ON THE LEFT: Unique selling point for an ISM
The Government of Barbados, Barbados Stock Exchange as well as the private sector are working jointly on the introduction of the Barbados International Stock Market (ISM) and mutual funds legislation, and are working to implement these initiatives as soon as possible and deliver economic growth for Barbados.
As proposed, the ISM allows international issuers (companies and institutions wishing to raise capital) to raise capital from investors who want to invest their capital transparently via the ISM.
International issuers will list their securities and funds on the Barbados ISM.
International and local investors can then invest in those listed securities and funds through the ISM. International issuers which the ISM is likely to attract would be Fortune 500 companies, multinationals and private equity firms, and investors would likely be international pension funds, investment banks and investment houses.
These investors can be confident in the listed securities or funds because, due to being listed, the security or fund is transparent as information about it is public and there has been compliance with ISM rules.
Why would institutions and other investors want to list in the Barbados jurisdiction? The Barbados prudential regulator is the best equipped in the region with proper prudential oversight.
Regional jurisdictions with ISMs include Cayman and Bermuda but Barbados would have a unique selling point for an ISM in that is it has a treaty network, whereas Cayman and Bermuda do not.
A treaty network is fundamentally important for a specific class of mutual fund administrators, given international tax developments with respect to taxation of such funds. Ireland and Luxembourg are in the European Union (EU) and subject to EU regulation; Barbados is not in the EU; however, it has treaties like them.
Also, Barbados is a common-law jurisdiction, Luxembourg is a civil law jurisdiction. The Barbados ISM therefore would have a strong regulatory and tax proposition to attract mutual fund administrators and investors.
Entities in Barbados that have US$1 million in assets or revenue have always had to be audited by law. This type of regulatory approach would be attractive to institutions that are seeking to raise and invest capital in a tax-neutral, cost-effective and well regulated environment. The Barbados reputation and regulatory track record would attract institutions.
The establishment of an ISM in Barbados is expected to deliver a number of economic benefits to Barbados. Economic benefits which the establishment of an ISM in Barbados can be expected to deliver include 3 000 to 4 000 new jobs, 30 000 new directorships paying US$5 000 to US$30 000, 100 trust and banking licences (Cayman has 600), new international institutional clients who will substantially increase the bottom-line profitability of the professional, legal and accounting industries.
Also, new Government revenues from regulatory fees and income tax revenues approximately an additional US$100 million per year. The economic impact on tourism, real estate and Barbados’ foreign currency reserves has not yet been completely assessed.
• Jonathan Brathwaite is principal of UHY (Barbados) SRL and an experienced international tax adviser.