Seminar looks at IRS rules on fund manager fees

(CNS): The issue of fee deferrals and the way in which hedge fund managers are paid for work provided to hedge funds was the theme of a timely seminar hosted by local firm dms Management and US-based Optcapital, LLC, last week. Some of the significant changes in US legislation, specifically the IRS’ 409A and what it means for Cayman service providers and the risks associated with non-compliance, were examined.

Managing Principals, Jim Christian and Thom Young of Optcapital, LLC, a deferred compensation specialist, joined David Bree, Managing Director of dms, and offered delegates an overview of US deferred compensation plans, details of 409A, and the implications for Cayman service providers.

In their presentation Young and Christian explained that 409A requires strict compliance with highly-technical documentation, proof and timing rules and imposes absolute liability for failures. The IRS’ interpretation of this statute is 400 pages and generally prohibits payment acceleration. The experts also offered insight into the current economic forecast for hedge funds, the risks associated with noncompliance of 409A, and ultimately drew inferences on how these developments will impact the future of Cayman Islands hedge funds.

 “dms Management recognizes the importance of presenting this topic to the Cayman Islands hedge fund community,” said Bree.”With the start of the new year, we wanted to showcase Optcapital’s meaningful insights to enable local service providers to be better equipped to handle these changes and any challenges they may face.”

Started in 1998, Optcapital is a SAS 70 Type II certified third-party provider of turnkey Nonqualified Deferred Compensation services and specializes in the administration of Hedge Fund Deferred Compensation and IRS 409A and 457A Regulations. dms is the largest management firm in the Cayman Islands focused on serving the hedge fund industry. Services include serving as independent directors, advising hedge funds in distressed conditions, structuring and servicing offshore hedge fund business solutions.