Offshore: To the rescue
The economic downturn has resulted in a global reappraisal of purported 'light touch' regulation. For example, while the UK and US implemented a legislative ban on short-selling and then lifted the embargo shortly thereafter in an effort to stimulate the economy, Guernsey as a jurisdiction has quietly watched and analysed the fallout from market conditions. The forecast for markets, however, is still gloomy. Another week, another aid package. From the US to the UK, the retail sector has suffered, inter-bank lending has stagnated and debt markets are wary. This has led to the strange dichotomy of the largest banks announcing substantial losses and aiming for cost saving redundancies, while being vilified in the press for paying bonuses. As the Chancellor of the Exchequer toys with the idea of a 'toxic bank' to clear bad debt off the balance sheets of banks, we hear of a toxic financial institution, Bernard L Madoff Investment Securities. The impact of these types of fraud, as demonstrated by the Court for the Southern District of New York judgment in Re Bayou Group LLC in 2007, is felt by not only redeeming and non-redeeming investors whose principal and profits may now be at stake, but by otherwise respected financial institutions that have found themselves subject to litigation as a result of their position as custodians or discretionary managers of Madoff feeder funds.
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