Canada's securities regulators have decided not to introduce specific regulations governing hedge funds. Hedge funds have become a $30-billion industry in Canada, and there have been some high-profile scandals recently, including the collapse of Portus Alternative Asset Management Inc. and Norshield Financial Group.

However, David Wilson, the new chairman of the Ontario Securities Commission, told reporters recently "We have a full group of rules that apply to all those sorts of vehicles. So we think the existing rules, by and large, if they are properly used and properly implemented and complied with, will do the job."

Mr. Wilson made the comments after a speech at a Toronto securities conference. In his speech he said the Canadian Securities Administrators, the umbrella organization for Canada's provincial securities commissions, has "pretty much decided that hedge funds per se do not require their own separate regulatory regime."

It is important to note that domestic hedge fund managers are already required to be registered in Canada - and do not have the exemptions from registration that exist in the US. The US is now requiring some hedge fund managers to be registered there.

On the other hand, Wilson said Canadian regulators are reviewing how some hedge fund-related products are sold to retail investors. In particular, he said the CSA is considering new rules governing "principal protected notes." These notes typically come with a guarantee on the principal amount invested and they are often tied to the performance of a group of hedge funds. Some sell for as little as $500 apiece and they are generally sold without a prospectus.

"We need to take a hard look at whether this [prospectus] exemption is suitable for highly complex structured products targeted at the mass market of retail investors," he said during his speech.

The Daily Telegraph reports that the Isle of Man is to abolish company tax and cap personal income tax at £100,000 from April 5 in a bid to attract the super-rich and budding entrepreneurs. Tax experts said the 33-mile long Crown dependency would become "one of the most favourable tax regimes in the world".

Allan Bell, the Treasury minister, told the island's parliament yesterday he was "inviting the enterprising and the ambitious to come to our island".

According to the Telegraph, many offshore tax havens are planning similar initiatives as a result of a series European Union directives designed to crack down on cross-border tax evasion.

Yet again, the Eurocrats tax harmonisation efforts back fire as tax rates keep on coming down!

The Dubai International Financial Exchange (DIFX) has listed the world’s largest Sukuk, worth US $3.5 billion, from Dubai Ports, Customs and Free Zone Corporation (PCFC) on January 26th, 2006. 

Steffen Schubert, Chief Executive Officer of the DIFX commented: "This is a very significant development for the DIFX as it demonstrates the growth of confidence in the exchange. This is the first primary sukuk listing on the DIFX and we expect to see more debt and equity securities of similar importance being listed in the coming months."

The issue is part of a large financing package being arranged for PCFC's general corporate activities, ongoing business development needs and expansion plans. Part of the proceeds will be used to complete the purchase of the British company P&O - currently the world’s fourth-largest ports group. The acquisition of P&O will give the state-owned Dubai company the operating rights to several US ports - from New York to New Orleans - an issue that is raising political opposition in the US based on concerns regarding the safety and security of the US homeland.

The Sukuk's unique convertible structure allows partial redemption of up to 30% in the form of equity shares of the subsidiaries of PCFC as and when they go for a Public Equity Offering within the next two years. If no Public Equity Offering takes place prior to the final redemption date, investors will be compensated with a higher yield.

The Sukuk offer a return of 7.125 per cent per annum if a Public Equity Offering happens during the next two years and a higher return of 10.125 per cent per annum on any amount of the Sukuk outstanding at maturity which have not been redeemed from the said equity offerings. The Sukuk will trade over the counter rather than on the exchange.

In addition, Mashreqbank has listed its US$750 million Euro Medium Term Note Programme as well as two series of Floating Rate Notes issued under it, on the DIFX on February 6th.
 
Series 1 of the Floating Rate Notes (FRNs) with a principal amount of US$300 million was issued in February 2004 and is due in 2009, while Series 2 with a principal amount of US$325 million was issued in March 2005 and  is due in 2010.

On the membership front, the DIFX has admitted Morgan Stanley as a member firm. Morgan Stanley is the seventh firm to become a member of the DIFX since the exchange opened for business on September 26, 2005.

Poor performance hurt hedge funds last year, with reduced inflows of fresh assets. MSCI Barra, a provider of index data and risk management analysis, reports that inflows slowed substantially last year to $11.99bn (€10bn), from $50.34bn in 2004 and $49.69bn in 2003.

However, performance has been better in january 2006, with the Credit Suisse/Tremont Hedge Fund Index rising by 3.23%

The Investment Executive magazine in Canada reports that the provincial government in Nova Scotia is giving tax breaks to a Bermuda company to encourage more outsourcing of jobs to Halifax!

West End Capital, a Bermuda based hedge fund/insurance group, apparently has legal, accounting and software staff in Halifax - because qualified people are paid less there and it is difficult to get work permits on the Islands of Bermuda (and then difficult to retain good staff on the Islands).

Paragon Bermuda - a Bermudian application development company which has investors in common with West End Capital - has long had software developers in Nova Scotia for similar reasons.

Appelby Spurling Hunter has a released a client note that states, inter alia:

"Effective on 25 November 2005, the Companies Act 1981 (Ninth Schedule) Amendment Order 2005 designated the "business of collective investment schemes", commonly known as mutual funds, as an unrestricted business activity. The effect of removing the requirement that Bermuda’s Minister of Finance consent to mutual fund incorporations is that the time to incorporate a mutual fund is substantially decreased because the Bermuda Monetary Authority has the sole responsibility for approving mutual fund incorporations."

See the full article here.

The European Savings Tax Directive (EUSD) has now been in force for more than six months, so we are starting to see the effects of the new rules on peoples’ behaviour. As with many regulations designed to increase tax collection revenues there have been some unintended consequences.

Under the EUSD, which was introduced with effect from 1 July 2005, financial organisations (“Paying Agents”) in countries subject to the directive that make a cross border interest payment to an EU resident individual have to report information on the payment to the revenue authority in the EU state where the individual is resident or to withhold tax on the payment. The EUSD applies throughout the EU and in some non EU territories, in particular some of the offshore financial centres (Channel Islands, Cayman, Switzerland), which agreed – or where forced to- implement it.

Bermuda is currently not subject to the EUSD, apparently due to an oversight by the UK authorities. Neither Singapore nor Hong Kong is included. In addition, because the UK and Gibraltar are not separate member states within the EU, the EUSD does not apply between them. This effectively means that the “level-playing field” that was promised to all the other participants has not been delivered.

The Wall Street Journal now says that Singapore is now attracting huge amounts of capital from Europe as a direct result of the implementation of the EUSD. It seems that many EU investors prefer to move their money out of Europe rather than face withholding taxes or disclosure of their investments under the EUSD.

Ironically, another unintended consequence has had the opposite effect, boosting the hedge fund industry in the offshore centres that adopted the EUSD (like the Cayman Islands) rather than in the ones that have not adopted the EUSD (which many people assumed would benefit from not being included). This has occurred because the EUSD only applies to payments made to EU residents by Paying Agents on behalf of investment funds which are recognized as Undertakings for Collective Investments in Transferable Securities funds (or “UCITS funds” for short) or funds recognized as their equivalent. This means that payments made to EU residents by Paying Agents on behalf of investment funds which are considered as non-UCITS equivalent funds fall outside the scope of the EUSD Directive altogether. Under the rules, each jurisdiction is free to determine for itself which domestic funds are UCITS equivalent. The Cayman Islands have determined that the vast majority of its hedge funds are non-UCITS equivalent funds and therefore fall outside the scope of the EUSD Directive altogether. Investment funds established in countries or territories which are not party to the EUSD Directive and which have a Paying Agent in an EU member state or applicable third country and which makes payments to EU residents are caught by the EUSD Directive as they are located in jurisdictions which currently do not have any corresponding legislation determining what a non-UCITS equivalent fund is from their home country point of view. Thus, instead of boosting business in jurisdictions, like Bermuda, that are not subject to the EUSD, the rules have made the Cayman Islands more attractive as a jurisdiction.

The directive is so riddled with loopholes that it resembles a Swiss cheese – for example, it only applies to individuals (not trusts or companies). So many individuals are able to get around the legislation by simply setting up a company, trust or other legal entity, where the individual is the beneficial owner.

Of course, the Eurocrats response to this mess is not to abolish the directive, but rather to call for it to be extended to everyone and every payment!

The South China Morning Post (SCMP) reports that the big institutional investors in Hong Kong, such as pension and endowment funds, are being slow ot invest in hedge funds. This is despite the fact that Hong Kong is attracting some of the biggest names in the business as it becomes Asia's hedge fund headquarters. Institutional investors have been hampered by a lack of resources and understanding of hedge funds and regulations have prevented Mandatory Provident Fund Schemes Authority (MPFA) funds - which have combined assets of HK$145 billion - from putting money into the funds.

The SCMP reports that Desmond Ng, head of Asian institutional business at JF Asset Management, said that there was a gradual warming among institutional investors to the idea of hedge funds, led by trusts and endowments such as those of the Hong Kong Jockey Club and City University of Hong Kong. He also said he hoped that MPFA funds would eventually follow.

"We're seeing progress in terms of changes that regulators at the [Securities and Futures Commission] and MPFA have put in to ensure that investors can include more investment classes, more investment vehicles. It's just going to be a matter of time until hedge funds get on the radar screen and are considered," Mr Ng said.

The Financial Times reports that Switzerland has received complaints from the European Commission that the advantageous corporate tax rates available in some Swiss cantons violate the terms of the free trade agreement between Switzerland and the EU.

Apparently both the British and French governments have been angered by Procter & Gamble, and its rival Colgate, relocating their European headquarters to Geneva, and Biogen Idec, the US biotech group, moving from Paris to Zug. Google recently decided to establish a European research centre in Zurich.

The FT reports that experts estimate that foreign companies establishing holding company structures can lower their tax rates in Switzerland to as low as 7 per cent, compared with 12.5 per cent in Ireland and an EU average of about 20 per cent.

The Swiss see the issue as an unjustified attack on their tax sovereignty as well as an indirect way for Brussels to attempt to harmonise the European corporate tax base, a goal that has also met stiff resistance in many of the 25 EU member states. Switzerland is not a member of the EU, but its crucial economic and political relationship with the surrounding EU block has been regulated by a series of bilateral agreements, including a free trade agreement signed in 1972. However, the free trade agreement does not apply to the services sector.

Switzerland has always argued that tax competition between its 26 cantons has been one of the pillars of its economic success and attractiveness to foreign investors.

At a high powered breakfast meeting in early February the Gibraltar Government expressed its support for a proposed new stock exchange in Gibraltar under the name GibEx.

The project is being led by the Bank Medici of Austria and Hassans, a leading law firm in Gibraltar. In attendance were: the Chief Minister - Peter Caruana, Marcus Killick the Financial Services Commissioner, Jimmy Tipping - the Finance Centre director, James Levy QC and Peter Montegriffo of Hassans and Sonja Kohn - the chairman of Bank Medici.

GibEx is proposed as an opportunity for Gibraltar to form a bridge between the offshore and EU onshore markets. Speakers included Dr Alexander Ganez, a former Austrian Stock Exchange Commissioner. Mrs Kohn reportedly said that Gibraltar is a "sleeping beauty" with "a lot of potential. A lot has been done and a lot will be done."

The owner and Managing Director of Dominion Investments (Nassau) Ltd, Martin Tremblay, was indicted in US federal court in January 06, accused of laundering $1 billion for others. Tremblay apparently transferred the cash to bank accounts in the Bahamas, the US, Canada and elsewhere, according to US federal prosecutors

The Securities Commission of the Bahamas (the "Commission") has issued a statement regarding Dominion, which states in part, as follows:

"[Dominion] was registered as a Broker Dealer II by the Securities Commission on December 11, 2001. Mr. Martin Tremblay, Managing Director and 100 % beneficial owner of Dominion, was licensed as a principal at the same time. Mr. Tremblay resigned as Managing Director and surrendered his Principal license on March 4, 2005, but remains the sole beneficial owner of the company. Mrs. Esther Weir was appointed Managing Director on March 15, 2005 replacing Mr. Tremblay. An on–site inspection of Dominion by the Commission was conducted from February 7-10, 2005. While the Commission’s inspection revealed various operational deficiencies these matters were being addressed by Dominion.

Immediately after the US authorities acted against Mr Tremblay, the FIU moved swiftly to freeze a large number of bank and securities accounts in The Bahamas associated with Mr. Tremblay and Dominion.

The Securities Commission, with the assistance of the Royal Bahamas Police Force, acted quickly to ensure that the books and records of the company were secured and to prevent any further business being transacted. The Commission, and the Police, further acted quickly in conducting a search of the premises of Dominion and obtained search warrants for other locations. A team of inspectors from the Commission was dispatched to Dominion to conduct an on-site inspection on the same day the information appeared in the local press. Further, Dominion’s office is being continuously monitored by the Commission. The Commission is also very concerned to ensure that the assets of legitimate investors of Dominion are secured and protected, and that the competing interests of parties related either to Dominion or Mr. Tremblay are addressed in an appropriate manner. To this end, the Commission is presently dealing with this matter through its statutory disciplinary process.

The Commission has and will continue to liaise closely with other domestic and overseas regulators and take every available action to protect the assets of investors."

The Jersey Financial Services Commission (JFSC), Jersey's financial services regulator, announced that  last year it generated more than £1 million extra income from fees than expected. Mainly form the thriving funds business. Total income from regulatory and registry fees was just over £13 million, compared to £11.9 million in 2004, according to the JFSC.

The number of new funds doubled, with more than 400 authorised in 2005. Many of these were due to the setting-up of property unit trusts, which benefit from UK stamp duty rules.

Appleby Spurling Hunter has been recognised as a leading offshore law firm in a number of recently released international publications.

Chambers and Partners Global Directory awarded Appleby Spurling Hunter a number one ranking in Bermuda. Appleby was the only firm to receive rankings in all three of the key offshore jurisdictions of Bermuda, the Cayman Islands and the British Virgin Islands.

The Malta Stock Exchange (MSE) has been boosted by an article in the Economist. Malta's equity index surged by more than 60% last year, after a 40% rise in 2004. However, The MSE lists only 13 stocks and a population of just 392,000.

The MSE recently received recognised exchange status form the Inland revenue in the UK which has sparked interest in listings from foreign and local companies, because of the tax relief that such status offers investors. There are 53 hedge funds listed already.

As for the future? The Economist says "In an era of consolidation, the independence of the MSE (owned by the government) is far from guaranteed. A partial sale or a link with another exchange is an option. OMX, the Nordic exchange operator that provides the all-electronic MSE's technology, is one potential partner."

Barbados saw an increase in the number of licences issued to companies in both the international business and financial services sector last year, according to a report by the country's central bank.

The central bank's economic review noted that 428 new business licences were issued last year, 67 more than were granted in 2004. Some 372 licences were granted to international business companies, an increase of 11 over the previous year.

Forty-two licences were approved for societies with restricted liability, 22 fewer than the number permitted in 2004. Additionally, approval was granted for 14 new Exempt companies – 11 for exempt insurance and 3 for exempt management firms. No new licences were offered to offshore banks.

The European Commission has launched a formal investigation into Luxembourg’s 1929 legislation exempting holdings and financial companies from corporate taxation, under EC Treaty state aid rules.

Many companies have holdings in Luxembourg that benefit from the tax rules by carrying out financing, licensing and coordination for the entire group.

The Commission stated: "Luxembourg’s 1929 legislation on exempt holdings establishes a special corporate vehicle to attract multinational groups’ financing, licensing and coordination activities to Luxembourg. The 1929 exempt holdings are companies established in Luxembourg, which solely exercise certain activities such as financing, licensing, management and coordination services within the multinational groups to which they belong. The 1929 holdings are exempt from Luxembourg’s business taxes on earnings, including dividends, interest and royalties as well as on payments, including dividends and royalty fees.

While the original objective of the scheme was to favour the distribution of profits within a multinational group without incurring multiple taxation, the globalisation of financial markets and the modern regulatory framework for financial services have rendered the 1929 legislation obsolete."

The Commission asked Luxembourg to review the tax regulations in October 2005, but Luxembourg refused to adopt the measures that the EU suggested so the Commission has now launched an in-depth investigation to verify whether the tax exemptions granted to the 1929 holdings constitute state aid and are compatible with the Single Market.

The Commission has expressed concern that the 1929 legislation creates significant distortions to competition and market efficiency particularly in the financial sector, without contributing to any significant extent to economic development.

"It is time to review this old-established regime favouring multinational groups setting up their financial activities in Luxembourg, as it appears it may unduly affect the functioning and competitiveness of the EU’s financial industry" observed Competition Commissioner Neelie Kroes.

the Bermudian owners of a home rumoured to be worth around $45 million have launched a legal battle against a government ban preventing them selling it to a foreigner. GoldenEye, a ten-bedroom home on the so-called "billionaire’s row" in Tuckers Town had reportedly attracted interest from high profile international names (like Oprah Winfrey) before the new policy came in. The house is owned by Alan and Vera Marshall. The rule change was made in February 2005 and prevents Bermudians from selling houses to non-Bermudians.

Non-Bermudian property owners are still permitted to sell their homes to other non-Bermudians. Right now the palatial dwelling stands empty with $1 million annual maintenance costs. The case is being heard by the Supreme Court and Vera Marshall apparently told the court that she once turned down an offer of $33 million for the house before the ban was introduced but could not now sell it to a Bermudian for more than a "ridiculously low" price like $1 million.

Tourism is so weak in Bermuda at the moment that the Bermuda government and hotel owners are now paying tourists to come to the Islands!

From now until April 27, North American visitors can fly to Bermuda on a charter flight that costs just $49 one-way, from New York and Boston. The initiative has been subsidised by the Department of Tourism as well as hoteliers who have been asked to contribute $165 per booking.

Only passengers boarding in North America can take advantage of the cheap flights from TNT Vacations, which is chartering a plane from Xtra Airways to make the twice weekly flights between now and April 27. The inaugural flight had just 52 passengers on board, but the Tourism Minister believes the next two months of the $49 promotion will see higher uptake by visitors from Boston and New York.

The Financial Times reports a Greenwich-Van Associates study which says that hedge funds have become a key force to be reckoned with in Asian equity markets, accounting for 30% of all commissions generated by brokers in the region during the last year.

The survey shows that commissions from hedge funds in Asian stock trading have climbed 20 per cent a year in the past two years because:

1. with four-fifths of global hedge fund assets in Europe and the US, the ability for funds to maintain a competitive edge has diminished - resulting in geographical diversification; and
2. Asian markets have been robust performers - both emerging markets and Japan - and hedge funds remain bullish on Asia.

Meanwhile, Investors Offshore reports that hedge funds have started 2006 well, propelled by gains in global equity markets, particularly in emerging markets. A preliminary report by Greenwich-Van Advisors, LLC, a hedge fund index provider states that the Greenwich-Van Global Hedge Fund Index gained 3.5% in January compared with a 2.7% return on the S&P 500 during the month. The Morgan Stanley Capital International World Equity Index returned 4.4% and the Lehman Brothers Aggregate Bond Index was flat, over the same period.

The Wall Street Journal reports that Singapore is attracting huge amounts of capital from Europe as a direct result of the implementation of the European savings tax directive (EUSD). It seems that many EU many investors prefer to move their money out of Europe rather than face withholding taxes or disclosure of their investments under the EUSD.

According to the WSJ: "..In 2001, Singapore stiffened laws against breaching the confidentiality of bank customers, making penalties for violators even tougher than in Switzerland. It imposed fines of $78,000, imprisonment for as long as three years, or both. In Switzerland, a similar breach could result in a prison term of six months or a fine of about $38,600. ...Swiss bankers say the withholding tax and the continuing push to further restrict client confidentiality are discouraging wealthy Europeans from keeping money in Switzerland. Singapore isn't a member of either the EU or the OECD, so it hasn't faced the same pressure. By keeping money in Singapore, Europeans can avoid the new tax, some bankers say...."

The WSJ also reports that the US economy has been growing much faster than major European economies - partly as a result of lower taxes and more flexible labour laws. GDP per capita in Germany, France and Italy is falling, relative to the US, to levels below those recorded in the 1970s. ..."At current trends, with demographics the way they are, the average US citizen will be twice as rich as a Frenchman or a German in 20 years," Jean-Philippe Cotis, chief economist at the OECD, told the WSJ.

Hong Kong's Secretary for Financial Services & the Treasury, Frederick Ma has said that he hopes that new legislation exempting offshore funds from profits tax, which is expected to be approved in the first quarter of 2006, will help attract more overseas investors to Hong Kong.

Mr Ma said that the proposal to exempt offshore funds from the 17.5% tax in respect of trading profits derived from qualifying securities transactions carried out in the territory, known as the Revenue (Profits Tax Exemption for Offshore Funds) Bill, will boost Hong Kong's status as an international financial centre.

Imposition of the tax on offshore funds led to an exodus of funds to other centres, such as Singapore. Hong Kong's main competitors, such as New York, London and Singapore, all exempt offshore funds from domestic taxes.

The Securities and Exchange Commission (SEC) announced that it has filed an enforcement action against five former senior executives of General Re Corporation (Gen Re) and American International Group, Inc. (AIG) for helping AIG mislead investors through the use of fraudulent reinsurance transactions. Four of the former executives, Ronald Ferguson, Elizabeth Monrad, Robert Graham and Christopher Garand, were with Gen Re, while the fifth, Christian Milton, was with AIG. The complaint, filed today in federal court in Manhattan, alleges that the defendants and others aided and abetted AIG's violations of the antifraud and other provisions of the federal securities laws by helping AIG structure two sham reinsurance transactions that falsely increased AIG's loss reserves in the fourth quarter of 2000 and first quarter of 2001 by a total of $500 million. The transactions were initiated by AIG to quell criticism by analysts concerning a reduction in the company's loss reserves in the third quarter of 2000.

Hong Kong Exchanges and Clearing will expand its listing committee to at least 28 members, including eight investor representatives to address long-running market concerns over its issuer-dominated composition. The new rules will come into effect in May 2006.

"This will give the committee an appropriate mix of market representatives," HKEx chief executive Paul Chow Man-yiu said.

The Exchange has also revised its controversial plan to impose a six-year term limit on members of the listing committee. The term limit was proposed to avoid conflicts of interest and was made on the advice of the Independent Commission Against Corruption. Under the original proposal, retiring members were not allowed to return to the committee for at least two years.

Now the committee will be given discretionary reappointment powers, after listing committee members expressed deep concerns that the term limit would make it more difficult to find capable replacements and affect the swift operation of the committee.

Can Dubai become the Hong Kong of the Middle East? asks Lucia Dore in the Khaleej Times.

The most obvious similarity is that they are both City States and regional hubs - Hong Kong for China and South East Asia and Dubai for the Middle East, Africa and the Indian sub-continent. Both are seaports, with world class container terminals, and both have superior international airlines and airport facilities. Another similarity is the low tax status of both economies. Dubai, in particular, is putting considerable effort into creating free zones, of which there are now thirteen.

Dubai is also an aspiring international financial services centre. In its quest to become the Hong Kong of the Middle East it has set up The Dubai International Financial Centre (DIFC) and has built on this by launching the Dubai International Financial Exchange (DIFX) last year.

The Dubai International Financial Centre Authority (DIFCA) has submitted for public consultation and comment amendments to its Companies Law, DIFC Law No. 2 of 2004.

The amendments seek to simplify dividend distribution requirements for companies, thus providing greater incentives for companies to list on the Dubai International Financial Exchange (DIFX).

The amendments will also create a Limited Liability Company (LLC) structure for non-regulated companies by the Dubai Financial Services Authority, which simplifies corporate administration formalities for the principals of LLCs whose activities are not regulated by the DFSA.

The DIFC Authority seeks comments from the international financial and legal community prior to the recommendation of the proposed amendments by the DIFC Authority Board of Directors to the Ruler of Dubai for approval and enactment. The consultation closes on 15 February 2006.

The DIFC Authority is also consulting with the DFSA on the proposed legislation.

Following the completion of the public comment and DFSA consultation periods, the final draft laws will be referred to His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, for approval and enactment in accordance with Dubai Law No. 9 of 2004.

The Central Bank of the Bahamas has announced the relaxation of exchange controls relating to real estate investments, foreign currency transfers, mortgages, and debt and equity instruments all of which have taken place with immediate effect.

The Bank states that this latest action is in line with its commitment to achieving a gradual yet meaningful liberalization of exchange controls, and the measures follow earlier adjustments introduced in May 1995 and September 2002, both of which provided for an increased delegation of authority to commercial banks over a broad range of current account transactions such as payments for imports, travel and services.

By way of an appointed day act 2006, the Companies (Amendment No.8) (Jersey) Law 2005 has been brought into force on the 1st February 2006 (except for Articles 24 and 35).

The amendment provides for the incorporation of cell companies. As with other jurisdictions, it is anticipated that these vehicles will be attractive to mutual funds (collective investment schemes).

Two types of cell company are permitted under the new Law: protected cell companies (PCC) and incorporated cell companies (ICCs).

A PCC is a single legal entity that attributes its assets and liabilities either to the protected cell company itself or to the individual cells it creates. The assets and liabilities of the PCC and those attributed to its cells are 'ring-fenced' from each other. By comparison, each cell of an ICC is itself an individual incorporated company which can hold assets and incur liabilities in its own name without contamination of or by the assets and liabilities of another cell.

ICCs are unique to Jersey. They reflect the best aspects of PCCs but are designed to give particular clarity to the ring-fencing of assets and liabilities of each cell in jurisdictions which are unfamiliar with cell companies.

Update: Just two days after the introduction of the protected cell company legislation, Bedell Cristin has announced the formation of the first such company for a collective investment fund.

The new protected cell company has been formed by Bedell Trust Company on behalf of MARS Capital Management Limited for a new collective investment fund, investors in which will participate in a variety of investment strategies through a number of separate cells.

Julie Coward has been elected the new president of the Jersey Association of Trust Companies (JATCo).   Mrs Coward is managing director of Basel Trust Corporation in the Channel Islands and also MD of BasTrust Corporation in Geneva.

The Channel Islands Stock Exchange (CISX) expects to attract an increasing amount of securitisation and specialist debt securities business in the coming year, according to the chief executive Tamara Menteshvili.

Last year the CISX celebrated their thousandth listing and quadrupled the average number of new listings. The exchange also introduced trading facilities for open-ended investment companies (OEICs) and 160 such funds have now been listed.

The CISX seems to be attracing business away from other EU exchanges, such as Dublin, by providing an alternative exchange in the same time zone, but outside of the European Union in relation to the EU Savings Tax Directive. 'That's one reason why we saw such tremendous growth last year,' Miss Menteshvili is reported as saying.

Lines Overseas Management (LOM) is challenging evidence presented by the US Securities and Exchange Commission in a US court.

In December 2005, The SEC produced a Status Report to update a US Judge on "significant developments" related to his review of a lower court's enforcement order of four subpoenas for information that were served on LOM and its managing director Scott Lines almost two years ago.

LOM has moved to strike the Status reort on the grounds that its allegations were "baseless", "defamatory" and "scandalous". The SEC said in a response last week that LOM's motion should be denied since each statement in the Status Report was "well founded" and "accurately reflected information that the Commission had obtained from credible and relevant sources". If the court does not strike the report, LOM has asked it to conduct an evidentiary hearing to resolve all the issues of fact disputed by LOM.

One of LOM's assertions is that the SEC has never properly served a subpoena on Donald Lines, the President of the LOM Group. The new SEC filing includes a sworn affidavit by a professional process server stating the details of his service of three subpoenas on Donald Lines while he was visiting Boston for medical treatment last year. Mr. Lines denies that he was actually served and has taken out a full page advertisement in local newspapers stating his version of the facts. The SEC said in its latest filing however there was "ample evidence to conclude that Lines was properly served with the SEC's subpoenas and was untruthful in his declaration to the contrary". In a declaration run in full in the Royal Gazette this week, professional process server Gerson Marciel from the Massachusetts firm of Stokes and Levin said that he personally served Mr. Lines at the Copley Hotel in Boston on November 10, 2005.

To learn more about these duelling full page ads, read this amusing article in the Royal Gazette and see whether you think Donald Lines was served or not - it all boils down to whether the man described by the process server was 185 lbs or 215 lbs (ie was it Donald Lines or not!).

Another of LOM's challenges relates to an SEC assertion that LOM "demanded" that the terms of a settlement with the Bermuda Monetary Authority (BMA) be kept confidential.

The settlement pertained to the BMA's investigation of LOM's role in the trading of Sedona Securities. That security is at the heart of an SEC probe into alleged market manipulation. For the past two years the SEC has been attempting to secure a court order to enforce subpoenas it served on LOM in order to obtain information relating to Sedona trades including materials from the BMA's investigations and settlement. According to the Royal Gazette, the Bermuda Supreme Court recently placed an injunction on some of the information requested by the SEC.

After the BMA completed its investigation in December last year, LOM reportedly told the Royal Gazette that the BMA had "certain regulatory issues with the regulated LOM companies arising out of Sedona and related matters. Those issues have been resolved to the satisfaction of the BMA by LOM companies having made changes to their management and control arrangements and having given undertakings to the BMA to further enhance their compliance regime and their management structure,"

LOM is listed and traded on the Bermuda Stock Exchange.

Jamaica, Barbados, Belize, Guyana, Suriname and Trinidad and Tobago, the six CARICOM member states, signed a declaration on 30 January signaling the formal launch of the CARICOM Single Market (CSM).

Member countries of the Organization of Eastern Caribbean States, namely: Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines also signed declarations signaling their intent to join the CSM by the end of June 2006.

The launch of the CSM is intended to lead to the implementation of a CARICOM Single Market and Economy (CSME), by 2008. The CSME seeks to go further than simply establishing a Free Trade Area. The CSME will involve a single currency and the harmonisation of economic policy. It seeks to establish a Single Market and Economy, which will ultimately mean not only the removal of tariffs and special treatment amongst members, but also the harmonization of tax and social regimes. To achieve this goal, CARICOM has earmarked US$70 million to be spent over a 10-year period.

With the gradual removal of traditional preferential trading arrangements with the UK and the EU under the current World Trade Organisation regime, the CSME is seen as vital to the survival of the Caribbean market.

Richard Teather, a Senior Lecturer in Tax Law at Bournemouth University (UK) and author of "The Benefits of Tax Competition", has published a new article entitled "Praise Be to Tax Competition!"

Teather argues that tax competition plays a vital role in keeping governments efficient. He points out that international bureaucracies like the Paris based Organization for Economic Cooperation and Development (OECD) want to create an international cartel to protect high-tax welfare states.

"The best known attempt by the European governments to shore up their crumbling tax systems was the Organization for Economic Co-operation and Development's campaign against low-tax jurisdictions. The OECD accepted (in theory) the benefits of tax competition in keeping taxes low and governments efficient, but sought to emasculate it by preventing "harmful" tax competition (which seemed to be defined as any tax competition that might actually be effective), forcing non-members to change their tax systems by imposing sanctions on non-compliant countries."

Teather argues that sweeping reform to reduce the burden of government is the only way to save Europe from economic ruin and that true tax competition is the only thing that can bring about those reforms.

"Tax competition does not prevent citizens, through electing their governments, from setting whatever tax systems they prefer. However it does mean that countries will face the consequences of their choices, and it gives an exit mechanism for minorities to protect themselves from victimization. It also helps to counter the democratic deficit caused by the political class offering a very limited choice of policies that does not reflect the range of the electorate.....

Tax competition is still thriving as investors, and increasingly workers, vote with their feet and move in response to high taxes. If Europe's economy is not going to suffer even more damage, its governments will have to stop their failed attempts to impose a tax cartel and recognize the realities of a global economy. This means lower, simpler taxes, which in turn means that restricted State spending will have to be more responsive to the wishes of their electorates, and tax competition is the force that has the best chance of bringing this about."

As a Brit who chose to move to North America rather than settle in the EU, I am a living breathing example of a worker who voted with his feet!