With the proposed FATCA regulations expected around the end of the year, Ernst & Young’s (E&Y) compliance team is hoping to see that the IRS has relaxed its stance on deemed compliance and specifics on implementation for the asset management industry.
In sharing its hopes and expectations for FATCA, it notes the proposed regulation has the largest industry response the IRS has ever seen from all types of asset manager – large, boutique, alternative, almost every product line and client type, every country, which face an almost unprecedented impact.
“We are hoping to see signs that the IRS has listened to industry concerns and has either adapted its stance or given more clarity on the approach to the asset management industry, including the relaxation of deemed compliance, which doesn’t currently work on a practical level, and specifics on implementation for the asset management industry, in particular how it will be implemented across the distribution chain,” says Stuart Chalcraft, an associate partner in E&Y’s asset management team.
Chalcraft says E&Y is not expecting further clarity on pass-thru, which has been given a staggered implementation date already. Additionally, he says, the team is not expecting any conclusions on the data-privacy debate with a lot of continuing inter-governmental dialogue on this makes a final conclusion by the end of the year unlikely.
Speaking on what asset managers should look for when IRS makes the announcement, Chalcraft says that many firms are currently working to assumptions in order to start their FATCA implementation and they will need to check that these assumptions still stand. For example, he says, the sector is largely assuming that there will be a distinction made between long-term and short-term products and that withholding will only be required when a payment is actually made to a consumer.
Chalcraft says that the detail of FATCA will be in the agreement that asset managers have to sign rather than in the actual text of the regulation and third party auditors. He adds that clearing houses should be looking for opportunities to grow their business and broaden their relationships with fund clients.
(JDC)