New York (HedgeCo.Net) – Hedge funds can expect to be kept on a tighter leash in the near future, as leaders from all over the world met at the G20 summit in London to discuss the next steps towards remedying the worst financial crisis in six decades.

Agreeing that lax regulation on all levels helped to fuel the credit crunch, the 20 leaders agreed to vamp up national regulators and to keep a watchful eye on any practices that may threaten international markets.    

To some, this includes hedge funds, who have taken much of the blame for market meltdowns thanks to domino effects that stem from imploding funds and the practice of short selling which some say can create enough speculation and fear to cause plummeting stock prices.  

The Financial Stability Forum, which has been around for over a decade, will be renamed the Financial Stability Board, and will have the task of overseeing international markets, banks, and to some extent, hedge funds. 

The FSF has already stated that hedge funds must disclose how much leverage they are using, so that investors can better gauge the risks involved.

In an effort to quell outrageous bonuses and pay, the FSF has said that an executive’s pay must directly reflect the risks they are taking, halting any million dollar pay days for a risky wager.  They also vowed to closely monitor the credit ratings agencies, whose actions contributed greatly to the economic meltdown.

The leaders also pledged to boost the war chest of the International Monetary Fund by adding $500 billion, promised to crack down on offshore tax havens and those individuals who failed to disclose information, and threw in $250 billion to help kick start trade over the next two years.  An agreement was made not to introduce any new policies that would restrict trade through 2010.

Although the FSF has not drafted any rules as of yet on hedge funds or tax havens, they did agree that “systemically important hedge funds” will be regulated.

"Today the largest countries of the world have agreed on a global plan for economic recovery and reform," said British Prime Minister Gordon Brown.

President Obama agreed, saying that “the London summit was historic.”

French President Nicolas Sarkozy, who is an advocate on stricter regulations for hedge funds added, “The G20 countries have decided on a profound reform of the international financial architecture, which has not been done to such an extent since the Bretton Woods accords in 1945.”

U.S. stocks surged following the summit and the promise of a renewed economy that came with it.  The Dow Jones Industrial Average shot past 8,000 for the first time since February 10.  It ended the day up 2.8 percent.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com  

Tags: credit crunch, domino effects, economic meltdown, financial crisis, financial stability forum, fsf, g20 summit, international markets, international monetary fund, kick start, leverage, national regulators, offshore tax havens, speculation, stock prices, vamp, wager, war chest, watchful-eye

New York (HedgeCo.Net) – Senate Finance Committee Chairman Max Baucus has introduced a new bill aimed at halting offshore tax evasion by U.S. companies.    

The new bill is in response to Senator Levin’s “Stop Tax Haven Abuse Act,” which also seeks to crack down on offshore jurisdictions and impose tighter restrictions for hedge funds.

The bill will entail several facets, mainly the requirement to report transfers of capital to offshore locations.  Any financial institution that directly or indirectly transfers a minimum of $10,000 to an offshore institution must give a detailed report to the U.S. Treasury with the customer’s name, both the onshore and offshore bank associated with the transaction, the amount, along with the account number and type of account.  Right now, this information is required to be filed with the Internal Revenue Service, in something known as an FBAR filing.

Any institution who fails to report these transfers or any person who does not include this information with their tax returns would face fines and penalties.
The draft bill may have more burdensome reporting requirements and compliance issues for hedge fund managers that do business offshore, but it differs greatly from the “Stop Tax Haven Abuse Act” introduced on March 2 by Senator Levin (D-MI), which would have harsher consequences and stricter requirements for hedge funds.

Stating that offshore tax havens “are engaged in economic warfare against the United States, and honest, hardworking Americans,” the bill essentially seeks to increase the disclosure of offshore accounts, holdings, transactions and entities while increasing the strength and jurisdiction of the U.S. Treasury.  Penalties of up to $1 million per violation are expected to be enforced for failure to report to the SEC.  

Foreign corporations that are managed and controlled in the United States will be treated as a domestic corporation and will therefore be responsible for paying U.S. taxes.  It is estimated that 80 percent of the country’s largest companies have subsidiaries in tax havens.  Levin also seeks to close the tax loophole associated with offshore dividends.  

Hedge funds will be required to establish anti-money laundering programs as well as use due diligence to evaluate investors supplying offshore funds.  The bill also creates a tighter cohesion between the Treasury and the U.S. Securities and Exchange Commission.

The Levin Bill seeks to end the estimated $100 billion in lost tax revenue each year from offshore tax abuse.  

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com   

Tags: abuse-act, compliance issues, draft bill, economic warfare, fbar, hardworking americans, hedge-fund-managers, internal revenue service, max baucus, offshore accounts, offshore bank, offshore jurisdictions, offshore locations, offshore tax havens, senate finance committee, senate finance committee chairman, senator levin, tax evasion, u-s-treasury