Ashley Le Feuvre, Senior Manager of Volaw’s Funds and SPV Group, reviews the new regulations for the EU Alternative Investment Fund Manager Directive (AIFMD) and how they will impact upon Jersey’s funds industry. 

In our winter 2011/2012 edition of Jersey Brief, Volaw had commented on the EU Alternative Investment Fund Manager Directive, stating that that there was confidence among practitioners in Jersey that the Island’s funds industry was well positioned to provide a flexible response to AIFMD. 

Following the long awaited release of the Level 2 regulations by the European Commission on 19 December last year, we are pleased to confirm that this remains the case. The EU Parliament and Council does have three months to consider the regulations but it seems very unlikely that they will be rejected and while several areas require further clarification, there is now a reasonably clear picture of what is required. 

After a lengthy period of negotiation and development, the AIFMD will finally come into force in July 2013 and following implementation, in order to continue marketing their funds to European investors, managers of European domiciled funds must fully comply with the directive. 

Managers with funds located in countries such as Jersey, however, which are defined in the directive as “third countries”, will continue being able to market their non-EU funds to European investors under the national private placement regimes, which will remain in place until at least 2018. 

The private placement regimes will be subject to compliance with certain new disclosure requirements but this will be significantly less onerous than maintaining full compliance with AIFMD. Jersey maintains a highly developed and robust regulatory regime and continues to look very well positioned to meet third country acceptability criteria. 

According to the latest Global Financial Centres Index (GFCI) released in September 2012, Jersey has retained its position as the highest rated offshore international finance centre and in fact, has moved up into the top twenty global financial centres for the first time. In order for Jersey funds to access the European Union a series of modifications are planned to Jersey’s existing regulations and codes of practice, which will serve to ensure that local structures comply with those aspects of the directive that apply under the private placement regimes. 

In addition, the Jersey Financial Services Commission continues working towards agreeing the necessary cooperation agreement with ESMA, the European Securities and Markets Authority and it is hoped that a standard form of agreement can be adopted, which will be put in place with each individual EU member state. 

From 2015 non-EU funds will be able to utilise the full passporting regime and regulations will be implemented in Jersey in order to achieve the necessary requirements for local structures. However, there is still the potential for differing criteria to be imposed by individual EU member states and with some countries in Europe continuing to take a dim view of the offshore financial services industry, it remains to be seen whether there will be a true European passport for Jersey funds. 

The opportunity will also exist for managers of funds not only to consider Jersey as a jurisdiction in which to base their new products but also, they may wish to consider the benefits that could be achieved for them and their investors by seeking to relocate existing operations to Jersey. This is true for fund vehicles and also for general partner operations and investment management firms themselves, which continue to relocate to Jersey. 

In conclusion, Jersey continues its preparations for AIFMD and is enhancing its regulatory framework where required, in order to offer fund managers a fully AIFMD-compliant regime for those that wish to have access to European investors and markets, while maintaining its existing regime in parallel for those that do not. For further information about establishing investment funds and on our administration services, please contact Ashley Le Feuvre or Trevor Norman of Volaw’s Funds and SPV Group.