tag:blogger.com,1999:blog-19649274.post114035508363209198..comments2024-03-29T12:03:50.891+05:30Comments on The Leap Blog: Imagine there's no `FII'Ajay Shahhttp://www.blogger.com/profile/03835842741008200034noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-19649274.post-37924045273243634022007-05-30T11:38:00.000+05:302007-05-30T11:38:00.000+05:30Actually, I had discussed the issue sometime back ...Actually, I had discussed the issue sometime back with a practitioner who has managed custody operations in many countries for some of the best names in business. I quote from his e-mail : <BR/><BR/>"The debate between omnibus (nominee) and end-beneficiary accounts goes way back.<BR/>Not all developed countries operate at an omnibus level (actually most of them are working within an end-client level environment).<BR/>The US, Hong Kong, Canada, The Netherlands, Greece, France, Italy, all the GCC countries and many more are operating at an end-beneficiary level.<BR/><BR/>As you guessed correctly, the end beneficiary level is a prerequisite condition for various laws/restrictions to apply (money laundering, foreign investment restrictions, substantial shareholders etc). Although the global trend had been towards omnibus schemes, after the September 11th incident (and of course the US Patriot Act), this trend came into an end.<BR/><BR/>In xxxxxx, our customers (global custodians holding assets on behalf of their<BR/>customers) are required to open and maintain several accounts (one account per each end-client, instead of one account for all clients). This requirement imposes additional costs and procedural requirements (PoAs, Certificates of Incorporation, notarizations, consularizations etc.).<BR/>Still, besides the additional work required (and higher costs), all our customers agree that having depository accounts at end beneficiary level is always the best and safest way to reconcile assets.<BR/><BR/>So, to answer your question, the account structure in xxxxxx country may sometimes being troublesome, but at a fairly acceptable level (in fact, this is the least of our clients' problems)."<BR/><BR/>At times, it is difficult to substantiate such operational experiences but I'll try to provide some. Many a times, costs of compliance and operational risks force organisations to abandon certain practices which are otherwise available. I think it would be a good idea to get this it sorted out by interviewing few other practitioners.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-32835082888335321992007-05-29T11:43:00.000+05:302007-05-29T11:43:00.000+05:30I wasn't aware that the omnibus account framework ...I wasn't aware that the omnibus account framework is dying. How fascinating. Could you tell us more?<BR/><BR/>My basic claim is simple. Dozens of well run countries have open capital accounts without an FII framework. I used to think this is done using omnibus accounts, but maybe I'm wrong and the mechanism is different. I believe the FII framework is unnecessarily restrictive. It introduces frictions for non-FII participants - why is that in India's interest? It reduces the diversity of players in India, thus hindering liquidity and market efficiency. And if you believed that capital controls are desirable owing to monetary policy reasoning, the FII framework doesn't deliver anything because for FIIs the capital account is open. In short, the FII framework gains nothing and loses something. So I think we should move forward to an open capital account for the purpose of the equity market, as is done in dozens of other countries. <BR/><BR/>If a US investor wants to buy UK stocks, how is it done?Ajay Shahhttps://www.blogger.com/profile/03835842741008200034noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-91143770872950655582007-05-29T11:29:00.000+05:302007-05-29T11:29:00.000+05:30Mr. Shah, what you are saying is that basically KY...Mr. Shah, what you are saying is that basically KYC, AML etc. all are meaningless farce and surveillance is wholly dispensable. Let have these removed for our Indian investors as well.<BR/><BR/>And contrary to your opinion, I understand, omnibus accounts are dying everywhere post 9/11 and US Patriot act.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-1141997833328071542006-03-10T19:07:00.000+05:302006-03-10T19:07:00.000+05:30De facto, a lot of the `proprietary trading' of st...De facto, a lot of the `proprietary trading' of stock broking firms is actually agency fund management for customers. They are running hedge funds. It's just that in India, there is no formal framework for a tax-passthrough but-not-regulated entity that's a hedge fund.Ajay Shahhttps://www.blogger.com/profile/03835842741008200034noreply@blogger.com