Solutions To Problems

TIR Capital Structure

On joining a brokerage group, they had just completed their first year-end and about to start the annual audit
The parent company of the group was a regulated entity
A certain asset category within trade receivables was not separately identified within the local regulations as non-allowable for regulatory capita purposes but was non-allowable in other jurisdictions
Auditors insisted in getting a ruling from the regulator who not surprisingly ruled them as non-allowable placing the company into a capital deficiency.

Prepared a very simple model that indicated that this would be a compounding issue that would not be resolved with a one-time capital injection
Identified that having the parent as a regulated entity was not ideal for many additional reasons
Investigated appropriate jurisdictions for formation of a new parent and settled on Cayman Islands due to its favourable fiscal policies and its credibility in the financial services sector and as a listing vehicle.

Carried out a Group restructuring by redeeming the redeemable preference shares of the existing parent and re-issuing them from the newly incorporated Cayman Island parent company
Transferred the investment in subsidiaries from the existing parent to the new parent
Obtained all the necessary regulatory approvals for the changes from the UK and US regulatory bodies

Extremely complex relationship with vendor involving multiple entities under a single umbrella
Many queries presented to vendor were not responded to
A single trade could result in over 100 entries on the vendor ledger due to client sub accounts
Accounting systems on trade date basis and clearing accounts on a settlement date basis
Related FX trades for securities transactions sometimes traded away from clearing vendor
Unrecovered differences had reached over US$5 million over multiple years and transactions of up to $50 billion per year

Meet with CEO and CFO of vendor to agree that there was an issue, the magnitude of the issue and the need to resolve.
Set up a protocol for submitting claims in respect of discrepancies and timeframe to respond
Requested IT to write a specific programme to replicate all the moves on the vendors platform to download to Excel
Asked vendor to provide digital copies of the statements
Used Excel macros and V Look up tables to identify differences

Recovered US$4.3 million from the vendor
Identified US$0.45m of 2 trading errors on our platform that had been entered incorrectly so that the accounting integration had not made the appropriate adjustment
Changed the trading platform to ensure that trade errors would all be captured by the integration
Agreed future protocol with vendor to ensure that all discrepancies resolved within 30 days of notification

Group had built an extremely efficient fiscal structure with an effective tax rate in the single digits
Significant efforts had been taken to mitigate that management and control did not exist within any of the higher tax rate jurisdictions
Despite having board meetings, strategy meetings and an employee based in Cayman Islands, there was no clear indication that this would reach the level necessary to deem management and control was in Cayman Islands

Separately for key shareholder needs there was an interest to invest in Ireland but little or no obvious commercial reasons.
Ireland had an International Financial Services Centre that enjoyed a 10% tax rate for approved entities.
If senior management were to move there we would be able to use Ireland as a location that along with group Board meetings and strategy meetings would provide the necessary substance for management and control if ever challenged by a higher tax jurisdiction

Myself as CFO, the Group’s President and the Group’s general counsel all relocated to Dublin as we set up a registered broker dealer in Ireland along with a Group management and Admin centre.
Group effective tax rate maintained in single digits
Key shareholders obtained their personal goals
Group was able to use the Licensed entity as both a captive clearing house for certain trades further improving operating margins

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