National Private Placement Regimes under AIFMD
The Alternative Investment Fund Managers Directive (AIFMD) came into force on 22 July 2013. It regulates the management and marketing of alternative investment funds (AIFs) and aims to harmonise the market for alternative investment fund managers (AIFMs) within the EU.
The directive offers a passport allowing AIFMs to market funds across the EU. This passport is currently available only to EU domiciled AIFMs, but is expected to be extended to non-EU AIFMs and AIFs in time.
The European Securities and Markets Authority (ESMA) was tasked with opining on the possible extension of the passport to third countries and has twice produced a positive assessment in respect of Jersey, which is one of just five “third countries” to have received such a recommendation.
ESMA’s recommendation means that Jersey is well placed to be among the first wave of third countries to get access to a European passport under the AIFMD.
In the meantime, Jersey AIFs can be marketed to EU investors in member states via National Private Placement Regimes (NPPRs). To access investors in a member state, there must be in place a bilateral agreement between the Jersey Financial Services Commission (JFSC) and the member state’s financial services regulator. As at March 2017, the JFSC had agreed 27 AIFMD bilateral cooperation agreements.
Despite Jersey’s geographical proximity to mainland Europe, the majority of investors in Jersey funds – more than 90 per cent according to research undertaken by Capital Economics – are located outside the European Union, excluding the UK. Within the European investor-base, access via NPPR has been tried and tested in key markets such as the UK, Netherlands and Germany.
The NPPR route has proved attractive and has shown solid growth, with 161 Jersey managers and 306 Jersey funds actively marketing to EU investors as at 30 June 2018, which builds on many years of market practice in respect of the private funds market across Europe, and which has provided a solution to EU-based investors wishing to access global products. The NPPR route has also mitigated a number of the challenges of full AIFMD adoption including compliance uncertainties relating to reporting and disclosure, which remain contentious and subject to further policy change in the light of forthcoming AIFMD2 developments.
Although the timing of the AIFMD passport extension is currently unclear, ESMA has indicated that, in line with the AIFMD, until three years after the passport becomes available to third countries, EU member states will be permitted to allow non-EU AIFs access via NPPRs. This will effectively create a period with dual-stream optionality for non-EU AIFs and it appears, also taking into account political uncertainty at an EU level, that NPPR will remain an option for a number of years to come.
To take advantage of NPPRs, AIFMs of Jersey AIFs need to be familiar with the NPPR requirements applied in each state in which it seeks to place the AIF. Jersey Finance’s NPPR tool provides an overview of the jurisdictions with which the JFSC has AIFMD cooperation agreements in place, along with relevant information and external links for each of those jurisdictions.
AIFMD cooperation agreements
Below is an overview of the 27 jurisdictions that have signed a cooperation agreement with Jersey:
Austria, Belgium, Hungary, Netherlands, Bulgaria, Iceland, Norway, Cyprus, Ireland, Poland, Czech Republic, Germany, Latvia, Portugal, Denmark, Liechtenstein, Romania, Estonia, Lithuania, Slovakia, Finland, Luxembourg, Sweden, France, Malta, United Kingdom, Greece.
AIFMD opt-in option
For Jersey AIFMs and depositaries that want to opt-in to a fully compliant AIFMD regime from 22 July 2013, the JFSC created an authorisation regime based on the existing Financial Services (Jersey) Law 1998. This new authorisation regime quite simply mirrors all the requirements of the AIFMD level 1 and level 2 texts.
AIFMD regime in Jersey
Click here to go to the JFSC website.