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PR Inside – “Hedge fund managers naturally seek international as well as national investors. To continue to do so in today’s evolving regulatory environment, managers are likely to need to establish operations in the EU for EU domiciled investors, in the US for US investors and offshore for international investors,” said Ogier partner Peter Cockhill.
Citing the various reports and legislative proposals put forward by governments and global regulatory bodies such as the OECD and IOSCO, and tracing these proposals back to their origins, the Ogier seminars drew several conclusions as to potential results.
“Transparency is the new paradigm,” added James Bergstrom. “In the near future only those offshore financial centres (‘OFCs’) which meet the regulatory and tax transparency requirements of the new Financial Stability Board will be permitted to participate in the international financial system.”
West Palm Beach (HedgeCo.net) – Carried interest legislation is being considered at the federal, state and local level, raising significant local and international tax issues.
Carried interests, which form an essential element of business in almost every section of the U.S. economy (real estate, private equity, hedge funds and health care), have been subject to significant legislative proposals over the last two years.
Most investment funds (hedge and equity) have a general partner (LLC or LP) which receives a management fee (2%) and a carried interest equal to a percentage (e.g., 20%) of economic income including realized capital gains.
Proposals to reform the taxation of carried interest started in January of 2007 with legislation introduced by Senator Levin (D-MI) that would recharacterize "carried interest" income as ordinary income.
During 2008 New York State proposed and New York City introduced legislation that would change the way carried interest is taxed.
President Obama’s Budget Blueprint released on February 26, 2009 includes a line item related to taxing carried interest as ordinary income.
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Bloomberg – Federal Reserve Chairman Ben S. Bernanke said American International Group Inc. operated like a hedge fund and having to rescue the insurer made him “more angry” than any other episode during the financial crisis.
“If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” Bernanke told lawmakers today. “AIG exploited a huge gap in the regulatory system, there was no oversight of the financial- products division, this was a hedge fund basically that was attached to a large and stable insurance company.”
Bernanke’s comments foreshadow tougher oversight of systemically important financial firms, and come as President Barack Obama seeks legislative proposals within weeks for a regulatory overhaul. The U.S. government has had to deepen its commitment to prevent AIG’s collapse three times since September as the company accumulated the worst losses of any U.S. company.
The company “made huge numbers of irresponsible bets, took huge losses, there was no regulatory oversight because there was a gap in the system,” Bernanke said. At the same time, officials “had no choice but to try and stabilize the system” by aiding the firm.
AIG is getting as much as $30 billion in new government capital and relaxed terms on its bailout announced yesterday.
In another sign of tighter regulation to come, Bernanke said supervisors should have authority to bar new financial products that may be destabilizing to markets.
Bernanke made the AIG comments in response to a question from Senator Ron Wyden, an Oregon Democrat, at a Senate Budget Committee hearing today in Washington.
