The Alternative Investment Fund Managers Directive 2011/61/EU (“AIFMD”) came into force on 22 July 2013, setting standards for the authorisation, operation and transparency of alternative investment fund managers (“AIFMs”) and the marketing of alternative investment funds (“AIFs”) into the EU.
Two methods for marketing funds to professional investors in the EU/EEA under the AIFMD
Marketing passport scheme: Marketing passports are used by EU AIFMs to market EU AIFs across the EU/EEA through a regulator-to-regulator prior notification procedure. Currently only EU and EEA countries benefit from the marketing passport. It remains unclear as to whether the marketing passport will be extended to include the third countries, such as Jersey, as had previously been the intention pre-Brexit.
National Private Placement Regimes (NPPRs): NPPR is a mechanism which allows non-EU AIFMs to market AIFs which would not otherwise be authorized to be marketed under the AIFMD marketing passport regime.
Jersey satisfies the requirements for the purposes of marketing under the NPPRs through:
- a co-operation agreement between the JFSC and the regulators of the EU/EEA member states, coordinated by the European Securities and Markets Authority (“ESMA”);
- Jersey remaining off the Financial Action Task Force blacklist; and
- AIFMs complying with transparency, reporting and disclosure requirements provided for by the AIF Code of Practice issued by the JFSC (the “AIF Code”).
It is important to note that certain EU/EEA member states have different requirements under their NPPRs, so advice should be sought from a local counsel in each relevant Member State before conducting marketing activities to potential investors in that jurisdiction.
Jersey AIFMs marketing into 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 to be a third country, it is outside the scope of full compliance with the AIFMD and can take advantage of the NPPR routes. Tea
AIFMD has been implemented on an ‘opt-in’ basis in Jersey. This means that where Jersey AIFMs are not targeting EU/EEA investors, they are not obliged to opt into AIF Code compliance, something which AIFMs, with respect to marketing EU AIFs, could not do if they were domiciled in the EU.
If the AIFM is Jersey domiciled and intends to market the fund to EU-based investors, it will:
- either need to hold a license under the Financial Services (Jersey) Law 1998 (the “FSJ Law”) or, if it is a sub-threshold AIFM (as summarised 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 “Jersey AIF Order”); and
- in each case, it will need to comply with the applicable sections of the AIF Code.
From a Jersey perspective and under the AIFMD there are less onerous requirements for sub-threshold AIFMs. To qualify as a sub-threshold
AIFM in Jersey, the AIFM’s combined AUM must fall below certain thresholds:
- manage leveraged assets of less than €100 million; gold
- manage unleveraged and closed-ended assets valued at less than €500 million.
Jersey funds marketing into Europe
- Jersey Private Funds (“JPFs”) must apply to the JFSC for an AIF Certificate under Jersey’s Alternative Investment Funds (Jersey) Regulations 2012 (the “AIF Regulations”) and comply with the applicable sections of the AIF Code. A Jersey-based AIFM will either need to be licensed by the JFSC under the FSJ Law or, if the AIFM meets exemption criteria as a “sub-threshold” AIFM, it will have to be approved as a sub-threshold AIFM under the Jersey AIF Order.
- Jersey Expert/ Listed/ Eligible Investor / Unclassified / Recognized Funds: these funds are already regulated under the Collective Investment Funds (Jersey) Law 1998 and their service providers need to be regulated under the FSJ Law regardless of whether they plan to market into Europe. As a result, the AIFMs of such funds will only be required to submit a notification to the JFSC before marketing interests in such funds into the EU/EEA and comply with the applicable sections of the AIF Code.
- Unregulated funds: unregulated funds cannot be marketed into the EU, so such funds would need to be converted into either a JPF, Expert, Listed, Eligible Investor, Unclassified or Recognized funds before they can be marketed to EU investors.