Last month, the House of Commons Justice Committee published its First Special Report Session 2017-19 on the implication for the Crown Dependencies, which confirmed that there is no intention to change the constitutional relationship between the UK and the Crown dependencies.
This is welcome news and affirms what we’ve been saying for a while now, which is that Jersey is a ‘no change’ jurisdiction. But let me explain what we mean by that.
Despite our proximity to mainland Europe, 90% of Jersey fund investors are located outside the EU (not including the UK). Of that 90% a significant chunk are investors based in the UK. Jersey’s access to these will remain unchanged no matter what Brexit brings. But it’s not quite the same picture for EU onshore jurisdictions that cannot guarantee they will have access to the UK in the future without barriers. Furthermore, following Brexit, the importance of single market access may significantly reduce meaning European money will come with extra costs and liabilities, and may only come to represent a fraction of the relevant investor universe in the future.
Then if we look at the picture for marketing into the EU we find that Jersey’s offering is equally future-proof. As a jurisdiction operating outside of the EU, the Island can offer a strong and flexible regulatory solution through its National Private Placement Regime (NPPRs). NPPRs do not require full adherence to the Alternative Investment Fund Managers Directive (AIFMD) – the process that regulates the marketing and investment of EU-domiciled AIFMS through a passporting system. While Jersey, if required, can offer an AIFM equivalent process, our NPPRs have proved a highly successful alternative and have been tried and tested in key markets such as the UK, Germany and the Netherlands. It’s no surprise then that they are proving increasingly popular, seeing a 10% rise year-on-year.
That said, should the AIFMD passport get extended beyond the EU, Jersey, having been one of only five non-EU jurisdictions to be given the unqualified and positive assessment by the European Securities and Markets Authority (ESMA), is well placed to be among the first wave of third countries to access it. Until then, and indeed beyond, NPPRs will continue to provide an effective route to market into the EU as well as the rest of the world.
So, while Brexit undoubtedly continues to create a storm, for Jersey’s funds industry it certainly appears to be more a ripple than a wave, thanks to the flexibility of the NPPR route combined with Jersey’s continued access to UK investors. Sadly, the same cannot be said for EU onshore jurisdictions that are still very much at sea with what may be on the horizon.