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Cross border master-feeder arrangements: SEC staff slightly expands utility of offshore feeders for global investment management firms, but tax and other challenges remain

Cross border master-feeder arrangements: SEC staff slightly expands utility of offshore feeders... PurposeTo analyze the recent SEC no-action relief allowing a non-US investment company to invest as a feeder fund in a US registered open-end management investment company without complying with all of the conditions of Section 12(d)(1)(E) of the Investment Company Act of 1940.Design/methodology/approachThis article discusses the various conditions that a non-US investment company investing as a foreign feeder in a US registered open-end management investment company must satisfy in order to avoid complying with certain provisions of Section 12(d)(1)(E) of the Investment Company Act of 1940. In addition, the article analyzes certain potential tax and regulatory challenges facing firms seeking to rely on the relief.FindingsThis article concludes that the SEC no-action relief is an incremental step in reducing barriers to global distribution of US registered funds and may marginally increase the use of cross-border master-feeder arrangements as contemplated by the no-action letter. Nevertheless, this article cautions that significant impediments to global distribution of US registered funds remain, including tax withholding and non-US law issues.Originality/valueThis article contains valuable information about the regulatory impediments to global distribution of US registered funds, as well as learned assessments of the impact of recent developments in this space by experienced securities lawyers. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Investment Compliance Emerald Publishing

Cross border master-feeder arrangements: SEC staff slightly expands utility of offshore feeders for global investment management firms, but tax and other challenges remain

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1528-5812
DOI
10.1108/JOIC-06-2017-0038
Publisher site
See Article on Publisher Site

Abstract

PurposeTo analyze the recent SEC no-action relief allowing a non-US investment company to invest as a feeder fund in a US registered open-end management investment company without complying with all of the conditions of Section 12(d)(1)(E) of the Investment Company Act of 1940.Design/methodology/approachThis article discusses the various conditions that a non-US investment company investing as a foreign feeder in a US registered open-end management investment company must satisfy in order to avoid complying with certain provisions of Section 12(d)(1)(E) of the Investment Company Act of 1940. In addition, the article analyzes certain potential tax and regulatory challenges facing firms seeking to rely on the relief.FindingsThis article concludes that the SEC no-action relief is an incremental step in reducing barriers to global distribution of US registered funds and may marginally increase the use of cross-border master-feeder arrangements as contemplated by the no-action letter. Nevertheless, this article cautions that significant impediments to global distribution of US registered funds remain, including tax withholding and non-US law issues.Originality/valueThis article contains valuable information about the regulatory impediments to global distribution of US registered funds, as well as learned assessments of the impact of recent developments in this space by experienced securities lawyers.

Journal

Journal of Investment ComplianceEmerald Publishing

Published: Sep 4, 2017

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