Abuse of Structured Financial Products: Misusing Basket Options to Avoid Taxes and Leverage Limits

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96 pages
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Brief Executive Summary
The Senate Committee on Homeland Security and Governmental Affairs' Permanent Subcommittee on Investigations offers a detailed case study of how two financial institutions developed structured financial products called MAPS and COLT, two types of basket options, and sold them to one or more hedge funds that used them to avoid federal taxes and leverage limits on buying securities with borrowed funds. To conduct this investigation, the Subcommittee subpoenaed, collected, and reviewed over 1.5 million pages of documents. The Subcommittee investigation examined the basket option financial products designed and promoted by Deutsche Bank and Barclays. The report recommends to collect additional taxes owed on basket option profits, stop bank participation in abusive tax structures, revamp TEFRA, and to stop circumvention of leverage limits.
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