Archive for May, 2011
Canada fears losing cash to offshore centres
(Toronto Sun): Offshore financial centres continue to attract billions of dollars of Canadian cash despite the fact that overall investment overseas has been declining, creating debate as to whether Canada is losing out on revenue. According to Statistics Canada, direct investment abroad dropped for a second year in 2010, falling by $4.5 billion to $616.7 billion, pulled down in part by a strong loonie (dollar). However, investment in low-tax countries such as the Bahamas, Barbados and the Cayman Islands all continued to rise. So did the amount invested offshore by Canada’s banks and financial institutions, which accounted for half of all investment abroad last year.
Canadian investment through offshore financial centres totals about $100 billion, or 20% of the total. However, the money rarely stays in the tax havens and is usually passed onto to operations elsewhere around the globe.
Cops seek 3rd man in robbery
(CNS): Detectives investigating yesterday’s attempted robbery at Blackbeard’s in Grand Harbour are looking for a third man who may have been involved in the botched crime. The man police are keen to trace was seen driving off from the Selkirk Drive area shortly after the incident. Detective Chief Inspector Mike Cranswick said information had come from members of the public who were in the area when the crime happened that pointed to a third person. “It seems that a car — a silver or grey Pontiac four door sedan — was parked in the vicinity of Selkirk Drive as the incident unfolded on Monday afternoon,” he revealed.
Cranswick said the male driver was the only person inside the car. “He drove off as the suspects left the liquor store and were chased into Selkirk Drive by members of the public,” the detective stated. “We would be keen to speak to this man, anyone who saw him in the area or driving off from the scene, or anyone who can provide any information as to his identity or the location of the car as soon as possible. Any information about this man or the car could be vital to the ongoing enquiry.”
Two men, aged 17 and 18 years, were arrested in the wake of the botched robbery and remain in police custody in connection with the incident. The teen suspects had reportedly attempted to rob the store in the middle of the afternoon, but although they were armed, the staff would not open the till for the would-be robbers. The teens then ran away empty handed but they were stopped outside the store by two members of the public, who struggled with the young robbers and managed to get the shotgun away from them.
Although the teens ran off, the two men ran after them and allegedly restrained them using force until the police arrived at the scene a few minutes after receiving the call.
Information can be passed to George Town CID on 949-4222 or via the confidential Crime Stoppers number 800-8477 (TIPS).
Crown drops Barnes gun case
(CNS): After almost five months in jail on remand, Andy Barnes was discharged by the Grand Court on Tuesday when the crown said it had decided not to proceed against him in a firearms case. Barnes, whose four-year-old son, Jeremiah, was shot and killed at a West Bay gas station in February last year, was facing charges of possession of an unlicensed firearm with intent to commit assault after an incident outside a liquor store in Bodden Town. The crown had alleged that Barnes had threatened to kill his girlfriend, Dorlisa Ebanks (Jeremiah’s mother), during an altercation at the Odessa Plaza and pulled out a gun. However, Barnes had strenuously denied the allegation and it is understood he had four witnesses, including Ebanks, willing to contradict the crown’s case against him.
At the time of Barnes’ arrest police said there were several witnesses who had seen him produce the gun and threaten Ebanks and other people in the area that evening. However, the prosecution had brought its case on the basis of just one eye witness account, who reportedly withdrew his evidence. The crown chose not to completely close the case against Barnes and requested the court discharge the defendant rather than acquit him, leaving the case on file.
With these Grand Court charges discharged indefinitely, on Tuesday afternoon Barnes was released from custody on bail as a result of other pending issues.
The 31-year-old man is expected to be a witness, along with Ebanks, in the forthcoming trial of Devon Anglin from West Bay, who has been charged with the murder of Barnes’ son.
Barnes was sitting in the driver’s seat of his car with Ebanks and his two sons on the forecourt of Hell Gas station at around 8:30pm on 15 February 2010. According to reports at the time, two masked men approached the car from the rear of the gas station when one of them opened fire. No one else was hit in the shooting, but 4-year-old Jeremiah, who was sitting in the back seat, was reportedly shot in the head.
Legality of Bin laden killing still in quesiton
(Guardian): The chorus of official applause from international leaders over the death of Osama bin Laden has failed to silence doubts about the killing’s legality. Despite widespread backing for the raid, there is a growing demand for the precise legal basis of the US operation to be explained, particularly given the absence of prior debate in the UN Security Council. Some are asking was it an "execution" or an "assassination"? The immediate justification for the killing was that the head of al-Qaida had long ago declared war on the US and other nations. "In war you are allowed to attack your enemy," a US embassy spokesman in London said. Hillary Clinton, the US secretary of state, echoed Barack Obama’s assertion, stating: "Osama bin Laden is dead and justice has been done."
A more thorough explanation of the legal basis was given last year by Harold Hongju Koh, legal adviser at the US state department.
He told a meeting of the American Society of International Law: "Some have argued that the use of lethal force against specific individuals fails to provide adequate process and thus constitutes unlawful extrajudicial killing. But a state that is engaged in an armed conflict orin legitimate self-defence is not required to provide targets with legal process before the state may use lethal force.”
Facebook is spy tool for US, says Assange
(NY daily News): WikiLeaksfounder Julian Assange called Facebook "the most appalling spyingmachine ever invented" in an interview with Russia Today, pointing to the popular social networking site as one of the top tools for the U.S. to spy on its citizens. "Here we have the world’s most comprehensive database about people, their relationships, their names, their addresses, their locations, their communications with each other and their relatives, all sitting within the United States, all accessible to US Intelligence," he said. "Facebook, Google, Yahoo, all these major U.S. organizations have built-in infaces for US intelligence. "Everyone should understand that when they add their friends to Facebook they are doing free work for the United States intelligence agencies," he added.
No fees relief in budget
(CNS):There is little chance of a reprieve for the people of Cayman on duties and fees when the premier delivers his 2011/12 annual budget to the Legislative Assembly later this month. Despite announcements by McKeeva Bush that he has stabilized the country’s finances and anticipates a surplus at the end of this financial year, the education minister has said that government is still in no position to reduce any of the fees or duty increases made in the last budget. Rolston Anglin said that the country was still not compliant in a number of areas regarding the Public Management and Finance Law, and even if the year ended in surplus, the public finances still had some way to go to meet the required measures of fiscal responsibility.
“At this stage the country is still not in a situation where the government can actually start to reduce income,” he said. “The government needs income to produce quality services.”
Speaking at a press briefing last Thursday held by the parliamentary UDP membership to show support for the premier, the minister also noted that even if there was a surplus the government was failing in other areas of the law which governs public finances and this also had to be considered.
“A lot of times the debate centres around whether we have a surplus or not, but we are also failing on ‘days cash’ and we are also failing on the ‘debt service ratio’. So the only way to build up reserves is for government to make more than it’s spending and increase the general revenue and other funds that contribute to that calculation,” he added.
It is still not clear if government will have cash left over by the financial year end. Although government was running at an estimated $13 million at the end of the third quarter, the last quarter is always a low revenue generator for public coffers, and as a result it could still be facing a deficit. It is, however, likely to be less than the estimated amount of some $30 milllion as called for at the beginning of the financial year.
This year’s budget is the second year of a three year fiscal plan which was devised primarily to address the levels of public borrowing and to bring public finances back in line with the requirements of prudent fiscal management under the PMFL. The plan was approved by the Foreign and Commonwealth Office in order to secure the UK’s approval to increase borrowing further during this year financial year because the net debt ratio had exceed the set limits.
Anglin further noted that, since the FCO had a hand in the country’s budget, the Cayman government still had to be very careful as it was dependent on the UK’s approval. Government has to remain within the parameters of this three year financial strategy, he added.
With the bottom line still in question and the need to navigate a still difficult fiscal landscape, Anglin said there would be no fee cuts. He said that the UDP administration had taken the view that the funding of government would be done via indirect taxes — fees and duty — not direct taxation, and the duty increases would remain.
Ellio Solomon, the backbench member for George Town, added that while he understood the difficulties people had regarding the increase in fees, he believed the majority of the Cayman people were happy and willing to make the sacrifice of paying that extra 25 cents for gas for the betterment of the country.
Cayman can handle new rules
(CNS): As a clearer time frame for new international regulations for hedge funds finally emerges, the implications for the industry in Cayman are positive, according to industry experts. During a panel discussion at this week’s GAIM Ops 2011 conference, members discussed the implications of the new regulatory landscape for the hedge fund industry and looked at two specific pieces of proposed legislation: America’s Dodd-Frank Act and the European Union’s Alternative Investment Fund Managers Directive (the AIFMD).
Michael G Tannenbaum, co-founder & partner with US lawyers Tannenbaum Helpern Syracuse & Hirschtritt, moderated the panel discussion at the specialist conference currentlyunderway at The Ritz-Carlton, Grand Cayman and said that America’s Securities and Exchange Commission (SEC – the entity tasked with creating the new Dodd-Frank rules) would have the legislation finalised by 21 July of this year, with a most likely implementation date of the end of the first quarter of 2012.
The AIFMD, on the other hand, would not properly have any impact until 2015, according to panellist speaker Ingrid Pierce, Partner and Head of Cayman Hedge Fund Practice at Walkers.
The Dodd-Frank Act will impact hedge fund managers as the rules will change as to when a hedge fund manager will have to register with the SEC. Those US hedge fund managers who want to sell their products to European investors will also be affected by the AIFMD as they will be required to comply with the new directive.
“Cayman legislation has been pretty level in the past few years and people have been pleased on the regulatory front as to how the regime has reacted here,” Pierce said. She went on to say that whatever happens internationally, the Cayman Islands regulatory regime will be able to respond swiftly and robustly with its own set of rules.
As far as the AIFMD was concerned, Pierce said that compliance with the Cayman Islands regime would actually be easier than before because once an investment manager had undertaken the proper procedures with regard to compliance and registered themselves accordingly, the information that would then be required by Cayman’s regulatory overseer, the Cayman Islands Monetary Authority, would be straightforward.
Pierce’s concern was the fact that all these new pieces of legislation did not appear to be co-ordinated and that if an investment manager wanted to be broad in his approach they would need to ensure compliance with various regimes, which would be a lot to keep up with.
Pierce also suggested that investment managers might consider outsourcing the compliance burdens to administrators or other third parties to ensure that resources were best spent in areas of expertise.
“Areas that fund managers will need to think about include valuation, remuneration, depositaries and limits on leverage,” she confirmed.
Another panel speaker, Stuart J Kaswell, Executive VP & Managing Director, General Counsel Managed Funds Association, said that fund managers would have to think a great deal more about registering with the SEC than simply the process of registering.
“An entire compliance programme needs to be put in place that includes a system of oversight and review,” he explained, noting that previously the SEC has geared up its inspections of newly registered fund managers so it was important to have everything in place initially, before registration takes place.
Panellists agreed that there was at least a good amount of time allocated for consultation before the new legislation became effective.
Greenlight’s earnings sink in wake of earthquakes
(CNS): Cayman based re insurance firm Greenlight Capital Re, Ltd has announced a net loss of $43 million for the first quarter of this year compared to losses of $12.4 million for the same period in 2010. The firm said in a statement that the earthquakes in both New Zealand and Japan, and the tsunami, had impacted the reinsurance sector during the beginning of the year and were the major reasons for the firm’s losses. The loss translates into a loss of the value per share of $1.19 for the first quarter of 2011, compared to the 34cents shareholders last at the beginning of last year.
"A number of global events occurred in the first quarter of 2011 which impacted the reinsurance sector. We reported a small underwriting loss in what remains a challenging environment," said David Einhorn, Chairman of the Board of Directors of Greenlight Re. "Our investment portfolio continued to be defensively positioned, and suffered a loss due principally to the underperformance of our short positions."
Aside from the earthquakes the firm had an investment loss of $36.2 million compared to a net investment loss of $16.8 million in the same period in 2010.
"Our frequency-oriented portfolio was not impacted materially by the large events that resonated throughout the industry," said Len Goldberg, Chief Executive Officer of Greenlight Re. "We remain committed to our strategy and are pleased with our underwriting portfolio. We are well positioned to take advantage of any upturn in pricing that may result from recent industry events."
Goldberg also announced his retirement as CEO earlier this week and will be leaving the firm in August. He will be replaced by Bart Hedges, the reinsurer’s president and chief underwriting officer.
Goldberg has been CEO and a director at Greenlight Re since August 2005 and will remain an active member on the board.
“I have made a personal decision to return to the U.S. to spend more time with my family,” Goldberg said in a statement.
Finance expert defends hedge fund business
(CNS): Despite the bad press surrounding the hedge fund business these controversial funds play an important and useful role in society according to one finance expert. While the media may prefer writing about the salaries earned by hedge fund managers, Edward H. Dougherty, Partner at Deloitte & Touche a speaker at this week’s GAIM Ops Cayman conference, said it was about time the public was properly informed about the positive side of the industry. Dougherty was speaking to one of the biggest ever attendances of the conference, now in its sixth year currently being held at The Ritz-Carlton, Grand Cayman when he gave the audience his top ten reasons why hedge funds were good for society.
Number ten on his list was that hedge funds had an incredibly charitable nature, noting that the top 25 US hedge funds had given US$6.16 billion to charity in 2010. He also commented that hedge fund managers themselves were tax payers and that the top 25 hedge fund managers of 2010 who earned a total of US$22 billion between them were liable to pay US$3.3 billion in taxes.
Dougherty also said that the industry was responsible for creating a good many jobs in the US and worldwide as well. He stated that out of the 300,000 or so jobs created by hedge funds, 240,000 were in North America; 50,000 were in Europe and 10,000 in Asia. He also spoke to the global nature of the industry and the fact that it facilitated innovation and increased market efficiencies by providing capital whereit had never before been available.
“Hedge funds have made a positive contribution to the global economy by giving access to investors to investment ideas across the globe,” he said. Hedge funds also provided liquidity to markets, even when liquidity dried up during the asset crisis of 2008. “Hedge funds became lenders – they were key liquidity providers throughout the asset crisis,” he confirmed.
According to Dougherty, the number one reason that hedge funds should be viewed with positivity among the public in general was the fact that they were key in solving what he termed “the pension problem”.
He explained that in the United States since the year 2000, the gap between what the State owed employees in pensions and its ability to pay that figure had widened considerably to around US$620 billion. At the moment, pension funds were only investing about 4 to 6% of their allocations in hedge funds, yet if they were to increase their allocation to 15% of their allocation the huge gap would shrink by around US$114 billion.
“That still leaves a gap of around US$500 billion, but it shows that hedge funds do have an important role to play,” he said.
Dougherty went on to quote Joseph Dear, the Chief Investment Officer with the California Public Employees Retirement System (CalPERS), a man he said “got it” when it comes to investing in hedge funds, who supported investing in such entities. Hedge fund investments were a critically important component of a pension fund’s diversified investment strategy, Dougherty said.
“President Obama recently spoke to the US Chamber of Commerce about the need for business to respond to the US economic situation. Hedge funds have been answering that call instinctively. It’s time to get this better acknowledged.”
Paper trails and trials of Madoff
(The Lawyer): Through his company Bernard L Bernard Madoff perpetrated probably the largest fraud of all time from the very heart of Wall Street. The fraud has had huge repercussions across the world, affecting thousands of ¬victims, including a significant number of investment funds in the Cayman Islands and the British Virgin Islands (BVI). The figures are truly enormous. Investors who thought funds into which they had ploughed capital were worth billions in November 2008 discovered in December 2010 that those same funds would in all ¬likelihood be worth a mere fraction of their expected value.
Since he was appointed in December 2008, the liquidator of BLMIS Irving Picard has been busy filing claims in the US in an attempt to fill the huge hole left in the BLMIS accounts.
In many cases Picard has concentrated on the investors themselves, in particular those who redeemed some of their investments, on the basis that they should be clawed back under the US Bankruptcy Code and be available for distribution to other investors who may not have redeemed.