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What’s on our minds as we head to SFIG Vegas

22 February 2019

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Bags are packed, boarding passes downloaded, and we’re excited to depart for SFIG 2019, the largest capital markets conference in the world hosted in Las Vegas. There are already many changes on the horizon in the CLO market this year impacting our clients and global business. We look forward to chatting with you about the potential impacts of new legislation. Get a jump start by reading our trend overview below and stay tuned for our key takeaways on the CLO market after the conference.

Everyone’s talking about Brexit

The whole world has an eye on Brexit, and CLO market participants and UK-based collateral managers are especially paying attention. What legal and regulatory changes lie beyond the 29 March deadline? Though it’s hard to say what impact Brexit will bring to the industry, we expect to see changes in risk retention policy and the Markets in Financial Instruments Directive (“MIFID”) authorisation for certain asset classes. MIFID is of particular interest to those watching the unfolding of Brexit; the law increases competition and investor protection. So, when Brexit is a done deal, will CLO market participants and UK-based collateral managers look to other jurisdictions such as Ireland, The Netherlands, and Luxembourg for CLOs?

Japanese Risk Retention Rules are coming

In just over a month, the Financial Services Agency (“FSA”) may finalize a proposal that would restrict Japanese investors, banks, and credit unions to buying securitisations only where the originator retains 5 percent of the underlying assets. The new rules may also influence European CLOs to meet these requirements as their own risk retention policy is more onerous than the proposal by the FSA. The FSA is seeking public commentary before the decision date on 31 March. What would your comments be?

We’re also waiting for those Economic Substance Guidance Rules

If you do business in a major financial centre, chances are you’ve heard of changing regulation addressing concerns of the EU and OECD. This new legislation regarding “Economic Substance” came to a head at the close of 2018. The new laws seek to incorporate and support international standards on global base erosion and profit shifting (BEPS). The aim is to counter harmful tax practices. New legislation enacted by jurisdictions demonstrates the financial centres are committed to complying with all international standards and best practices. Guidance Notes, soon to be released, will more specifically assist in determining if an entity is participating in business that requires economic substance.

Asset managers: are you prepared to chat with the IRS?

If you’re a manager for a US fund, you need to prepare for new audit legislation enacted by the IRS. Whether you’re in the United States or somewhere else around the world, you’ll need to appoint a partnership representative (“PR”) to manage the audit process with the IRS. The catch? The PR needs to have a substantial presence in the US, meaning a US tax payer ID, address, phone number and be readily available to meet with the IRS at any time. Audit season is around the corner. Let us know if you have questions.

Care to continue the conversation?

Pick up an iced coffee, charge your phone, and say hello at booth 108. See you there.

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