Jersey FSC Regulatory Seminars : Trust Company Business + Anti-Money Laundering

The Jersey Financial Services Commission is pleased to advise industry that it will be holding two regulatory seminars in July 2010.

The first seminar on 22 July 2010 is a full day dedicated to trust company business and will be relevant to trust company business employees of all levels. The subjects to be covered include a summary of common findings from on-site examinations, a case study charting the demise of a trust company to illustrate the use of regulatory powers and other topical matters.

The second seminar on 23 July 2010 is scheduled for the morning only and has the theme of anti-money laundering and will be of interest to all sectors of the finance industry.

Regulatory Seminars

Standard Chartered announces its acquisition of the African custody business from Barclays

Standard Chartered has entered into an agreement to acquire the African custody business from Barclays Bank PLC. This will provide Standard Chartered with custody capabilities in its markets across Africa. The acquisition is subject to certain regulatory and other approvals, and is expected to be completed in 2010.

The African custody business forms a key part of Standard Chartered’s build-out of international custodian services, alongside existing capability in Asia and the Middle East. The acquisition adds direct custody capabilities in eight African markets (Botswana, Ghana, Kenya, Mauritius, Tanzania, Uganda, Zambia and Zimbabwe) and indirect capabilities in a further eight markets (Egypt, Cote d’Ivoire, Malawi, Morocco, Namibia, Nigeria, Tunisia and South Africa) provided through a network of third party sub-custodians via an operations hub in Mauritius. The new business will strengthen Standard Chartered’s regional product offering for both international and regional businesses, strengthening client relationships, whilst providing an additional source of liquidity to the Group.

Commenting on the deal Karen Fawcett, Group Head of Transaction Banking at Standard Chartered, said: “We are very pleased to have secured the acquisition of Barclays’ African Custody business. This deal will enable Standard Chartered to rapidly develop our custody capabilities in our core markets across Africa. We are already seeing ongoing demand for regional and international investment services across this region. Standard Chartered remains committed to providing clients with an integrated set of solutions that promote ongoing growth of this industry. With this acquisition, we will enhance our custody offering and continue to gain a strong foothold as Core Bank to our clients in Africa.”

Barclays Bank PLC’s African custody business has been consistently recognised as the Best Custodian Bank in Africa, receiving 19 awards in the 2008 Global Custodian Magazine Survey.

This acquisition is another demonstration of the significant investment Standard Chartered Bank has been making in its African franchise over the last few years, following its recent purchase of First Africa (a leading African M&A advisory business) in 2009 and the opening of its new representative office in Angola, its fourteenth African market in early 2010.

Deloitte podcast: Globalization of regulation

Current regulatory frameworks failed to protect investors and communities from a financial meltdown. With moves toward reforming the financial market regulation at the national level gaining speed, the need for a common global approach to regulation is more important than ever. Disparate regulatory frameworks increase the risk of regulatory arbitrage and increase costs with limited commensurate benefit. Government should continue to pursue a global outlook to financial regulation to avoid such risks.

This podcast focuses on the potential impact of disparate, inward looking regulatory systems on the global economy, provides an overview of the challenges to adopting a global approach to regulation and how to address those challenges, and offers insight as to how businesses can best navigate and stay ahead of the evolving regulatory environment.

Highlights

Why do we need a global approach to regulation?
What is needed to develop a coordinated regulatory framework?
What are the regulatory pressures unique to Europe and the United States?
How can businesses prepare for changes in the regulatory environment?

Guests

Jeffrey Willemain, Regulatory & Risk Global Leader, Deloitte Touche Tohmatsu.
Alain Pons, CEO-Elect, Deloitte France
Hendrik Descheemaeker, Managing Partner, European Regulatory Affairs, Deloitte Touche Tohmatsu

FSA consults on use of certain new powers granted by the Financial Services Act 2010

The consultation paper includes proposed Handbook changes in relation to the following areas:

• To redraft the provisions requiring disclosure of short-selling positions and place them in a new part of the Handbook covering financial stability and market confidence;
• The imposition of financial penalties or censure on those who breach short-selling rules;
• The power to suspend firms or individuals by stopping them undertaking some or all of the activities which they are permitted to carry on for a period of time, and to use this new power in conjunction with other enforcement tools;
• The power to impose financial penalties on individuals who have carried out controlled functions without the necessary approval from the FSA;
• The ability to gather information in relation to financial stability from both authorised and unauthorised persons to help identify potential threats to the UK financial market;
• To enable the Financial Services Compensation Scheme (FSCS) to recoup its management costs, when acting on behalf of other compensation schemes, from FSCS levy payers if it is unable to recoup those costs from the relevant compensation scheme. Another new rule will reflect Treasury’s new power to recoup interest costs from the FSCS in the event of it requiring the FSCS to contribute to the costs incurred in applying the stabilisation powers of the Special Resolution Regime established under the Banking Act 2009.

The consultation closes on 25 June 2010.

Pan Commonwealth Conference on Services Trade focuses on ICT

The 2nd Pan Commonwealth Conference on Services Trade with the theme “Creating an enabling environment for information technology services”, was held from 20 to 22 April 2010, at the Four Points by Sheraton in Ebène.

The conference organised by the Commonwealth Secretariat in collaboration with the World Bank Institute, the Regional Multidisciplinary Centre of Excellence (RMCE), Mauritius and the Common Market for Eastern and Southern Africa, and Mauritius, served as a platform where both local and foreign participants assessed and made an overview of the current status of the information and communication technology (ICT) sector particularly in the aftermath of the recent financial crisis. A comprehensive set of recommendations on how to create an enabling environment to harness potentials of the ICT sector has also been drawn out.

Among the different issues discussed during the conference were, an overview of trends and performance in services trade, the statistics gap, enabling information and technology enabled services (ITeS) export development, a regional outlook of services trade, the role of EPAs in supporting services reform in Africa, the Caribbean experience, opportunities and strategies in IT-enabled services, COMESA experience, Mauritius ICT/ITeS experience, and trends in services trade.

As regards ICT development in Mauritius, the country is following a two-fold strategy to transform itself into a regional ICT hub as well as emerge as a leader in some identified areas namely, networking, mobile technologies and information security, and be seen as a preferred centre of ICT skills, expertise and employment in the region. Mauritius is also cooperating with other countries of the region to boost its availability of skilled ICT manpower to achieve the objective of transforming the country into a cyber-island.

The ICT sector in Mauritius registered a growth rate of 14.7% in 2009 and its contribution to GDP has been nearly 6% with more than 300 companies operating in the sector mainly ITeS/BPO, and ICT exports are estimated at Rs 3 billion of which 90% are trade in services. To further promote Mauritius as a business hub, Mauritius is rethinking its overall strategy on different fronts, mainly infrastructure development and manpower planning, and the need to have a pool of globally competitive Infocom professionals.

It is considered that with the existing SAFE cable, the country has seen a vibrant development of its BPO/ITeS sector and the Lower Indian Ocean Network (LION) cable, a vital link to Madagascar and Reunion Island, has further helped the country to consolidate and expand its connectivity in the region.

Le MMM met l’accent sur la nouvelle économie

Paul Bérenger en compagnie de sa «top team» économique, Vishnu Lutchmeenaraidoo, Kee Chong Li Kwong Wing et Ramesh Basant Roi, entre autres.

KC Li - Forum

Mauritius to build resilience in the face of climate change

A two-day workshop on Africa Adaptation Programme on Climate Change for the Republic of Mauritius is being held at La Cannelle, Domaine Les Pailles since yesterday. The workshop is a joint initiative of the Ministry of Environment and National Development Unit, the United Nations Development Program Country Office and the Government of Japan.

The Africa Adaptation Programme entitled Supporting Integrated and Comprehensive Approaches to Climate Change Adaptation in Africa aims at assisting some 21 African countries to integrate climate change adaptation into their national development processes. The programme consists of two components: a national component, developed to meet specific country climate circumstances and needs and an inter-regional technical support component that will provide a regional platform for countries to share their experiences and best practices.

Because of its impacts that cut across a variety of sectors including both the societal systems such as food supply, human health, and water resources, and the biological systems like freshwater ecosystems and biodiversity, climate change is now considered as a developmental as well as an environmental issue. In this context, the Africa Adaptation Programme provides an approach where socio-economic development and adaptation to climate change are not mutually exclusive. The programme intends to build capacity to understand, analyse and react to future climate change impacts to provide a proper balance between mitigation and adaptation to reduce the climate-change vulnerability of socio-economic systems in the most cost-effective way.

Sub-Saharan Africa and Small Islands Development States (SIDS) are considered to be among the most vulnerable regions in face of climate change because of inherent low adaptive capacity and high exposure of population and infrastructure to sea-level rise and increased storm surges, respectively. Mauritius features in both categories. As such, the country has to be prepared to adapt to climate change through scientific and technological expertise allied to local knowledge.

The risks posed by climate change to the country include sea-level rise, rising temperatures, and an increase in the intensity of tropical cyclones and increasingly variable rainfall. According to the ministry of Environment and National Development Unit, the livelihood of farmers and fishermen is directly at stake and our water and land resources, agricultural development and tourism industry will most probably worsen if global green house gas emissions are not reduced to the required level and by target dates.

Government has already invested in activities that reduce the country’s vulnerability and increase our resilience to climate change. The measures encompass energy efficiency, adoption of renewable energy, adaptation projects and furthering of carbon sinks.

Appleby Guernsey Office Opens as World´s Largest Offshore Legal Services Provider Continues to Drive Expansion

Appleby, the world’s largest provider of offshore legal, fiduciary and administration services, has confirmed that its new office in Guernsey, the Channel Islands will officially open on 19 April 2010. The group will now have 81 partners, 215 lawyers and over 800 staff worldwide and has been ranked as the world’s “No 1 Offshore Law Firm” by partner numbers in The Lawyer’s 2010 Offshore Survey.

The new office will practise Guernsey law with a focus on corporate and commercial law, private client and trust matters, litigation, insolvency and restructuring and, following approval by the Guernsey Financial Services Commission, will offer a complete range of fiduciary services.

The latest move underlines Appleby’s strategy to offer clients the widest choice of sophisticated financial centres through which to invest, and establishes the group’s position as the only offshore legal, fiduciary and administration service provider with a major foothold in eight of the world’s leading offshore business centres.

Appleby Guernsey will initially comprise corporate and commercial Group Partners, Barney Lee and Helen Crossley, litigation Partner, Jeremy Le Tissier and private client and trust Partner, Gavin Ferguson, each of whom joined from a local law firm in Guernsey. Group Partner, David Clark, will act as managing director of the office and has relocated from Appleby London. Chris Ward, formerly managing director of Rothschild Trust Guernsey, will head up the Fiduciary and Administration Services business.

The group now has 12 offices worldwide in the key offshore centres of Bermuda, the British Virgin Islands, Cayman Islands, Isle of Man, Jersey, Mauritius, Seychelles and Guernsey, as well as the leading financial centres of London, Hong Kong, Zurich and Bahrain. The move follows last year’s successful opening in the Isle of Man, when Dickinson Cruickshank joined the Appleby group.

Peter Bubenzer, Appleby’s Global Managing Partner added: “We are very excited about this development. Our entry into the Guernsey market further builds our strength and depth across multiple jurisdictions — providing greater resources and a wider choice to our clients. The Guernsey office will offer our corporate, institutional and private clients with greater resources and a broader range of structures and jurisdictions, unmatched by any other provider of offshore legal services. We believe that this move will reinforce Appleby’s position as the first choice for clients in the offshore sector.”

Mauritius hosts 7th Corporate Registers Forum Annual Conference

Mauritius is hosting the 7th Corporate Registers Forum (CRF) annual conference 2010 on the theme ''The Integrity of Corporate Registers'', from 20 to 23 April at the Sugar Beach Hotel in Flic en Flac.

The theme has been inspired by the need for better governance of information for the benefit of users of company registries namely shareholders and other institutional investors. In the light of the recent financial crisis, which was partly attributed to regulatory failures, users of company information are demanding data that are trustworthy and have called for better enforcement of existing regulation.

The conference, with the participation of both local and international delegates, aims at providing an opportunity for members of the CRF to reflect on and share their experiences in the field of corporate registers, as well as acquire new ideas and knowledge. It will also serve as a platform to facilitate communication between registry professionals as regards latest developments in corporate registry management. Processes to prevent fraud in registers and innovative services in business registration are also on the agenda.

Mauritius is a Chartered member of the CRF and currently holds the Chair of the CRF executive committee through Mrs Prabha Chinien, the Registrar of Companies. CRF is an international non-profit organisation for administrators of Corporate and Securities Registers. Its objective is to provide delegates of member countries with an opportunity to review the latest developments in corporate business registers and to exchange experiences and information on the operation of the corporate business registration systems internationally.

It will be recalled that the first Corporate Registers Forum was inaugurated in Auckland in New Zealand in 2003 and thereafter the annual conferences have been held in Australia in 2005, in Hong Kong in 2006, in Malaysia in 2007, in Canada in 2008 and in South Africa in 2009.

Member countries of the CRF include Australia, New Zealand, Canada, Cook Islands, Fiji, Hong Kong, India, Malaysia, Samoa, Singapore, Tonga, South Africa, United Kingdom and Vanuatu. To date, 33 jurisdictions are members of the CRF.

CIEL Investment Limited reinforces its presence in the Global Business Sector

CIEL Investment Ltd (CIL) reinforces its presence in the financial services sector, particularly in the global business sector with the acquisition of a 55% stake in an offshore management company, Mauritius International Trust Company Limited (MITCO).

According to Jean Pierre Dalais, CEO of CIEL Capital, “the island has become a regional financial centre due to the rapid growth in the global business sector since 1993 with 33,500 corporate vehicles registered in Mauritius as at June 2009. The expanding network of double tax treaties has reinforced the seriousness of Mauritius as a tax efficient jurisdiction” Thierry Hugnin, also of Ciel Capital added that “Through this acquisition, CIL increases its footprint in the financial services sector and notably in the global business sector where we own Halifax Management Services, a company acquired in October 2007. MITCO will complement the existing strengths of Halifax and they will eventually merge into a unified entity providing the full range of services to their growing clients”.

CIL is also an important shareholder of Bank One and Investment Professionals Ltd

A one-stop shop for Mauritius ICT Indicators

The Mauritius ICT Indicators Web Portal, developed by the National Computer Board (NCB), was launched by the Minister of Information and Communication Technology, Mr A. Dulull, in the presence of the Chairman and the Executive Director of the NCB, Mr S. Ramgoolam and Mr D. Faugoo, yesterday at Clos St Louis, Domaine Les Pailles.

The ICT Indicators Portal is deemed a single point of ICT reference for information on indicators related to the ICT sector as well as an important tool to gauge achievements, measure progress, benchmark results and feed analytical reports pertaining to the sector. The portal provides decision makers, investors and regulators with timely and accurate ICT indicators which are essential in setting policy priorities and developing strategies. It also acts as a reference platform for ranking Mauritius at international level with coherent and international comparative data.

The setting up of the Portal follows the recommendations of the National ICT Strategic Plan (NICTSP) 2007-2011 to establish a National ICT Indicator Taskforce whose main task was to define and identify indicators for the ICT sectors. The 147 designated indicators are in line with those of international organisations such as the International Telecommunication Union (ITU), the World Summit on Information Society (WSIS), UNESCO and the Directorate for Science, Technology and Industry (DSTI) Committee for Information, Computer and Communications Policy. They are classified under broad categories namely ICT Infrastructure Readiness (physical networks, level of connectivity), ICT Market Revenue (derived from ICT goods and related services), ICT Manpower, ICT Usage in businesses, households and education. The portal can be accessed at http://indicators.ncb.mu

In his address, Mr. Dulull welcomed this initiative, which he said is a further step in achieving government’s vision to make ICT the fifth pillar of the economy and transform Mauritius into an information society. He highlighted the importance of democratising access to information technology and ‘putting ICT at the doorstep of our citizens. The minister also announced that the NCB is already working on the second phase of the ICT Indicators Web Portal project which will allow data collection agencies to have secure online access for updates thereby feeding the site with latest figures for the sector.

The launching ceremony was followed by a half-day workshop aimed at gathering inputs from the ICT industry and relevant stakeholders to assess the current state of the Information Society in Mauritius and finalise the State of Information Society Development Report. The Report which is expected to be ready next month will contain not only the latest indicators on ICT and its usage but also an analysis and assessment of the industry. The report will be an annual feature of the NCB.

SEBI : Additional information regarding PCC, MCV or equivalent structure

1. In order to ascertain the constitution of Foreign Institutional Investors (FII) and Sub Accounts (SA), it has been decided to gather additional information pertaining to their structure.

2. In view of the above, all applications submitted for registration w.e.f April 07, 2010 shall be accompanied by the following declarations and undertakings on the letter head of respective FII, duly signed by its authorised signatory on behalf of itself and all its Sub Accounts.

Declarations

The applicants are required to provide the following declarations on its letterhead

Please tick whichever applicable.

(a) The applicant declares that it is not a Protected Cell Company (PCC) or Segregated Portfolio Company (SPC) and does not have an equivalent structure by whatever nomenclature.

(b) The applicant declares that it is not a Multi Class Share Vehicle (MCV) by constitution and does not have an equivalent structure by whatever nomenclature. It contains only single class of share.

(c) The applicant declares that it is a MCV by constitution and has more than one class of shares or has an equivalent structure and that a common portfolio is maintained for all classes of shares and satisfies broad based criteria.

OR

(c) A segregated portfolio is maintained for separate classes of shares wherein each such class of shares are in turn broad based.

Undertakings

In case the applicant is/ proposed to be a MCV or an equivalent structure and have more than one class of shares, it shall undertake the following on its letterhead:

(a) Common portfolios shall be allocated across various share classes and it shall be broad based;

OR

(a) If portfolios are segregated for each distinct share class, then each such share class shall satisfy the broad based criteria;

(b) In case of change in structure/ constitution/ addition of classes of shares, prior approval of SEBI shall be taken;

(c) In case of any addition of share classes, it shall follow the criteria at (a) above.

3. All the existing Foreign Institutional Investors and Sub Accounts who are already registered as on April 07, 2010, shall provide the abovementioned declarations and undertakings on or before September 30,2010.

New Mutual Funds Legislation for the British Virgin Islands

Funds incorporated in the British Virgin Islands (“BVI”) will now have further legal and regulatory support following the enactment of the Securities & Investment Business Act (SIBA).

The Act which became law yesterday codifies some of the practices already undertaken by funds domiciled in the BVI and introduces laws to regulate investment business, public issues of securities and market abuse. Fund managers already find the legal and regulatory system in the BVI familiar and easy to use as the Mutual Funds Act, 1996 has been in place for well over ten years. The BVI also derives its laws and regulations from English law.

SIBA introduces four new regulatory areas:

• It updates and modernises the regulation of the BVI investment funds industry, by repealing the current Mutual Funds Act, 1996 and replaces it with SIBA and the Mutual Funds Regulations, 2010;
• It introduces an investment business licensing regime to regulate entities conducting “investment business” in or from within the BVI;
• It adopts restrictions on, and regulations for, the making of “public issues of securities” into the BVI; and
• It introduces a market abuse regime.

The framework for the regulation of BVI funds is not materially altered by the enactment of SIBA and most of the popular concepts remain: many of the legislative changes made under SIBA and the Mutual Funds Regulations, 2010 merely codify existing BVI FSC policies which have developed over recent years in line with evolving international standards.

Changes introduced by SIBA include:

• A requirement of BVI funds to have at least two directors
• A requirement for BVI funds, licensed managers and licensed administrators to appoint a BVI resident authorised representative
• A change in the minimum initial investment by investors investing in professional funds to US$100,000
• A requirement for professional and private funds intending not to appoint an investment manager, administrator or custodian (functionaries) to apply to the FSC for an exemption;
• A requirement for seven days prior notification of a proposed appointment to a functionary of a private or professional fund, unless the Commission agrees to accept a shorter notice period; and
• A change in the timeframe in which professional funds are able to commence business before receiving recognition from the FSC, enabling professional funds to commence business for up to 21 days before receiving FSC recognition provided the application for recognition is submitted to the FSC for consideration within 14 days of the launch date (previously under the Mutual Funds Act, 1996 a professional fund could commence business for up to 14 days before receiving FSC recognition).

The BVI Financial Services Commission has welcomed the new law with the Managing Director and CEO, Robert Mathavious commenting: “This Act emphasises the quality of the legislation in the BVI and underlines the importance of the jurisdiction as a fund domicile. The BVI has a significant presence in the mutual fund industry with around 3000 active funds* and it continues to attract new fund managers encouraged by its robust but fair legislation.”

Sherri Ortiz, Executive Director BVI International Finance Centre, added:

“The BVI continues to strive towards recognition as an innovative, efficient and respected financial centre as reflected in the enactment of today’s SIBA Act. We have been working closely with the private sector prior to this act coming into force. New fund managers are attracted here, encouraged by the high regulatory standards and expansion of legal, accounting and fund administration services.

"The BVI continues to work as a globally integrated financial centre playing an important role in the global economy by facilitating the flow of international capital and investment.”

Business Annual - Offshore Guide 2010/11

The Changing Face of International Finance

Jersey’s wealth management solutions and the ‘BRIC’ economies to be debated at London conference

The response of the wealth management sector to the rise of the ‘BRIC’ economies is top of the agenda at Jersey Finance’s annual private wealth conference in London later this month.

Speakers and panellists will debate trends in the global economy with emphasis on how an international finance centre such as Jersey plays a part in the creation of investment solutions for private clients and their advisers.

The conference will be addressed by Richard Cookson, Citi Private Bank’s Global Chief Investment Officer, who will examine how the collective economies of Brazil, Russia, China and India (‘BRIC’) have thrived during the crisis and how the financial services industry can take advantage of the shift in world economic power, while highlighting also the risks that remain.

Jersey Finance chief executive Geoff Cook will introduce the event and update delegates on developments in Jersey. A panel discussion follows and the speakers will be joined by Senator Philip Ozouf, Jersey’s Treasury Minister and Deputy Chief Minister, Richard Teather; Senior Lecturer in tax law at Bournemouth University and Advocate Alan Binnington, Director RBC Wealth Management in Jersey.

The debate will be widened to cover tax issues, disclosure and the future of automatic exchange of information, the UK Budget and the next General Election. The panellists will discuss likely moves by the G20, the IMF and the US and their possible impact on the global market for trust and wealth management services. The question and answer session will be facilitated by Sarah Montague, presenter of the ‘Today’ programme on Radio 4 and will include questions from delegates.

Geoff Cook commented:

‘While there are many issues for discussion within the private wealth sector, there remain significant opportunities for centres like Jersey also and we intend to highlight the solutions and structures within our regime which can support the needs of the wealth management and trust industry as the world emerges from the crisis. We have brought together a high calibre panel with the knowledge and insights to discuss these issues in a global context.

‘I am particularly delighted that Jersey’s Treasury Minister will join the event since it reaffirms the Government’s commitment to the finance industry in Jersey and provides delegates with an opportunity to hear directly from the Minister responsible for the Jersey’s fiscal regime.’

Hedge Funds' Assets up 13 Per Cent in 2009 as Annual Performance Return Reaches 10 Year High

• Hedge funds’ assets up 13 per cent in 2009, fund of hedge funds’ assets down 17 per cent
• Annual performance return totalled 19 per cent, best hedge fund performance in a decade
• London holds steady as second largest centre for managers of hedge funds with 20 per cent of assets

Hedge funds’ assets increased by 13 per cent in 2009 to $1.7 trillion, according to International Financial Services London (IFSL), the independent organisation promoting UK financial services worldwide. Its annual Hedge Funds report indicates that growth of assets is likely to continue in 2010 barring further economic turbulence.

Redemptions continued for the second year running, albeit at a slower pace. The 19 per cent return in 2009, the best hedge funds’ performance in a decade, more than made up for the $85bn in net outflows. The asset raising environment gradually improved during 2009 with a return to net asset inflows during the second half of the year. Around 60 per cent of hedge fund assets with redemption restrictions at the start of the year were returned to standard liquidity terms by the end of 2009 according to the report.

The fund of hedge funds industry has been particularly affected by the economic downturn of the past two years and reputational damage resulting from the Madoff fraud. Assets of fund of funds totalled $500bn at the end of 2009, down 17 per cent from the previous year, and over 40 per cent below the peak seen two years earlier.

The number of hedge funds totalled around 9,400 at the end of 2009, a reduction of more than 1,000 from the peak seen two years earlier. New hedge fund launches however exceeded the number of liquidations in the second half of the year.

IFSL estimates that 41% of global hedge fund assets were managed from New York in 2009, down from 52% at the start of the decade. London’s 20% share of the global total was unchanged from the previous year. Europe has more than doubled its share of the global total since the start of the decade. The hedge fund industry is however concerned that the European Commission’s proposed Directive on Alternative Investment Fund Managers may by create major difficulties in the medium term for non-EU funds and managers in accessing the EU market.

Marko Maslakovic, Senior Economist at IFSL, said: “The 1,000 hedge funds located in London managed more than three-quarters of European based hedge funds’ assets. The structural advantages which have long attracted hedge funds to London include its local expertise and the proximity of clients and markets. London is also a leading centre for hedge fund services such as administration, prime brokerage and custody”.

Click here to view PDF of Hedge Funds 2010 report

The IFSB-IRTI-IDB publishes report on Islamic Finance : Global Financial Stability

A report on Islamic Finance: Global Financial Stability was launched in the Inaugural Financial Stability Forum organised by the Islamic Financial Services Board (IFSB) on Tuesday, 6th April in Khartoum.

The Report examines the intrinsic strength of the Islamic finance model, the state of the Islamic financial services industry and challenges and strategies for strengthening financial stability in the Islamic financial services industry. Although the Islamic financial services industry was relatively less affected by the crisis, its underlying causes bear important lessons for the Islamic financial services industry going forward. This becomes even more important as Islamic finance operates within the global financial system that is characterised by increasingly large and volatile cross-border capital flows amid an environment of deeper international financial integration. Therefore, it is vital to accelerate the development of critical building blocks of the Islamic financial system to respond to the changing economic and financial landscape, and support the orderly development of Islamic finance for sustained global financial stability.

The Report recommends, among other things, the establishment of an Islamic Financial Stability Forum or IFSF. The IFSF will be a dedicated forum to promote cooperation and collaboration among its members in areas such as surveillance, sharing of experiences in crisis prevention, management and resolution, implementation of international standards as well as international cooperation in capacity building and in the development of emergency infrastructure and facilities.

The Inaugural Financial Stability Forum themed “Developing Capacity Building to Enhance Financial Stability in the Islamic Financial Services Industry” was held in Khartoum on 6 April 2010 and was chaired by H.E. Dr Sabir Mohamed Hassan, Governor of Central Bank of Sudan, and Chairman of the IFSB Council. Two papers were presented and discussed in the Forum, entitled (i) capacity building in the financial sector, and (ii) capacity building for central banks and regulatory authorities. The Forum was attended by the central bank Governors, governors’ representatives who are members of the IFSB Council and the Vice President of the Islamic Development Bank.

The Report entitled Islamic Finance: Global Financial Stability is jointly published by the IFSB, the Islamic Development Bank (IDB) and the Islamic Research and Training Institute (IRTI). Dr Ahmad Mohamed Ali, President of the IDB Group stated in the Preface of the Report, “We believe that there is much that Islamic finance can contribute to this process. From this perspective, the new financial order would be more inclusive and more global in nature, lending it more support and sustainability. Collectively, we hope that we will be able to build a more stable and more peaceful world for the future generations.”

The Report was produced by a Task Force on Islamic Finance and Global Financial Stability, in response to the recommendations of the Forum of the Global Financial Crisis and its Impact on the Islamic Financial Industry, which was organised by the IDB Group on 29 October 2008. The Task Force, headed by H.E. Dr. Zeti Akhtar Aziz, Governor of Bank Negara Malaysia, includes an international group of eminent scholars, practitioners and Islamic finance experts. Dr. Zeti remarked that it is hoped that the report will provide useful insights on Islamic finance and the important focus that needs to be given to financial stability in the rapidly changing international financial environment. Equally important is the capacity to contribute to global financial stability. The priorities identified in this report are also aimed at strengthening further the foundations that will ensure the sustainability and capacity of Islamic finance to contribute towards global growth and a greater shared prosperity.

UK : Royal Assent for Financial Services Act 2010

The Financial Services Act 2010 received Royal Assent today, resulting in a number of changes to the Financial Services Authority’s (FSA) objectives, powers and duties.

The main changes:

• Financial stability: The new financial stability objective for the FSA includes a duty for the FSA to determine and review its financial stability strategy, in consultation with the Treasury;
• Consumer education: The FSA is also required to establish a new consumer financial education body. When this body is fully operational, it will assume the FSA’s current responsibilities in relation to financial education.
• Enforcement powers: Notable changes here include the power to suspend individuals, and firms, along with the ability to fine those who are carrying out a role that needs FSA approval without the necessary approval being in place. The time limit to issue a warning notice against an individual increases from two years to three years from the time the FSA first becomes aware of the misconduct;
• Remuneration: The FSA will have the power to specify that remuneration agreements in breach of its remuneration rules are void;
• Consumer redress scheme: This clause would give the FSA the power to impose a consumer redress scheme. It will come into effect only by order of the Treasury.

Some of the new powers require the FSA to make rules, or publish statements of policy. The FSA will publish a consultation paper in due course concerning implementation of the provisions in the Act.

The changes announced today in the Financial Services Act 2010 were anticipated in the FSA's Business Plan for 2010/11, published in March, and the FSA will continue to execute these business priorities.

IOSCO publishes Disclosure Principles for Public Offerings and Listings of Asset Backed Securities

The Technical Committee of the International Organization of Securities Commission (IOSCO) has published a final report – Disclosure Principles for Public Offerings and Listings of Asset Backed Securities (ABS Disclosure Principles) – containing principles designed to provide guidance to securities regulators who are developing or reviewing their regulatory disclosure regimes for public offerings and listings of asset-backed securities (ABS).

The objective of the ABS Disclosure Principles is to enhance investor protection by facilitating a better understanding of the issues that should be considered by regulators in developing or reviewing their disclosure regimes for ABS.

The ABS Disclosure Principles were developed following a recommendation in the Technical Committee’s Report on the Subprime Crisis1, published in May 2008, that IOSCO develop international principles regarding the disclosure requirements for public offerings of ABS if it was found that IOSCO's existing disclosure standards and principles did not apply to such offerings. Following an in-depth analysis it was found that, due to the unique nature of ABS and ABS issuers, the types of disclosure that would be deemed most material to ABS investors are not fully captured by the existing IOSCO disclosure standards and principles, leading to the development of these principles.

Summary

The ABS Disclosure Principles provide guidance for listings and public offerings of ABS, defined as those securities that are primarily serviced by the cash flows of a discrete pool of receivables or other financial assets that by their terms convert into cash within a finite period of time, such as RMBS (residential mortgage-backed securities) and CMBS (commercial mortgage-backed securities), among others.

The principles are based on the premise that the issuing entity will prepare a document used for a public offering or listing of ABS that will contain all material information, clearly presented, that is necessary for full and fair disclosure of the character of the securities being offered or listed in order to assist investors in making their investment decision.

The ABS Disclosure Principles will complement IOSCO’s existing disclosure standards and principles, which include International Disclosure Standards for Cross-Border Offerings and Initial Listings by Foreign Issuers (1998); Principles for Ongoing Disclosure and Material Development Reporting by Listed Entities (2002); General Principles Regarding Disclosure of Management's Discussion and Analysis of Financial Condition and Results of Operations (2003);International Disclosure Principles for Cross-Border Offerings and Listings of Debt Securities by Foreign Issuers (2007); and Principles for Periodic Disclosure by Listed Entities (2010).

The ABS Disclosure Principles would also provide guidance if a Document is required:

• when a financial intermediary that has participated in a public offering of securities later sells to the public the securities that were unsold in the original public offering; or
• when the issuer has sold securities in a private placement to any party who then resells those securities to the public.

These principles would not provide guidance for securities backed by assets pools that are actively managed (such as some securities issued by investment companies), or that contain assets that do not by their terms convert to cash (such as collateralized debt obligations).

Disclosure Principles for Public Offerings and Listings of Asset Backed Securities (ABS)

The ABS Disclosure Principles outline the information that should be included in any offer or listing document for a publicly offered or listed ABS, which should include details on the following:

1. Parties Responsible for the Document;
2. Identity of Parties Involved In the Transaction;
3. Functions and Responsibilities of Significant Parties Involved In the Securitization Transaction;
4. Static Pool Information;
5. Pool Assets;
6. Significant Obligors of Pool Assets;
7. Description of the Asset Backed Securities;
8. Structure of the Transaction;
9. Credit Enhancement and Other Support, Excluding Certain Derivative Instruments;
10. Certain Derivative Instruments;
11. Risk Factors;
12. Markets;
13. Information about the Public Offering;
14. Taxation;
15. Legal Proceedings;
16. Reports;
17. Affiliations and Certain Relationships and Related Transactions;
18. Interests of Experts And Counsel; and
19. Additional Information.

The disclosure topics highlighted in the ABS Disclosure Principles are intended as a starting point for consideration and analysis by securities regulators. Some regulators may find it useful to incorporate all of the disclosure topics into their ABS disclosure requirements. Others may conclude that the relevance of specific disclosure topics in their jurisdictions may vary according to the characteristics of the issuing entity or the securities involved, and may wish to incorporate the principles on a more selective basis.

The principles-based format of these principles allows for a wide range of application and adaptation by securities regulators.

Tax: Revised OECD-Council of Europe treaty will boost multilateral cooperation

The OECD and the Council of Europe have agreed on an update to an international treaty that aims to help governments enforce their tax laws, as part of the worldwide drive to combat cross-border tax evasion.

The update takes the form of a protocol amending the Convention on Mutual Administrative Assistance in Tax Matters for which the two multilateral organisations are the custodians. Its effect is to align the convention to the international standard on information exchange for tax purposes by allowing for the exchange of bank information.

The Protocol will be opened for signature on the occasion of the OECD’s annual Ministerial Meeting in Paris on 27-28 May. This initiative responds to a call by G20 leaders at their April 2009 summit for proposals as to ways to help developing countries secure the benefits of the new cooperative tax environment. U.K. Prime Minister Gordon Brown, as chair of the G20, indicated that “it would be helpful, in this regard, if an effective multilateral mechanism could be developed”.

The original convention entered into force in 1995. It currently groups 14 countries -- Azerbaijan, Belgium, Denmark, Finland, France, Iceland, Italy, Netherlands, Norway, Poland, Sweden, United Kingdom, United States, and Ukraine – with Canada, Germany and Spain having signed it but not yet ratified it. Other OECD and Council of Europe members, including some that are G20 countries, are looking at becoming parties to the convention, and it is now being opened up to other countries that are not members of either the OECD or the Council of Europe members .

This will enable developing countries to become parties to the amended convention and benefit from the new, more transparent tax-cooperation environment. The protocol provides, among other things, for exchange of information, multilateral simultaneous tax examinations, service of documents and cross-border assistance in tax collection, while respecting national sovereignty and the rights of taxpayers and ensuring extensive safeguards to protect the confidentiality of the information exchanged.

OECD Secretary-General Angel Gurría and Council of Europe Secretary-General Thorbjørn Jagland welcomed the finalisation of the protocol by both organizations, noting that as more countries join, the benefits of the convention grow.

“Given its multilateral nature, the Convention is a unique instrument to counteract international tax avoidance and evasion,” Angel Gurría commented. “The OECD and the Council of Europe have agreed to improve international cooperation to combat tax evasion and the standards set by the convention are being updated to reflect this new consensus.”

“New provisions aim to remove obstacles to effective co-operation and exchange of information, especially those related to bank secrecy legislations,” said Thorbjørn Jagland. “The amending protocol also provides for the opening of the convention to countries that are not members of the Council of Europe or the OECD, thereby transforming it into an instrument to fight tax evasion worldwide.”

Mauritius and the Benefits of Regulatory Capacity Building

As a small island developing state (SIDS) and CDM Host Country with relatively limited potential for mounting many large-scale projects, Mauritius quickly recognized the need to establish a robust legal framework to promote foreign investment in GHG Reduction projects and an efficient CDM project approval process.

Under the umbrella of the CD4CDM project, a two-year capacity building program implemented by the UNEP Risoe Center (URC) together with the Mauritian Ministry of Environment, a comprehensive Regulation governing the CDM was formulated in record time in comparison to other countries in the region.

Over the course of three days, the DNA Secretariat, the Minister of Environment, and URC advisors convened all relevant government stakeholders including the State Law Office around the table to quickly thrash out the content of the regulation. Beyond the process itself, the final regulation adopted—the Environment Protection (Designated National Authority) Regulations of 2009—is one of the most compact yet comprehensive models yet to be adopted in Africa, with a streamlined approval procedure eliminating duplication between the EIA processes and the public participation requirements associated with CDM approval.

This is an example of both good practice in DNA regulation development and the benefits of more structured CDM capacity building programs that include targeted legal reform and regulatory advisory services.