- Alternative Investment Fund Managers Directive (AIFMD)
The AIFMD and the relevant Jersey implementing legislation has been in force for over six months. However, as a result of transitional arrangements in certain member states, a number of fund managers (AIFMs) and their advisers are yet to come to terms with the new regime.
By July 2014 all relevant entities will be required to opt in to Jersey's AIF regime so now is the time for Jersey AIFMs to consider what steps they must take if they wish to continue to have access to EU markets.
1.1 UK transitional arrangements
The UK Government confirmed in December 2013 that it intended to amend the transitional arrangements for UK firms. The proposed arrangements will allow a UK AIFM to manage AIFs after 22 July 2014 without having been authorised or regulated, provided that the AIFM has submitted to the FCA before 22 July 2014 an application for authorisation or registration. Such an AIFM will be able to continue managing AIFs until the FCA has determined the application.
HM Treasury intends to make an amending statutory instrument detailing what happens to AIFMs whose applications remain outstanding after 22 July 2014, but AIFMs are still encouraged to make their applications in good time.
This is not surprising perhaps, given that as at mid March out of an anticipated 776 firms only 361 firms had applied to the FCA for AIFMD authorisation.
1.2 Remuneration Policies
EMSMA has recently refined the remuneration rules in the case of delegation of portfolio management or risk management activities. The amendment clarifies that the category of staff covered by ‘appropriate contractual arrangements’ are staff who have a ‘material impact on the risk profiles of the AIFs it manages as a result of the delegation’.
1.3 Regulatory reporting
ESMA has updated its Q&A relating to AIFMD and, in particular, has issued guidance on the reporting obligations of AIFMs, including clarifying that when a non-EU AIFM reports information to the national competent authorities of a Member State, only the AIFs marketed in that Member State have to be taken into account for the purpose of the reporting. In addition, detailed guidance is given on how AIFMs should calculate various percentages and how they should report information.
2 US Foreign Account Tax Compliance Act (FATCA)
As we advised in previous briefings, FATCA creates a new tax information reporting and withholding regime for payments made to certain ‘Foreign Financial Institutions’ (FFIs) and other ‘foreign’ persons. The definition of FFI is very broad and includes investment funds. Failure to report could result in 30% withholding tax being deducted on U.S. source income and payments.
Implementation of FATCA is phased, and the first changes are due to take effect from 1 July 2014 with certain withholding requirements taking effect from the same date.
On 13 December 2013, an intergovernmental agreement (IGA) between Jersey and the USA was signed at the US Embassy in London (which is due to be ratified by the States of Jersey in the summer). The purpose of the IGA is to ensure that FFIs will:
- not be required to enter into an FFI agreement, but instead will be directed by Jersey legislation to comply with FATCA;
- have reduced (or nil) withholding tax and withholding obligations; and
- report on relevant accounts to the Jersey Comptroller of Income Tax, not direct to the IRS.
The UK Crown Dependency Governments have released FATCA Guidance Notes. Comments and feedback from industry users have been invited.
- Regulatory Updates
3.1 Review of beneficial ownership
Jersey's Chief Minister’s Department has published a Consultation Paper concerning transparency of beneficial ownership of companies. The consultation period will end on 30 April 2014.
Jersey is already significantly ahead of other jurisdictions in its requirement to disclose beneficial ownership to the JFSC upon incorporation and to maintain CDD on beneficial owners for the life of the company. It is hoped that the new initiative will not result in Jersey becoming a less attractive jurisdiction in which to structure investments and other asset holding vehicles.
3.2 Ombudsman Scheme
The draft Financial Services Ombudsman (Jersey) Law was approved by the States of Jersey on 1 April and is now awaiting UK Privy Council approval. The consultation on the secondary legislation that will refine the scope of the scheme and who will be eligible to complain has opened, but it is hoped that all funds other than Recognized Funds will be excluded from the scheme.
3.3 Anti-money laundering
In 2009, the IMF published a report on Jersey’s compliance with the Recommendations of the Financial Action Task Force (FATF). Whilst Jersey was assessed as “complying” or “largely complying” with the Recommendations, a number of suggestions were made in the report about how Jersey’s framework for anti-money laundering and countering terrorist financing (AML/CFT) could be improved. A revised consolidated version of the AML/CFT Handbook for regulated financial services business was published by the Commission on 11 December 2013.
3.4 Amendments to Codes of Practice
The Commission has published revised fund services business and investment business Codes of Practice to provide clarification on the scope and basis on which the Codes are issued, align regulatory requirements across the Codes wherever possible and augment existing requirements or set certain new requirements. The amendments to the Codes of Practice will become effective from 1 July 2014.
- International Relations
On 20 December 2013 the French Government announced that Jersey is no longer considered to be non-cooperative in the exchange of tax information and as such, Jersey has been removed from the French ‘non-cooperative’ list. On 11 December 2013 it was announced that Jersey and Guernsey are to establish an office in Caen to represent both islands’ interests with French authorities. The Bureau des Iles Anglo-Normandes will support relations with France in areas such as energy, fisheries, civil contingencies, transport links, tourism, education, language links and business development.
This is a welcome development and indicative of the ability of Jersey's government to act quickly and constructively.