The new chairman of Cayman Finance, Richard Coles, says he would like to cement the partnership between the public and private sector and argues that it is not conducive to demand special rules for the financial services industry.
When Richard Coles was named the chairman of Cayman Finance in April he wasted no time saying how much he values the partnership between the private sector and government. The former attorney general believes that his experience in government was one of the reasons he was asked to consider taking on the role of chairman of the organisation representing Cayman’s financial services.
“I am very familiar with government, with a lot of the people in government, but also with the workings of government, how decisions are taken there, the way consultation is done and so on,” Coles says. At the same he has worked in the private sector in the UK before coming to Cayman more than 20 years ago and more recently he has worked in the financial sector with HF Funds Services as an independent director to hedge funds.
It is this rare, dual experience that made him a candidate for the role of chairman and which will be integral in dealing with the government.
“The success of Cayman as a financial centre is the partnership that has been forged over the years between the private sector and government,” Coles says. While having experienced this relationship on both sides can only be an advantage, he says the government is equally anxious to have a good working relationship with the private sector.
A recent example is the work of the Financial Services Legislative Committee in preparing changes and amendments to the Companies Law that were passed in the Legislative Assembly in April 2011. The FSLC undertook the industry consultation over the proposed changes, which address specific company law issues that have arisen in practice. The work of the Committee in proposing and drafting new laws that enhance the jurisdiction is very valuable, Coles notes.
“It is refreshing to see that government is tapping into some of the huge resources that are available in Cayman’s private sector”, Coles says, adding that many people are “more than willing to give their time and knowledge to the country through assisting government”.
“To have quality individuals with real experience who are prepared to devote time to draft legislation is hugely important, because I know from my own experience in government that when government wants new legislation drafting, we have a limited number of legal draftsmen within government and they always have a back load of work waiting to be done.“
If the financial services industry can assist by producing a first draft for government to consider, both government and private sector can make huge strides in producing the needed legislation in a more timely way.
“It is easier than starting with a blank piece of paper,” Coles says. “And then, depending how comfortable government is with it, we can move forward.”
This will mean that sometimes the bulk of the work is done by the Legislative Committee in conjunction with government and sometimes it may be appropriate to hand the piece of legislation to the government’s legal draftsmen to work on it.
“It depends on the circumstances but I can’t see a reason why we cannot work together on that,” he says, adding that the intention is to continue with that process, build on it and to involve more people in the private sector that government feels comfortable with in terms of sharing ideas.
Not only agreement
A stronger partnership, however, will not mean that government and Cayman Finance agree on everything, Coles insists. In the past, the industry organisation and government have been at loggerheads over fee increases and immigration rules.
It is unfortunate, says Coles, that when government intends to raise revenues, it is always looking to hike up the same types of fees.
Cayman’s competitors will have a hard time saying they can do things better than the financial services sector in the Cayman Islands, but if we keep raising the fees, it is not hard for them to boast that they can do it cheaper, he says.
Not all clients will be prepared to pay a premium to do business in the Cayman Islands, he adds.
As far as work permits are concerned he acknowledges that they are a “sensitive issue”.
“Many Caymanians are very anxious that Caymanians should have many jobs in the financial sector and probably more jobs and probably higher up in the organisation than perhaps there are at the moment,” he concedes. “I have no problem with that at all.”
However, whether that is helped by decreasing the number of people who come to Cayman “is a debatable point,” he says.
“Some people obviously think it is and think that by limiting the number of people who come to Cayman that assists Caymanians in rising to the top of the organisation. I am not sure that events have actually proved that to be true. We have seen instances in the recent few years when the population has gone down for a whole variety of reasons, but could we truthfully say that has led to Caymanians getting more jobs and better jobs?” he asks.
“I would hazard a guess that actually the reverse is true, that Caymanians have lost jobs.”
No special case for financial services
Although Cayman will have to find new ways of dealing with immigration and budget issues, applying special rules to the financial services sector is not the right way, according to Coles, who strikes a very different tune on this issue than Cayman Finance has done in the past.
“I don’t think it is going to be conducive for us to say, as has been said sometimes, the financial services sector is a special case and we need special rules that apply to us and don’t apply to anybody else,” he says.
“I don’t think that is very acceptable to the rest of the community in the Cayman Islands.”
Even if Cayman Finance could make a good case for special treatment, Coles believes this would be “divisive”.
Instead, “we have to find something that is applicable across the board and it is not going to harm Caymanians, in fact it is going to assist in them reaching their goals”.
Coles laudes government’s efforts of lobbying Washington and London and sees potential for Cayman Finance to assist in this approach. He does not think it is particularly effective for Cayman Finance, as a private sector organisation to undertake the role of lobbying foreign governments by itself.
“You need your own government to open the doors,” he says. “So I would hope that when the government does lobby other foreign governments on areas of the financial industry that Cayman Finance can play its part.”
Even in public relations, an area where Coles’ predecessor Anthony Travers was very active, he believes Cayman Finance can do more.
“I would like us to be a bit more proactive on that. We tended to be quite reactive in the past. We waited for these negative articles to come out and then we respond,” he notes. “There is room for that, but I would prefer to see us proactively going out and promoting Cayman and what we do here and in that way telling the true story about Cayman rather than propagating the myths that we see so often in the foreign press.”
This would include reaching out to foreign journalists and getting editorial content into the foreign press. “That is what I would like to see us achieve, more of anyway.”
But also locally Coles would like to create a greater awareness of what the finance industry is all about.
Many residents and Caymanians may recognise financial services as one of the pillars of the Cayman economy, but they don’t see it as particularly relevant to their lives, he finds.
There is a notion that some people are making a lot of money, but whether the success of the financial services industry trickles down to the ordinary person in the Cayman Islands is something that has to be demonstrated.
“I believe it certainly does but I believe we need to show people how that happens, make people proud of this industry that has helped build up the Cayman Islands and understand what the benefits are for everybody in Cayman in making sure that it continues to be successful,” says Coles. “The onus on doing that is with us, we have to do that.”
This will require new and creative methods, because Coles doubts that pure statistics will be able to achieve it. “We have to explain at the grass-roots level, that would include the schools but I am not limiting it to the schools, I think we are talking about society generally.”
Coles believes the Cayman Islands will always be in the “firing line”, because it is a mark of its success as an offshore jurisdiction.
He argues that Cayman has to recognise that there will always be new targets to meet. “We will never get to the point where they will say the Cayman Islands are fine, we are just going to leave them alone now and concentrate on somebody else.”
As long as Cayman is successful it will remain a target. “So we need to respond. Of course the whole issue of taxation is a live one and I know Tony Travers has said quite a bit about that. But I would concentrate on the positive things that we do in Cayman, rather than criticise what other governments may or may not do.”
The Cayman Islands has no problem in dealing with tax evasion, because its financial business is for the most part institutional and not private individuals.
“But obviously if others want to try and persuade the Cayman Islands to have the same taxation policies as other governments that is another issue. I strongly believe that each country should be able to set its own tax policy. If the Cayman Islands Government sets one tax policy, it is no business for any other country what we do in the Cayman Islands,” he says.
He notes the clear distinction between tax evasion and tax avoidance, saying that lawfully using any means at one’s disposal to minimise tax liability, is what just about everyone tries to do, if they are in a tax paying country. “You would be crazy not to do that. I don’t see anything wrong in that.”
“If other countries want to stop that happening to their nationals or to their national corporations, they need to pass laws themselves to make what is lawful unlawful,” he argues. “And we will abide by that but it is not up to us to do it. It is up to them to do it.”
Yet he is under no illusion that it will always be a problem because in many cases “those countries are unwilling to alter their tax laws for political reasons and so it suits them to push the blame onto somebody else”.
On the issue of tax information exchange Coles says, “it is not a particularly hard thing for us to do”.
“Unfortunately, what that tells me is that they are likely to dream up something that is somewhat harder for us to do,” he says.
One thing that might follow on the back of that, he speculates, are demands for showing a more physical presence for entities that use the Cayman Islands. Coles can imagine that in the future there will be pressures on moving an organisation that is legally created and based in Cayman to a more advanced stage, which includes offices and staff to demonstrate a capability to do business and run it from the Cayman Islands.
This in turn will bring new challenges in terms of work permit and immigration issues.
“If we are encouraging people to come to Cayman to set up more of a physical presence here and therefore bring more staff here and create bigger offices here, we have to recognise that means we have to accommodate them.”
It is something that a solution has to be found for Coles says, “because it is no good putting out the welcome mat for people to come here, if we don’t truly mean it”.