International Finance and Administration - ICSA Word -...

© ICSA, 2017 of 30

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Subject no. 52B

Paper 1

International Finance and Administration Wednesday morning, 7 June 2017 Time allowed: 3 hours Do not open this examination paper until the presiding officer or an invigilator tells you to. You must not take this paper out of the examination room. The examination paper contains 30 questions and is divided into four sections. You must attempt all questions in Section A and Section B, two questions in Section C and two questions in Section D. Section A contains 20 marks, Section B contains 50 marks, Section C contains 30 marks and Section D contains 30 marks. There are 130 marks available in total for the paper. You should allow yourself approximately 30 minutes in total to answer the questions in Section A, 70 minutes in total to answer the questions in Section B and 20 minutes for each of the questions attempted in Sections C and D. You may continue your answers on a separate sheet of paper if necessary. Separate answer sheets are available from the invigilator.

Note: Unless otherwise specified, you should assume that an Act or an organisation referred to in the questions is a UK Act or organisation.

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Section A Answer all the questions in this section. Continue your answers on a separate sheet of paper if necessary. 1 Give an example of a direct tax.

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(1 mark) 2 What is the main difference between a ‘trust deed’ and a ‘declaration of trust’ document?

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3 Trust administration involves the administration of the trust assets in a manner that is in the best

interest of the trustees. Is this true or false?

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True

False

(1 mark)

4 The time period within which future interest in trust property must vest with one or more of the beneficiaries is known as the:

(Tick one box only)

A Vesting period

B Perpetuity period C Purpose period

D Interest period

(1 mark)

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5 Why is it so important that trustees ensure that the assets of the trust are properly vested in them

and that they (rather than the client) remain in control of them?

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6 With regard to performance of a contract, what is said to be the general rule?

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7 Explain one of the three elements of the Retail Distribution Review.

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(2 marks) 8 In instances where a company decision needs to be recorded but a meeting has not been held, what action should be taken to record the decision?

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(1 mark) 9 Explain the term ‘jurisdiction’.

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10 Which of the following is not considered a typical stage of money laundering?

(Tick one box only)

A Layering

B Integration C Fraud

D Placement

(1 mark)

11 Explain one risk which exists when company administrators in offshore centres anticipate the proceedings of a directors’ meeting and prepare draft minutes in advance.

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(1 mark) 12 In 1998, the Organisation for Economic Co-operation and Development (OECD) used the term

‘tax haven’ in its report entitled ‘Harmful Tax Competition: An Emerging Global Issue’. In the report, a number of factors were used to decide whether a jurisdiction was a ‘tax haven’. What were two of the four key criteria included?

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13 A client who had placed US$500,000 in an insurance-based investment product subsequently arranged an early surrender, and did not show any concern over the loss. What should the administrator who handles this transaction be concerned about?

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14 Using an example, explain the term ‘onshore offshore’ jurisdiction.

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15 A country becomes a member of The Group of International Finance Centre Supervisors. Explain what it has agreed to, on becoming a member of this group.

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Total for Section A = 20 marks

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Section B Answer all the questions in this section. Continue your answers on a separate sheet of paper if necessary. 16 Describe the characteristics of a company limited by guarantee.

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17 Using examples, explain the term ‘capacity’ with regard to contract law.

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(6 marks)

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18 Explain how common law and equity currently inter-relate in cases where UK courts make

decisions.

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19 Explain how a trust, or a transfer to a trust, may be ‘void’ or ‘voidable’.

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(6 marks)

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20 With regard to tax-planning efforts, explain how the residency of a trust is determined.

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21 Explain the concept of ‘separate legal personality’ as a feature of limited companies.

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(6 marks)

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22 Explain why companies appoint an auditor and why some companies in offshore centres are not

audited.

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(6 marks)

23 Following the incorporation of a company, describe a range of actions which directors and

company administrators will need to take.

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(6 marks)

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24 Explain why the Alternative Investment Fund Managers Directive (AIFMD) was introduced and

how it affects what alternative investment fund managers (AIFMs) can do.

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(6 marks)

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Total for Section B = 50 marks

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Section C Answer two questions only. Continue your answers on a separate sheet of paper if necessary. 25 Potential breaches of the UK’s Data Protection Act 1998 include “unlawfully obtaining and/or

selling of personal data” and “processing personal data without notification”.

Discuss how such breaches can occur and how organisations can work to avoid them.

(15 marks)

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26 An offshore banking regulator has the power to decide which organisations can operate as banks

in its jurisdiction.

Explain how the regulator uses criteria to determine which banks to allow.

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27 The US Foreign Account Tax Compliance Act (FATCA) aims to improve international tax

compliance. Since the introduction of FATCA, the UK has entered into similar intergovernmental agreements with its Crown Dependencies and Overseas Dependencies.

Analyse the impact that FATCA and other intergovernmental agreements have had.

(15 marks)

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Total for Section C = 30 marks

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Section D Answer two questions only. Continue your answers on a separate sheet of paper if necessary. 28 Compare and contrast ‘discretionary trusts’ and ‘accumulation and maintenance trusts’.

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29 Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs) are both forms of entity used

in the provision of offshore services. Explain how the different features of LLPs and LPs are used by offshore services providers.

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30 David and Susan Brown (David and Sue) are the two non-executive directors of the Le Seer

Offshore Growth Fund Limited (‘the fund’) which is based in the Cayman Islands. Daniel Le Seer (Daniel) is the appointed Investment Manager of the fund.

David and Sue are the owners of a successful bakery company and they have known Daniel since he married David’s sister. Daniel later asked them to take on their roles at the fund. There are no other directors and administration of the fund has been delegated to local administrators. David and Sue have not concerned themselves with either the activities of the fund or its accounts, relying on the fact that Daniel reassures them all is well and that great returns are being made. Their directors’ fees are US$25,000 per annum each and they are flown, at the expense of the fund, to the Cayman Islands three times a year to stay with Daniel and his wife in order to sign documents in respect of the fund’s activities and accounts.

Recently, some of the fund’s assets were found to be worthless because Daniel had entered into

options contracts with another company he operates, which were not permitted in the fund’s rules. The fund has subsequently gone into liquidation and investors have lost in total over US$110 million.

With regard to the role and duties of non-executive directors, evaluate the role of David and Sue in

the failure of the fund.

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Total for Section D = 30 marks

Total for paper = 130 marks

END

The scenarios included here are entirely fictional. Any resemblance of the information in the scenarios to real persons or organisations, actual or perceived, is purely coincidental.

Do not write on this page – examiner use only Section A Section B Section C

Section D

Question Question Question Question

1 16 25 28

2 17 26 29

3 18 27 30

4 19 Total Total

5 20

6 21

7 22

8 23

9 24

10 Total

11

12

13

14

15

Total

Marker (full name):

Reviewer (full name):

Clerical check (full name):

Examiner review:

Total marks for paper:

International Finance and Administration - ICSA Word -...

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