Jersey: Jersey Funds Legal And Regulatory Quarterly Update - 1 January 2016 To 31 March 2016

Last Updated: 21 April 2016
Article by Niamh Lalor

Jersey Financial Services Commission (JFSC) updates

1.1. JFSC Business Plan 2016

On 5 February 2016, the JFSC delivered its Business Plan to the financial services industry.  The plan sets out the key priorities for the JFSC during 2016.  A Press Release is available together with the presentation slides. 

Consistent with earlier announcements, the JFSC is focusing on its "Change Programme" and a fundamental revision of its approach to supervision. The JFSC promises to embrace an increasingly risk-based methodology and adopt an entity-based, as opposed to licence-based, supervisory model. This should make interaction with the JFSC far more straightforward, with financial services businesses having a single point of contact at the JFSC.

1.2. Funds Service Business Form

An amended FSB/NDF form which now includes the question "Is the Fund an AIF within the meaning given in Directive 2011/61/EU?" is available for download from the JFSC website. Where fund services business providers are acting in respect of non-Jersey domiciled AIFs, they must be aware of their obligations as an AIFM, arrange all regulatory approvals and ensure compliance with the AIF Codes.

1.3. Cyber-security expectations for regulated persons

On 22 February 2016, the JFSC published a 'Dear CEO' letter, seeking to outline the "growing importance of cyber-security arrangement and the Commission's expectations of registered persons".

1.4. Trust Company Feedback for 2014 and 2015

The JFSC has published a summary of the findings from the JFSC's programme of on-site examinations conducted during the calendars years 2014 and 2015.

The key findings included:

  • deficiencies identified in initial and ongoing customer due diligence, particularly where enhanced due diligence is required;
  • inadequate overall assessment of AML/CFT risk as part of the Business Risk Assessments, particularly due to a lack of consideration of specific risks currently facing the business;
  • failures in corporate governance, including policies and procedures either being incomplete, inaccurate or absent, failure for the board to meet on a sufficiently frequent basis, ineffective monitoring through periodic reviews and failure to identify potential conflicts of interest or failure to act on trigger events.

2  Updates to Jersey legislation

2.1. Draft Financial Regulation (Miscellaneous Provisions No.3) (Jersey) Law 201-

The draft law makes amendments to a number of laws administered by the JFSC, namely:

  • the Alternative Investment Funds (Jersey) Regulations 2012;
  • the Banking Business (Jersey) Law 1991;
  • the Collective Investment Funds (Jersey) Law 1988;
  • the Financial Services (Jersey) Law 1998;
  • the Insurance Business (Jersey) Law 1996; and
  • the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008;

(together, the Regulatory Laws).

The changes to the Regulatory Laws, which are designed to counter money laundering and the financing of terrorism, constitute routine maintenance of the legislation that provides the JFSC with powers to supervise financial services firms, and various other businesses.

2.2. Companies (Transfer of Shares – Exemptions) (Amendment) (Jersey) Order 2016

This Amendment Order adds the Luxembourg Stock Exchange and the Johannesburg Stock Exchange to the list of approved exchanges where Jersey companies can list uncertificated shares, pursuant to the Companies (Transfer of Shares – Exemptions) (Jersey) Order 2014 (the Order). Ogier acted on the first uncertificated listing of a Jersey company on NASDAQ under the Order before it was amended, and worked with Jersey Finance to procure this amendment to add the JSE and Luxembourg exchanges to facilitate proposed client transactions.

3  Tax

3.1. OECD updates

(a) Country by Country Reporting

The Chief Minister's Department has published a Consultation on Base Erosion and Profit Shifting: Introduction of country by country reporting. The Consultation invites comments on the draft regulation proposed by the UK to progress this OECD initiative.  It is envisaged that Jersey's regulations will closely follow the UK (and OECD model) legislation. The Consultation closes on 22 April 2016.

This is in line with continuing efforts to boost transparency, and the OECD proposes to put in place an international framework through a multilateral instrument. So far 21 countries have signed a Multilateral Competent Authority Agreement for the automatic exchange of country by country reports.

(b) OECD Consultation paper on Treaty Entitlement of Non-CIV Funds

On 24 March 2016, the OECD published a consultation paper discussing the Treaty Entitlement of Non-CIV Funds. The paper is part of the follow up work on BEPS Action 6 (Preventing the Granting of Treaty Benefits in Inappropriate Circumstances) and seeks comments on a range of issues, including the effect that a limitation on benefits provision would have on Non-CIV funds. The closing date for comments is 22 April 2016.  The Jersey Funds Association and Jersey Finance are preparing a response to this consultation.

(c) OECD calls for united front on BEPS

The OECD has presented a new framework to G20 Finance Ministers that would allow all interested countries and jurisdictions to join in efforts to update international tax rules. Those who join the OECD's new forum will participate as 'BEPS Associates' in an extension of the OECD and G20 members on the remaining standard setting, review and implementation of the BEPS project.

(d) International Tax Compliance Regulation

The Minister for External Relations has lodged draft legislation that aligns the penalties for FATCA non-compliance and UK IGA non-compliance with those set out in the recent equivalent CRS Regulations.

(e) CRS self-certification forms

The OECD has published specimen CRS self-certification forms drafted by the Business and Industry Advisory Committee to the OECD. These are not 'approved forms' and are intended only 'to illustrate how financial institutions may consider requesting customer information from their account holders'. The forms provided are Controlling Person tax residence self-certification from, Entity tax residency self-certification form, and Individual tax residence self-certification form.

3.2. Taxation (Implementation) (International Tax Compliance) (Common Reporting Standard) (Amendment of Regulations) (Jersey) Order 2016.

The Order amended Schedules 2, 3 and 4 of the Jersey Common Reporting Standard regulations, which provide details of the jurisdictions committed to the adoption of CRS. It is anticipated that we will see further amendments as jurisdictions confirm their intentions.

3.3. CRS Guidelines

The Chief Ministers Department has finalised a second edition of the CRS Guidance Notes, embracing amendments made since the December 2015 First Edition.  The Second Edition is available here.

3.4. Channel Islands tax representative appear at EU committee

Representatives from the Channel Islands have faced questioning from MEPs on taxation systems. Jersey was represented by international affairs advisor, Colin Powell, who was asked to explain local practices and to provide views on the Europeans Commission's Anti-Tax Avoidance Package, published in January 2016. A letter sent by the Chief Ministers of Jersey and Guernsey to the European Parliament ahead of the meetings is available and recordings of the meetings can be found on the European Parliament's website.

3.5. EUSD Regulations suspended

The Minister for External Relations made the Taxation (Agreement with European Member States) (Suspension of Regulations) (Jersey) Order 2016, suspending the operation of the European Union Savings Tax Directive between Jersey and all contracting parties (apart from Austria) as a result of the coming into force of CRS.

4  Beneficial ownership

4.1. United Kingdom

On 17 December 2015, the Department for Business, Innovation and Skills published its Response to the June 2015 Consultation concerning the proposed Register for People with Significant Control. The Response confirms (amongst other matters) the list of companies that will not be required to keep a register, how 'extent of control' will be recorded, the fixed fee for searches, the regime for excluded information, the position where foreign limited partnerships hold shares or rights in a UK company and the new test for 'significant control of an LLP'.

4.2. Jersey

The Government published its Consultation on Beneficial Ownership of Jersey Companies and a Register of Directors. The Consultation sought input on the automatic updating (post incorporation) of changes in company beneficial ownership and control and the introduction of a public central register of directors. The Consultation closed on 7 April 2016 and Ogier was involved in preparing responses highlighting Jersey's position as a well-established industry that promotes high standards of professional conduct amongst its members and already adheres to strict rules regarding identifying beneficial owners and exchanging information to other tax authorities.

5  EU

5.1. AIFMD Passport

A letter from the European Commission (EC) has been published, setting out the EC's response to ESMA's advice on the application of the AIFMD passport to non-EU AIFMs.  The EC has confirmed the appropriateness of ESMA's approach of assessing country by country.  The EC has suggested that ESMA assess a number of other jurisdictions by 30 June 2016 and provide a more detailed assessment of the capacity of supervisory authorities and their track record in ensuring effective enforcement, including those jurisdictions initially assessed by ESMA.

5.2. MiFID 2 implementation formally delayed by one year

On 10 February 2016, the EC published the legislative acts amending the revised Markets in Financial Instruments Directive and associated Regulation (together 'MiFID 2') which extend the application date of MiFID 2 until 3 January 2018.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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