The Structured Products Association offers its congratulations to everyone who participated in the Special Section on Structured Investment Products on page C-11 of today's Wall Street Journal.
As written by StructuredRetailProducts.com's reporter Lori Pizzani, the one-page special section provided an important primer on what structured products are -- as well as what they are not. It was an exceptionally well-balanced piece that included a chart on the various types of structured products, including the risks and attributes of each category.
The story included quotes from DWS Scudder's Chris Warren, Eksportfinans' Martine Mills Hagan, SPA Leading Edge Advisor award-winner Tony Proctor of Proctor Financial and Dean Erickson of Erickson Capital.
Given the post-Presidential election excitement, this issue of the Wall Street Journal is likely to be the most highly read issue of the entire year. Typically, the Journal reaches more than 2 million readers.
The SPA acknowledges Eksportfinans' contribution as a lead sponsor of the section and its role as a catalyst for what we expect to be the first of an annual tradition.
For those who missed the article in the print version, click here for a PDF of the section.
SPA-2008
Wednesday, November 5, 2008
MTN-i: Obama's Victory and Structured Notes
Barack Obama has won the U.S. presidency with an historic 21-month march to the White House. But as the next U.S. president, his inevitable changes to the federal tax system will have implications for how efficiently structured notes produce returns -- as well as the desirability of
structured notes as an investment alternative.
In a special report being made vailable to SPA members, mtn-i's Thomas Reggiori Wilkes explores how the likely scenarios for capital gains and income tax reform may alter how notes are structured and the effect of tax treatment on the relationship between capital appreciation and coupon driven returns.
To access this report, click here.
For a special free trial subscription to mtn-i's US structured note news and data service either email us@mtn-i.com, or click here: http://www.usmtn-i.com/.
An excerpt from the report:
Trading tax treatments
Currently, structured products are taxed under a combination of capital gains and income tax codes. Non-principal protected products, and some partially protected products are subject to capital gains tax and are currently tax efficient versus their principal protected peers. Principal protected products, including FDIC insured structured certificates of deposit pay ordinary income tax on coupon payments. Regardless of whether Obama won the election, changes to tax rates will have an impact on structured notes.
“Higher tax rates are an assault on the investor class and structured products will no doubt feel the resultant pain. There may be nuanced increases or decreases on issuance of different species of structured products as tax policies may favor interest income over capital gains exposure. However, there may be very real differences in issuance levels of structured products given whether the election cuts to the left or the right,” said one broker dealer.
Thomas A. Humphreys, a tax partner at Morrison & Foerster, who specialises in the U.S. federal income taxation of capital markets transactions explains that the relationship between the two taxes is a key determinant of which instrument investors chose to invest in. "Should a higher tax environment include both higher capital gains and higher income tax rates, say from the current 15% to 20% and 35% to 40% respectively, then the relative benefits of investments that produce capital gain over those that produce ordinary income should remain the same."
"Historically there has always been a gap between the two tax rates. However, should the case be that the capital gains rate rises and moves closer to the ordinary income tax rate, the relative benefit of investments that produce capital gains decreases. There would be less of an incentive for opting for one type of investment over the other," says Humphreys.
structured notes as an investment alternative.
In a special report being made vailable to SPA members, mtn-i's Thomas Reggiori Wilkes explores how the likely scenarios for capital gains and income tax reform may alter how notes are structured and the effect of tax treatment on the relationship between capital appreciation and coupon driven returns.
To access this report, click here.
For a special free trial subscription to mtn-i's US structured note news and data service either email us@mtn-i.com, or click here: http://www.usmtn-i.com/.
An excerpt from the report:
Trading tax treatments
Currently, structured products are taxed under a combination of capital gains and income tax codes. Non-principal protected products, and some partially protected products are subject to capital gains tax and are currently tax efficient versus their principal protected peers. Principal protected products, including FDIC insured structured certificates of deposit pay ordinary income tax on coupon payments. Regardless of whether Obama won the election, changes to tax rates will have an impact on structured notes.
“Higher tax rates are an assault on the investor class and structured products will no doubt feel the resultant pain. There may be nuanced increases or decreases on issuance of different species of structured products as tax policies may favor interest income over capital gains exposure. However, there may be very real differences in issuance levels of structured products given whether the election cuts to the left or the right,” said one broker dealer.
Thomas A. Humphreys, a tax partner at Morrison & Foerster, who specialises in the U.S. federal income taxation of capital markets transactions explains that the relationship between the two taxes is a key determinant of which instrument investors chose to invest in. "Should a higher tax environment include both higher capital gains and higher income tax rates, say from the current 15% to 20% and 35% to 40% respectively, then the relative benefits of investments that produce capital gain over those that produce ordinary income should remain the same."
"Historically there has always been a gap between the two tax rates. However, should the case be that the capital gains rate rises and moves closer to the ordinary income tax rate, the relative benefit of investments that produce capital gains decreases. There would be less of an incentive for opting for one type of investment over the other," says Humphreys.
SPA-MoFo: Special NYC Event on Thurs. Dec-4
Dec. 4: SPA / Morrison & Foerster to Host Special Event and 5th Annual SPA Holiday Toast
Save the date for a special final event of the year from the Structured Products Association and Morrison & Foerster.
Given the litigation climate and the tax/regulatory changes expected from a transitioning presidency, the SPA and MoFo will host a year-end round-up of the extensive changes sweeping the structured products industry's legal-compliance-regulatory environment.
Prior to the event, the SPA will be holding its first full meeting of the SPA Legal and Compliance Committee -- with the purpose of getting out in front of critical regulatory issues that will soon be confronting the industry.
Two panels will present in the one-hour session:1) external counsel on the sweeping changes and status of class action lawsuits targeting the financial services industry; and 2) in-house counsel/compliance departments, and how they are contending with the rapidly changing environment.
The session will conclude with the fifth annual SPA Members' Holiday Toast -- hosted at the offices of Morrison & Foerster. More details to follow.
In the meantime, save the date: Thursday, December 4, 2008. For more details or to register, email MoFo's Michelle Paitich at mpaitich@mofo.com.
Save the date for a special final event of the year from the Structured Products Association and Morrison & Foerster.
Given the litigation climate and the tax/regulatory changes expected from a transitioning presidency, the SPA and MoFo will host a year-end round-up of the extensive changes sweeping the structured products industry's legal-compliance-regulatory environment.
Prior to the event, the SPA will be holding its first full meeting of the SPA Legal and Compliance Committee -- with the purpose of getting out in front of critical regulatory issues that will soon be confronting the industry.
Two panels will present in the one-hour session:1) external counsel on the sweeping changes and status of class action lawsuits targeting the financial services industry; and 2) in-house counsel/compliance departments, and how they are contending with the rapidly changing environment.
The session will conclude with the fifth annual SPA Members' Holiday Toast -- hosted at the offices of Morrison & Foerster. More details to follow.
In the meantime, save the date: Thursday, December 4, 2008. For more details or to register, email MoFo's Michelle Paitich at mpaitich@mofo.com.
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