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Cross border master-feeder arrangements: SEC staff slightly expands utility of offshore feeders for global investment management firms, but tax and other challenges remain

Mark Amorosi (Washington, DC office. Boston, MA office. Pittsburgh office. Boston, MA office of K&L Gates LLP)
George Zornada (Washington, DC office. Boston, MA office. Pittsburgh office. Boston, MA office of K&L Gates LLP)
Todd Gibson (Washington, DC office. Boston, MA office. Pittsburgh office. Boston, MA office of K&L Gates LLP)
Joel Almquist (Washington, DC office. Boston, MA office. Pittsburgh office. Boston, MA office of K&L Gates LLP)
Pablo J. Man (Washington, DC office. Boston, MA office. Pittsburgh office. Boston, MA office of K&L Gates LLP)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 4 September 2017

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Abstract

Purpose

To analyze the recent SEC no-action relief allowing a non-US investment company to invest as a feeder fund in a US registered open-end management investment company without complying with all of the conditions of Section 12(d)(1)(E) of the Investment Company Act of 1940.

Design/methodology/approach

This article discusses the various conditions that a non-US investment company investing as a foreign feeder in a US registered open-end management investment company must satisfy in order to avoid complying with certain provisions of Section 12(d)(1)(E) of the Investment Company Act of 1940. In addition, the article analyzes certain potential tax and regulatory challenges facing firms seeking to rely on the relief.

Findings

This article concludes that the SEC no-action relief is an incremental step in reducing barriers to global distribution of US registered funds and may marginally increase the use of cross-border master-feeder arrangements as contemplated by the no-action letter. Nevertheless, this article cautions that significant impediments to global distribution of US registered funds remain, including tax withholding and non-US law issues.

Originality/value

This article contains valuable information about the regulatory impediments to global distribution of US registered funds, as well as learned assessments of the impact of recent developments in this space by experienced securities lawyers.

Keywords

Citation

Amorosi, M., Zornada, G., Gibson, T., Almquist, J. and Man, P.J. (2017), "Cross border master-feeder arrangements: SEC staff slightly expands utility of offshore feeders for global investment management firms, but tax and other challenges remain", Journal of Investment Compliance, Vol. 18 No. 3, pp. 16-20. https://doi.org/10.1108/JOIC-06-2017-0038

Publisher

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Emerald Publishing Limited

Copyright © 2017, K&L Gates LLP.