
3. In any case where the noncomplying purchase was made no more than four years prior to the date on which the Managing Director informed the member, as provided for in paragraph 1, the Executive Board may decide either (a) that the member shall be expected to repurchase from the Fund the outstanding amount of its currency resulting from the noncomplying purchase normally within a period of 30 days from the date of the Executive Board decision, or (b) that the nonobservance will be waived pursuant to
4. Instead of repurchasing from the Fund the outstanding amount of its currency resulting from the noncomplying purchase as provided for in paragraph 3(a), the member may request the Fund to use an equivalent amount of its holdings of the member’s currency in the Fund’s transactions and operations, but if such use cannot be made within 20 days from the date of the Executive Board decision the member shall be expected to make a repurchase in accordance with paragraph 3(a).
5. A waiver under paragraph 3(b) will normally be granted only if the deviation from the relevant performance criterion or other condition was minor or temporary, or if, subsequent to the purchase, the member had adopted additional policy measures appropriate to achieve the objectives supported by the relevant decision.
6. If a repurchase pursuant to the expectation under paragraph 3(a) has not been effected, the Managing Director shall submit promptly a report to the Executive Board accompanied by a proposal on how to deal with this matter, in which the Managing Director may recommend that the Fund initiate action under Article V, Section 5 of the Articles.
7. Provision shall be made in Fund arrangements for the suspension of further purchases under an arrangement whenever a member fails to meet a repurchase expectation pursuant to these guidelines.
8. Nothing in these guidelines shall limit the power of the Fund to take, in cases of noncomplying purchases, other action that could be taken pursuant to the Fund’s Articles and Rules.
9. For the purposes of this decision:
(i) whenever the Managing Director considers there is evidence indicating that a member may have made a noncomplying purchase, but the nonobservance of the relevant performance criterion or other specified condition was de minimis in nature, as defined in paragraph 1 of Decision No. 13849, the communication referred to in paragraph 1 may be made by a representative of the relevant Area Department;
(ii) if the Managing Director determines that a member has made a noncomplying purchase and considers that the nonobservance of the relevant performance criterion or other specified condition was de minimis in nature, as defined in paragraph 1 of Decision No. 13849, the notification referred to in paragraph 2 may be made by a representative of the relevant Area Department, and the report of the Managing Director contemplated in paragraph 2 shall, wherever possible, be included in a staff report on the relevant member that deals with issues other than the noncomplying purchase and shall include a recommendation that the related nonobservance be considered to be de minimis in nature, and that a waiver for nonobservance be granted. In those rare cases when such a staff report cannot be issued to the Board promptly after the Managing Director concludes that a noncomplying purchase has been made, the Managing Director shall consult Executive Directors and, if deemed appropriate by the Managing Director, a stand-alone report on the noncomplying purchase will be prepared for consideration by the Executive Board, normally on a lapse-of-time basis; and
(iii) whenever the Executive Board finds that a noncomplying purchase has been made but that the nonobservance of the relevant performance criterion or other specified condition was de minimis in nature as defined in paragraph 1 of Decision No. 13849, a waiver for nonobservance shall be granted by the Executive Board.
Decision No. 7842-(84/165), November 16, 1984,