ESMA has today concluded that "no obstacles exist to the
extension of the passport to Guernsey and Jersey".
ESMA has assessed six jurisdictions to date and said that
Switzerland will remove any remaining obstacles with the enactment
of pending legislation and that it had formed no definitive view on
the other three (Hong Kong, Singapore, and the USA).
AIFMD - ESMA recommends 3rd country passport for Jersey and
The six jurisdictions were selected based on various factors
including the amount of funds activity under existing EU national
private placement regimes and the experience of EU national
authorities in dealing with these jurisdictions.
The selection of Jersey and Guernsey in the list of
jurisdictions for priority assessment is testament to their
international importance as fund domiciles (which together have
over £500 billion of assets under management) and of their
standing as internationally co-operative and transparent
jurisdictions. ESMA's recommendation that they be granted full
EU passport access underlines the flexibility and
"future-proofing" that they offer.
Guernsey funds partner Ben Morgan said: "Since the advent
of AIFMD, fund establishment in Guernsey and Jersey has continued
on a more or less business-as-usual basis. Firstly, funds are
regularly established by promoters with no EU connections and
secondly, Guernsey/Jersey funds are often established by EU AIFMs
and non-EU AIFMs for marketing Guernsey/Jersey funds under the NPP
regimes of EEA states.
"In addition, Guernsey and Jersey structures have also been
established alongside EU AIFs (for passporting purposes). The
extension to Guernsey and Jersey of the passporting regime will
mean that the entire fund structure can be domiciled in the Channel
Islands, something which should be welcomed by all investors,
including those in EEA member states, given the resultant cost and
time savings associated with having everything in one
Jersey funds partner Dan O'Connor said "Ultimately,
with this announcement, clients have full AIFMD optionality. The
existence of mature and experienced fund services industries and
internationally recognised regulatory regimes that combine speed,
certainty and flexibility with an appropriate level of regulatory
oversight, have played a large part in the influx of new fund
managers and the record growth in fund assets under management that
Jersey and Guernsey have been experiencing.
"We have seen many fund managers significantly reduce
operational costs and disclosure requirements by choosing Jersey
and Guernsey funds and marketing to potential EU investors using
NPP regimes. We expect this announcement to provide further comfort
to fund managers and their advisers that Jersey and Guernsey funds
provide the best of both worlds."
Jersey and Guernsey are outside the European Union and regarded
as "third countries" for AIFMD purposes. Each has
implemented AIFMD requirements only to the extent necessary to
allow their funds and managers to access investors in EU/EEA
Channel Islands funds are eligible to be marketed into the EU /
EEA in accordance with the AIFMD through national private placement
regimes and (once available) through the EU passporting regime.
For Jersey and Guernsey funds (and other non-EU funds) with a
Jersey or Guernsey manager:
Where the fund is not an "AIF" or is not
"marketed" into the EU/EEA (as defined in the AIFMD), the
fund and its manager are not subject to any AIFMD-related
Article 42 requirements only
The fund can be "marketed" into the EU/EEA through
national private placement ("NPP") regimes by complying
with only the requirements of AIFMD Article 42 (annual reports,
pre-investment disclosure and regulatory reporting on liquidity,
risk management arrangements and leverage). This reduces costs as
other AIFMD requirements do not apply, including that no depositary
is needed (although a small number of EU/EEA countries require a
depository before permitting marketing).
A Jersey or Guernsey manager can opt for full AIFMD compliance
under its local funds regime, to be ready for the extension of the
AIFMD passporting regime to third countries.
ESMA's advice and opinion have been sent to the EU
Commission, Parliament and Council for their consideration on
whether to activate the relevant provision in the AIFMD extending
the passport through a Delegated Act. ESMA aims to finalise the
assessments of Hong Kong, Singapore and the USA as soon as
practicable and to assess further groups of non-EU countries until
it has provided advice on all the non-EU countries that it
considers should be included in the extension of the passport.
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