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Channel Islands Celebrate AIFMD Announcement

by Jason Gorringe, Lowtax.net, London
31 July, 2015

The European Securities and Markets Authority has recommended that Guernsey and Jersey be granted a 'third country' passport under the Alternative Investment Fund Managers Directive (AIFMD).

The positive recognition of the islands' regulatory frameworks has been welcomed by the territories' fund industries and promotional agencies. If ESMA's recommendations are approved by the EU Commission, the Parliament, and the Council, the Channel Islands will be able to offer a broad range of marketing and organizational options to fund managers, whether they are targeting European or global investors.

The AIFMD was introduced to improve oversight of funds marketed to EU consumers, and a transitional period ended on July 22, 2014. EU managers marketing EU Alternative Investment Funds (AIFs) are required to obtain an EU-wide passport to market their funds to professional investors. Non-EU AIFMs or non-EU AIFs managed by EU AIFMs will be unable to obtain a passport until at least 2016, and must instead seek to market the funds through a National Private Placement Regime (NPPR).

After undertaking assessments of six jurisdictions, including also Hong Kong, Singapore, Switzerland, and the US, ESMA concluded that "no obstacles exist to the extension of the passport to Guernsey and Jersey, while Switzerland will remove any remaining obstacles with the enactment of pending legislation. No definitive view has been reached on Hong Kong, Singapore, and the USA due to concerns related to competition, regulatory issues, and a lack of sufficient evidence to properly assess the relevant criteria."

Geoff Cook, Chief Executive, Jersey Finance, said: "Jersey's private placement route into Europe continues to be actively used, with AIFMD not appearing to have stymied fundraising activities for Jersey funds at all. Nevertheless, this announcement from ESMA is a ringing endorsement of Jersey's alternative fund regulatory framework and reinforces just how important it was for Jersey to become the first offshore jurisdiction to offer an opt-in AIFMD-compliant regime back in 2013. Overall, this announcement opens up considerable options to managers so that, whatever their strategy and target markets, they can rely on Jersey as a hub from which to offer highly flexible routes to investors in Europe and beyond."

Ben Robins, Chairman of the Jersey Funds Association, said: "This is a fantastic development for Jersey that could position it right at the forefront of domiciles serving the global funds industry and particularly underlines its role as a specialist center for alternative funds benefiting European investors. Managers have long appreciated Jersey's security and stability and its dedicated 'Anglo Saxon' approach to client service as a high quality, rather than high volume, jurisdiction."

Dominic Wheatley, the Chief Executive of Guernsey Finance, said: "Guernsey's response to the AIFMD regime has been second to none, so to receive ESMA's recommendation for an AIFMD passport extension is extremely pleasing."

"Guernsey has had its own opt-in equivalent AIFMD regime fully operational since January 1, 2014 - well in advance of today's news. We did this in order to demonstrate the high standards that our funds industry works to and are now ideally placed to continue to provide access to Europe."

Andrew Whittaker, Chairman of the Guernsey Investment Fund Association (GIFA), said ESMA's recommendation would enable Guernsey to operate on a level playing field with its European counterparts in the future."

"As a non-EU jurisdiction with close proximity and business ties to the EU, it is essential that we are able to comply with AIFMD for those clients obliged to or who wish to take advantage of the regime."

"Our opt-in equivalent regime may make commercial sense for a fund manager marketing almost exclusively to Europe and who therefore may require full AIFMD compliance. In being able to offer both EU and non-EU solutions from one location, Guernsey will be ideally placed to serve the global fund industry."

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