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Klonaris finds the SMART solution

Alocal attorney is responsible for the latest manifestation of the SMART fund, called SMF006 or the’Side Pocket”fund–a tool now available to financial services providers throughout the country.

Pamela Klonaris, a lawyer of 22 years experience, toldGuardian Businessyesterday that after the bottom fell out of the securities market internationally at the end of 2008, one of her clients had a problem, and she likes to solve problems.

“2009 was a very rough year for investment funds because funds were suspending redemptions and subscriptions, they weren’t able to calculate their net asset values(NAVs), they couldn’t get any value for their investments and they were imposing gating limitations, which further created a domino effect.”

Gating limitations she said refer to a percentage of an investment fund, usually 10 to 20 percent, which if redeemed would trigger a suspension of redemptions, Klonaris explained. Other funds invested which had reached the gating limitation would subsequently be impacted, as the fund-of-funds would then itself have redemption and valuation problems.

Klonaris’client wanted to move illiquid assets out of a fund, but still be able to manage the liquid assets that remained in the fund. The flexibility of the legislation related to SMART fundsallowed Klonaris to custom-tailor a solution, the”Side Pocket”SMF006 fund, to hold the illiquid assets. The SMART(Specific Mandate Alternative Regulatory Test)fund was introduced to The Bahamas via the Investment Funds Act 2003.

“People are just beginning to realize how you can use it,”said Klonaris.

Solution providers need to look beyond the now six models available locally, according to Klonaris, adding that the open architecture of the fund was always intended to result in’all sorts of models”which would become available to the industry.

“Another thing I found was that it went very smoothly,”the attorney said, refering to the implementation of SMF006. She added that each new iteration of the SMART fund is essentially subsidiary legislation. After’selling’the fund idea to the Securities Commission it was presented to the attorney general. She said the process took about six months.

Klonaris was recognized for the innovation by the Bahamas Financial Services Board(BFSB)which awarded her with the Financial Services Industry Development&Promotion Award for 2010.

Klonaris said that she always knew she was going to be an attorney, and never wanted to do anything else. She said she finds her relationships with her clients to be her favorite part of the job.

“What’s great about this is that I get to work with great people every day,”Klonaris said.

The pace of the industry today provides one of her biggest challenges.”Clients want things immediately. If that was true two years ago, it is doubly true now.”

Klonaris shared some advice for young lawyers getting into the financial services industry.

“Networking,”she said. Despite the daunting aspects of stomping for the industry or the time spent attending meetings of the Society of Trust and Estate Practitioners(STEP), the BFSB and the Bahamas Association of Compliance Officers, she said that these were critical to the growth and development of young lawyers in the financial services industry.

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