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Directive 2011/61/EU on alternative investment fund managers (“AIFMD”) entered into force on July 22, 2013, setting standards for the authorisation, operation and transparency of alternative investment fund managers (“AIFM”) and the marketing of alternative investment funds (“FIA”) in the EU.
Two methods of marketing funds to professional investors in the EU/EEA under the AIFMD
Trade Passport Regime: Marketing passports are used by EU AIF managers to market EU AIFs in the EU/EEA through a pre-notification procedure between regulators. Currently, only EU and EEA countries benefit from the trade passport. It remains unclear whether the Marketing Passport will be extended to third countries, such as Jersey, as had been the intention before Brexit.
National Private Placement Schemes (NPPR): The NPPR is a mechanism that allows non-EU AIFMs to market AIFs which would otherwise not be allowed to be marketed under the AIFMD marketing passport regime.
Jersey meets the requirements for marketing under NPPR by:
- a cooperation agreement between the JFSC and regulators of EU/EEA member states, coordinated by the European Securities and Markets Authority (“ESMA”);
- Jersey remaining off Financial Action Task Force blacklist; and
- AIFMs complying with the transparency, reporting and disclosure requirements set out in the AIF Code of Practice published by the JFSC (the “FIA code”).
It is important to note that some EU/EEA member states have different requirements under their NPPR, so advice should be sought from a local lawyer in each relevant member state before carrying out any marketing activities with potential investors in that jurisdiction.
Marketing of Jersey AIFMs in Europe
Jersey-based fund managers are in a unique position as they are considered, from an EU perspective, to be located in a ‘third country’. As Jersey is considered a third country, it falls outside the scope of full AIFMD compliance and can take advantage of NPPR routes. the
AIFMD has been implemented on an opt-in basis in Jersey. This means that where Jersey AIFMs do not target EU/EEA investors, they are not required to opt for AIF Code compliance, which AIFMs, in relation to the marketing of Jersey AIFs EU, could not do if they were domiciled in the EU.
If the AIFM is domiciled in Jersey and intends to market the fund to EU-based investors, it:
- either must hold a license under the Financial Services (Jersey) Act 1998 (the “YSF Law“) or, if it is a sub-threshold AIFM (as summarized below), it will need to be approved by the Jersey Financial Services Commission (the “JFSC”) as a sub-threshold AIFM service provider under the Alternative Investment Funds (Jersey) Order 2013 (the “AIF Order of Jersey”); and
- in each case, he must comply with the applicable sections of the FIA Code.
From Jersey’s perspective and under the AIFMD, there are less onerous requirements for sub-threshold AIFMs. To be considered a sub-threshold
AIFM in Jersey, the cumulative outstandings of the AIFM must be below certain thresholds:
- manage leveraged assets below €100 million; or
- manage non-leveraged and closed-end assets worth less than €500 million.
Jersey finances marketing in Europe
- Jersey Private Funds (“JPF“FIA regulations”) and comply with the applicable sections of the FIA Code. A Jersey-based AIFM will either need to be approved by the JFSC under the FSJ Act or, if the AIFM meets the criteria for exemption as a “sub-threshold” AIFM, it will need to be approved as a AIFM sub-threshold under FSJ law. FIA order.
- Jersey Expert / Listed / Eligible Investor / Unclassified / Recognized Funds: these funds are already regulated under the Collective Investment Funds (Jersey) Act 1998 and their service providers must be regulated under the FSJ Act, whether or not they plan to market in Europe. Accordingly, alternative fund managers of these funds will only be required to submit a notification to the JFSC before marketing interests in these funds in the EU/EEA and to comply with the applicable sections of the AIF Code.
- Unregulated funds: Unregulated funds cannot be marketed in the EU, so these funds would need to be converted to JPF, expert, listed, eligible investor, unrated or recognized funds before they can be marketed to investors in the EU.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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