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Anthony Travers, chairman, Cayman Finance

Four steps to maintain Cayman’s offshore leadership

By Anthony Travers - There’s no doubt that the global financial meltdown has resulted in a fundamentally changed set of financial and regulatory circumstances and a more hostile political environment. Yet it is perverse that the Cayman Islands have been the focus of numerous public relations attacks from G20 countries that themselves have suffered badly at the hands of the global meltdown.

The Cayman Islands’ regulatory system ensured that no financial institution failed, its Aa3 Moody’s rating is superior to that of Ireland, and its budget, despite ludicrous headlines from a transparently briefed popular press, is now balanced.

Whilst we continue to identify and analyse the issues facing us with a view to realigning our financial services industry, we do so without taking overmuch note of blame-deflecting politicians labelling us as implicated in tax avoidance that arises from flawed domestic legislation, or as having an inadequate regulatory system.

In the light of the blindingly evident tax and regulatory transparency, this type of mischaracterisation can no longer be taken seriously – nor can European Union regulation that has more to do with seeking to constrain hedge funds from pricing European sovereign debt at its true market value than any attempt to prevent a repetition of the financial crisis. The fact that Cayman continues to register more than 100 new funds a month is some evidence that the market place endorses the Cayman approach.

We believe that the Cayman Islands have four central issues that need to be tackled in response to the changed global environment.

First, to ensure substantial presence and a viable local economy that provides sufficient job opportunities for Caymanians, we must implement immediately the suggested changes to immigration policy to provide 25-year security of tenure for financial professionals wishing to establish operations in Cayman.

Secondly, we must continue to refute through our public relations campaign the nonsensical suggestions of the truth-deniers concerning tax evasion and tax haven status or indeed money laundering. What we do in Cayman is lawful, proper and transparent, and we must continue to say so.

Thirdly, we continue to reject the suggestion from certain non-elected European bureaucrats that we introduce direct taxation. It can hardly be said that their economies are a ringing endorsement of the concept, and our tax neutrality is now superior to any other.

Fourth and lastly, we maintain appropriate regulation recognising that Cayman entities, funds or otherwise, that elect to trade in onshore jurisdictions are subject to the laws and regulation of those jurisdictions in any event. The real question, given the constraints of the EU’s Alternative Investment Fund Managers Directive, is how many now will chose to do so in Europe.

With these policies in place, as the statistics now make clear, we have no doubt that Cayman will remain at the forefront of the offshore financial centres, and indeed that its position as such will be enhanced.

Anthony Travers is chairman of Cayman Finance

Please click here to download a copy of the Hedgeweek special report Cayman Islands Hedge Fund Services 2011


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