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FUNDS


Additional requirements The US Foreign Account Tax Compliance Act (March 2010), which aims to clamp down on tax avoidance by US investors with assets deposited abroad, also looks set to place additional reporting requirements on funds. The Act, which comes into full effect in


2013, calls on foreign financial institutions (FFIs) to pledge to the US tax authority (IRS) that they will identify their US customers and disclose information on the assets they hold – both US and foreign securities. Otherwise, the FFI in question will face a 30 per cent withholding tax on their US revenues and the proceeds from their sales of US securities. “FATCA, as it stands, will apply to every


trust company, corporate services provider, fund manger and administrator, though representations are still being made to the IRS to ameliorate its provisions,” says Aileen Barry, Director of Tax Investigations at DLA Piper UK LLP, pointing out that there are concerns over whether trusts should be treated as FFIs. Barry, who made a presentation to the Jersey Compliance Officers Association on


FATCA on 5 April 2010, argues that Channel Island funds need to start thinking about its requirements now, and should analyse how much US business they have and whether they want to grow it or move out. “For every fund that has US clients, it will


be difficult for them not to have to declare the required information fully,” she says. She adds that while FATCA will bring huge costs in


new information and reporting systems, some funds are likely to develop specialist expertise and promote these capabilities, offering other funds a more streamlined approach to reporting. “Other funds may choose not to accept US clients,” she adds. n


Liz Salecka is the former Editor of European Banker


Dodd-Frank: the requirements


The US Dodd-Frank Act calls on all asset managers with US connections who advise on the investment, purchase or sale of securities as well as their value, to register with the SEC. They will be required to: l Comply with the US’s Investment Advisers Act (1940) and other fiduciary laws l Become subject to new record-keeping and reporting requirements l Allow books and records to be subject to oversight and inspection by the SEC l Determine whether they have ‘custody’ over clients’ cash and securities, and, if they do, comply with the SEC’s Revised Custody Rule 2-06. This calls for securities to be held by qualified custodians; the dispatch of quarterly statements to investors; surprise examinations by independent auditors; and controls if the custodian is a related party.


36 businesslife.co April/May 2011


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