In an article titled “Investing in Bangladesh: How Recent Developments in the Cayman Islands Facilitate Inbound  Investment”, Chetan Nagendra examines two recent events: Cayman Islands’ acceptance as a full member of IOSCO and its recognition in the ‘white list’ of jurisdictions that have substantially implemented the OECD tax standard. He notes that these events are likely to see a further flow of investments from Cayman Islands into Bangladesh as it enables registration of Cayman funds as foreign institutional investors (FIIs) by SEC:

[Cayman Islands Monetary Authority’ (CIMA)] admission to IOSCO demonstrates the jursidcition’s willingness to engage other regulators to facilitate cross-border information exchange and assistance. It is believed that the Bangladeshi securities regulator, the Securities and Exchange Board of Bangladesh (SEC) will treat this development positively and allow for speedier and less cumbersome registration of Cayman domiciled funds as foreign institutional investors (FIIs) in Bangladesh.

Registration is mandatory for foreign institutional investors in Bangladesh. Cayman Islands domiciled investment funds have historically faced challenges when seeking to invest in Bangladeshi listed securities. SEC has previously required extensive due-diligence on funds domiciled in the Cayman Islands, citing CIMA’s lack of IOSCO membership. It is expected that with IOSCO membership, Cayman domiciled funds that invest in Bangladesh can now directly register as a FII with SEC rather than investing through intermediary funds based in another jurisdiction or through participatory notes.

The article however notes that since Cayman Islands does not have a double taxation avoidance treaty with Bangladesh, funds from Cayman will still have to be routed through jurisdictions that have advantageous tax treaties with Bangladesh (such as Mauritius and Cyprus).

The article is on page 68 of the World Commerce Review (Sep ’09), which can be accessed here.