Granting Guernsey a 'third country' passport under the
Alternative Investment Fund Managers Directive (AIFMD) would lead
to increased investment in European infrastructure projects,
research by the island's financial services regulator has
The Guernsey Financial Services Commission (GFSC) undertook a
survey of Guernsey fund administration companies in response to a
request from the European Securities and Markets Authority (ESMA),
to understand the potential impact of extending an EU AIFMD
passport to Guernsey. ESMA's request, which was made before it
published its non-EU AIFMD passport review findings, asked
specifically for an evaluation of the 'expected inflow of funds
by size and type into the EU' from Guernsey if the passport
were to be granted.
From an industry-wide perspective the GFSC survey projected that
there would be a 12% increase in the number of Guernsey funds
launched on an annual basis with an accompanying 21% increase in
the scale of capital being raised. At the same time, given the
typical share of EU investments held in Guernsey funds, the GFSC
submission forecast that there would be a 27% increase in
investment into EU assets generally and a 40% increase in
investment into infrastructure assets over five years through
Guernsey-based funds, as a result of a passport being granted.
ESMA assessed Guernsey, alongside 11 other non-EU jurisdictions,
as part of its non-EU AIFMD passport reviews and gave Guernsey one
of only five 'unqualified and positive assessments' when it
announced its recommendations on 19 July. ESMA's advice will
now be considered for approval by the European Commission,
Parliament and Council before they activate the relevant provision
in the AIFMD to extend the passport through a Delegated Act.
Guernsey Finance Chief Executive Dominic Wheatley said:
"The GFSC survey evidences the important role that the
Guernsey funds market has to play in the European economy and how
this could be enhanced further once we are granted an AIFMD
"ESMA's unqualified and positive assessment back in
July demonstrated the confidence and trust in our regulatory
framework, supervisory practices and track record as a jurisdiction
that meets the highest international standards. It also offered a
greater degree of certainty for investment managers utilising
Guernsey for funds which are then sold into the European Union,
something this report and its projections show is of great
This research was conducted prior to the UK's Brexit vote on
23 June. The GFSC has since gone back to those firms surveyed to
ascertain their initial views on the potential impact Brexit might
have on the likely result of a passport extension.
Dr Andy Sloan, Director of Financial Stability at the GFSC, said
that while it was too early to be definitive, the general consensus
was that extending the passport would have an increased positive
"Given Guernsey is already a third country, its
attractiveness as a jurisdiction would increase due to the
stability and security its unchanged status affords. This is allied
to its internationally recognised commitment to meeting global
regulatory and tax transparency standards and that the same funds
would be able to be marketed in parallel into the EU and the
UK," said Dr Sloan.
Since AIFMD came into force in 2013, Guernsey has adopted a
'dual regime' whereby there are two parallel regulatory
regimes for investment funds. The existing regime remained in place
for managers and investors not requiring an AIFMD fund, including
those using EU national private placement regimes and those
marketing to non-EU investors, and ran parallel with an opt-in
regime which is fully compliant with AIFMD.
*A report, 'Passport expectations – benefits of
granting Guernsey an AIFMD passport', which contains the
findings of the GFSC survey, can be viewed here.
Observing a recent discussion between the children of a successful entrepreneur, I was reminded once again of the potential impact of family members being provided with differing information about the family enterprise.
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