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U.S. Legislation of Sovereign Wealth Funds

U.S. Legislation of Sovereign Wealth Funds. Sovereign Wealth Funds at a Glance. - There’s no universally accepted definition of a SWF, but they are government-owned investment vehicles that are invested in foreign assets

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U.S. Legislation of Sovereign Wealth Funds

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  1. U.S. Legislation of Sovereign Wealth Funds

  2. Sovereign Wealth Funds at a Glance -There’s no universally accepted definition of a SWF, but they are government-owned investment vehicles that are invested in foreign assets -SWFs are not novel or necessarily foreign - the first one was conceived and established in the United States in the 1854 by the newly formed state of Texas (the first foreign sovereign wealth fund in the modern era is Kuwait’s, founded in 1953) -Don’t have good data on SWFs but have good C Bank reserves, because the latter must be reported to the IMF -Central Banks, State-Owned Corporations and SWFs are not the same -Sourced by commodities, trade surpluses, budget surpluses

  3. U.S. Legislation and SWFs -There are two types of legislation that govern SWFs -The percentage of permissible investment by foreign entities in certain sectors -The power of the President and the Executive Branch to block acquisitions by SWFs for national security purposes - The Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007 (Section 721) -International Investment and Trade in Services Act -International Emergency Economic Powers Act (IEEPA) -Global governance: IFSWF + Santiago Principles – basic standards on reporting but membership voluntary

  4. The Problem with U.S. SWF Legislation -Although U.S. laws do not address SWFs specifically, several laws in place impose restrictions on general foreign investment in a number of sectors, and, coupled with a complex and unpredictable enforcement system, thus leaves the U.S. at a disadvantage in the arena of international trade -The issue of U.S. legislation toward SWFs – at its most basic – pits investment and economic growth against security concerns -The reality is that a recent boom in the size and number of SWFs is a challenge for U.S. officials working with amended laws originally adopted during a different geopolitical era

  5. Dubai Ports World -Sale of ports management companies in six U.S. ports to the a state owned company in the United Arab Emirates, DP World -President Bush argued for the deal, but legislation was introduced in Congress to delay the sale -DP World approached the CFIUS -Dubai Ports World eventually sold P&O's American operations to American International Group's asset management division, Global Investment Group for an undisclosed sum

  6. Policy Proposal -Should the U.S. adopt new legislation specifically for SWFs? -Fighting secrecy with ambiguity? -Clear, public transparency indices -Unify enforcement structure - Disorganization and uncertainty behind vague laws that provide broad powers to the executive branch regarding international trade and investment of SWFs into the U.S.

  7. Research Links • http://www.gao.gov/new.items/d09608.pdf • http://www.treasury.gov/resource-center/international/foreign-investment/Documents/FINSA.pdf • https://www.youtube.com/watch?v=0Y4oly7H3UE • https://www.sec.gov/news/testimony/2008/ts0342408et.htm • https://blogs.law.harvard.edu/corpgov/2013/06/21/impact-investment-sovereign-wealth-funds-corporate-governance-and-stock-markets/

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