Overview
The Jersey Financial Services Commission (the “Commission”) today outlines the timetable for implementing Jersey’s regulatory regime in relation to the Alternative Investment Fund Managers Directive (2011/61/EU) of the European Parliament and of the Council of 8 June 2011 (the “Directive”) following the approval of the European Securities and Markets Authority (“ESMA”) coordinated cooperation agreement on 22 May 2013.
Jersey’s response to the Directive is outlined in more detail below and comprises stand-alone Regulations, Orders and Codes of Practice.
It is important to note that the regulatory regime for Jersey investment funds, managers and depositaries falling outside the scope of the Directive remains quite separate and entirely unaltered.
Background - potential impact on Jersey
The funds sector is a significant part of Jersey’s financial services industry. Whilst not having direct effect in Jersey, the Directive impacts on the ability of Jersey investment funds, or funds to which investment management or depositary services are provided in Jersey, to be marketed in Europe.
The meaning of “alternative investment fund” (“AIF”) for the purposes of the Directive has a broader meaning than the meaning of “fund” under the Collective Investment Funds (Jersey) Law 1988 (“CIF”). This means that arrangements which are not currently treated as funds under Jersey law may fall within the scope of the Directive.
Response to the Directive – New Regulations
The Alternative Investment Funds (Jersey) Regulations 2012 (the “Regulations”) came into force in April 2013 and form an integral part of Jersey’s alternative investment fund framework. However, the Regulations are not effective until 22 July 2013, which is the implementation date of the Directive.
The Regulations provide the Commission with the necessary powers over the whole of Jersey’s investment fund platform (including private funds) enabling the Commission to sign up to the cooperation agreement.
Cooperation Agreement - steps to enable European access to continue
The cooperation agreement is required pursuant to the Directive to enable Jersey alternative investment fund managers (“AIFMs”) to continue seamlessly to market into Europe under national private placement rules until at least 2018. The agreement is between the Commission and the supervisory authorities of the relevant Member State.
The Commission has been liaising with ESMA, the party responsible for negotiating the cooperation agreement on behalf of all 27 EU Member State securities regulators as well as the authorities from Croatia, Iceland, Liechtenstein and Norway since February 2012 and is delighted that those discussions have successfully concluded. ESMA’s Board of Supervisors approved the cooperation agreement with the Commission on 22 May 2013. Whilst ESMA has negotiated the cooperation agreement centrally, it is worth noting that it is a bilateral agreement that must be signed between each EU securities regulator and the Commission.
Codes of Practice for AIFs and AIF Services Business (the “Codes”)
The Commission has prepared draft Codes for the purpose of establishing sound principles and providing practical guidance for the conduct of AIFs, AIFMs and depositaries established in Jersey who, from 22 July 2013 are either (i) managing a European AIF, or (ii) marketing any AIF in Europe.
The Commission will shortly be publishing a consultation paper in relation to the draft Codes and subject to consultation, the Codes will come into effect on 22 July 2013.
The Commission will also amend the CIF Certified Funds Codes and the Fund Services Business (“FSB”) Codes to include an additional principle which cross-refers to the relevant requirements of the Codes as far as the Codes apply to the fund or the FSB in question. The Commission will also consult publicly in relation to these proposed changes.
Jersey Eligible Investor Fund
The Commission will shortly be consulting on a Jersey Eligible Investor Fund Guide setting out the principal characteristics of an additional new type of fund devised to respond to the requirements of the Directive.
Fees
The Commission proposes to introduce a straightforward fees regime to levy fees on AIFs and service providers to AIFs which have not previously paid fees. The proposed regime will not impose any fee on any business which has previously paid a fee to the Commission in respect of its CIF or FSB activities. The Commission will shortly be publishing its consultation paper in relation to this.
Orders
Various Orders have been prepared under the Regulations, or under other legislation, which clarify the scope of application of (and exemption from) the Regulations and other legislation. The Commission expects these Orders to be finalised in advance of
22 July 2013.
Conclusion
The timetable in relation to the Directive has been dictated by the European Union’s timetable. The Commission is grateful in advance for any comments received within the timescales set out in the various forthcoming consultation papers, which will be necessarily shorter than is usually the case.
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