Citco updates Æxeo Investor for US tax act

February 2014

This year will see implementation of the most meaningful component of the US Foreign Account Tax Compliance Act, or FATCA as it is better known.

From July 1, 2014 all new investors will be subject to enhanced due diligence in order to be rendered FATCA-compliant. For most investors, this will generally mean that they will have to complete and submit more extensive IRS tax forms (W-8BEN, W-8IMY, W-9, etc.). Any investor deemed as noncompliant will be considered recalcitrant and potentially subject to withholding on their investment.

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Taking good governance to global subsidiaries

February 2014

Recent scandals, such as BP’s Deepwater Horizon oil spill in the Gulf of Mexico, clearly demonstrate that entities which operate across multiple jurisdictions and business areas must ensure that their subsidiaries in these regions are adequately governed. The alternative may be that, as in BP’s case, a failure in one regional entity comes to have a disproportionate impact on the group as a whole.

Global subsidiary governance, as a subset of the much broader subject of corporate governance, is becoming more important to multinational organisations of all kinds, not just corporate giants such as BP. Issues such as alignment with group goals and objectives; efficiencies; information flow; regulatory compliance; companies act compliance and risk management apply to many private equity funds and family offices.

Yet despite the apparent importance of all of these issues, the approach by parent organisations to global subsidiary governance appears to have been mostly ad hoc and underfunded; just as the approach to corporate governance has been.

In particular, pressure on costs means that boards are loath to spend more than the absolute minimum on the internal departments needed to exercise proper governance.

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Understanding Islamic finance

February 2014

Last October, London hosted the World Islamic Economic Forum. It was the first time the event had been held outside the Muslim world, and it was strongly backed by the UK government, with George Osborne, the UK’s Chancellor of the Exchequer, saying that he wants the City of London to become “the unrivalled western centre for Islamic finance”.

The Middle East may seem the natural home of Islamic finance, and Asian centres have the potential to grow, but the recent turmoil in emerging economies has helped London to strengthen its position.

Islamic Finance is a banking system based on the principles of Islamic law (or Sharia) and guided by Islamic economics. It emerged in the early 1960s in the Muslim world in order to provide financial contracts in conformity with the principles of Islam. Its main principles are the sharing of profit and loss and the prohibition of the collection and payment of interest (riba); as such it could be seen as a cultural form of ethical finance.

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China gives cautious welcome to global funds

February 2014

China’s recently proposed financial reforms and the imminent launch of its qualified domestic limited partner (QDLP) programme are further signs of the ongoing liberalisation of its capital account and the continued promotion by the People’s Bank of China of inbound and outbound capital flows.

The QDLP programme was made public in September. It gives six leading global hedge funds approval from the Shanghai regulator to raise US$300 million of capital on the mainland. This ushers in a significant new era for the US$2 trillion global hedge fund industry, as it opens the door to Chinese institutional and high net worth investors.

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