Offshore law firm Walkers has
welcomed the approval of the European Alternative Investment Managers Directive
by the European Parliament.
The confirmation of the terms of
the Directive removes the uncertainty for non-EU fund managers marketing non-EU
funds in the European Union and marks a very positive development for the investment
funds industry in the Cayman Islands, British Virgin Islands and Jersey.
The Directive allows for the
distribution of non-EU funds to professional investors in the EU through both a
private-placement regime and a passport system. The private-placement regime,
which has been the traditional method of distribution in the EU for non-EU
funds, will remain in place at least until 2018.
It is proposed that this regime
will transition in 2015 to allow full access to an EU passport marketing regime
to non-EU funds on the same terms as EU funds. EU funds will become eligible
for a passport in 2013.
“The confirmation that non-EU fund
managers will be able to continue marketing Cayman Islands, BVI and Jersey
funds to professional European investors is excellent news for the industry,”
said Rod Palmer, partner and global head of Investment Funds with Walkers.
The private-placement marketing
regime introduces certain conditions for non-EU funds to be distributed in the
EU. These conditions include the need for supervisory co-operation agreements between
the regulator of the EU member state in which a fund is being marketed and the
regulator of both the fund manager and the fund. In addition, the country in
which both the fund and the fund manager are established cannot be on the
Financial Action Task Force (FATF) blacklist. Funds also need to comply with
certain basic transparency and reporting requirements.
“The Cayman Islands, BVI and Jersey
are very highly rated by the FATF in respect to their anti-money laundering
regimes, which means they will not have to make any changes in their funds’
operations to comply with the Directive,” said Richard May, partner with
Walkers based in the British Virgin Islands.
Access to the EU marketing passport
will be subject to similar conditions to the private placement regime. In
addition to satisfying those conditions, the non-EU fund manager will require
to be authorised in an EU member state (its member state of reference).
OECD-compliant tax information exchange agreements will need to be in place
between the fund domicile and both the fund manager’s EU member state of
reference and each other member state in which the fund interests are proposed
to be marketed.
“In our recent discussions on the
Directive, the Cayman Islands Monetary Authority confirmed their commitment to
entering into co-operation agreements with EU regulators as a matter of
priority,” said Jennifer Thomson, partner with Walkers in the Cayman Islands.
“This follows Cayman’s long history of working with regulators worldwide and reflects
Cayman’s own strong regulatory framework. We know Jersey and BVI regulators
share this commitment as well.”
Each of the Cayman Islands, BVI and
Jersey appears on the OECD’s ‘White List’ of nations which have substantially
implemented the internationally agreed standards on tax and information
exchange, and they continue to enter into new tax information exchange
agreements (TIEAs) with EU member states, among others. Currently the Cayman
Islands, BVI and Jersey have collectively entered into nearly 60 TIEAs, with
more pending.
“A further positive outcome for the
industry is that the Directive does not apply to passive marketing or reverse
solicitation of non-EU funds,” added Jonathan Heaney, head of the Investment
Funds Group in Walkers’ Jersey office. “This means that European investors may
contact non-EU fund managers and invest in Cayman, BVI or Jersey funds even if
the fund manager does not satisfy the conditions of the Directive.”
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