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Alternative Investment Funds (Jersey) Regulations 201- and Financial Services (Amendment of Law) (No.4) (Jersey) Regulations 201-: Lodging

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A decision made on 19th Ocotber 2012:

Decision Reference: MD-E-2012-0133

Decision Summary Title :

i) Alternative Investment Funds (Jersey) Regulations 201- 

ii) Financial Service (Amendment of Law) (No.4) (Jersey) Regulations 201-

Date of Decision Summary:

18 October 2012

Decision Summary Author:

Director, Finance Industry Development

Decision Summary:

Public or Exempt?

Public

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

 

Written Report

Title :

i) Alternative Investment Funds (Jersey) Regulations 201- 

ii) Financial Services (Amendment of Law) (No.4) (Jersey) Regulations 201-

Date of Written Report:

18 October 2012

Written Report Author:

Director, Finance Industry Development

Written Report :

Public or Exempt?

Public

 

Subject:

 

Approval of the following draft Regulations:

 

i)                    Alternative Investment Funds (Jersey) Regulations 201- 

ii)                   Financial Service (Amendment of Law) (No.4) (Jersey) Regulations 201-

 

Decision(s):

 

The Minister for Economic Development approved the following draft Regulations:

 

i)                    Alternative Investment Funds (Jersey) Regulations 201- 

ii)                   Financial Service (Amendment of Law) (No.4) (Jersey) Regulations 201-

 

(Together the “draft Regulations”)

 

The Minister further directed that the documents be lodged au Greffe for debate by the States at the earliest opportunity.

 

 

 

 

 

Reason(s) for Decision:

The draft Regulations are necessary to make a variety changes to the regulatory regime of funds in the island to allow Jersey to sign an international agreement as a result of European Union Directive 2011/61/EU, the Alternative Investment Fund Managers Directive (the “Directive”).  The draft Regulations are therefore proposed to be made under the European Communities Legislation (Implementation) (Jersey) Law 1996.

 

The draft Regulations provide the Jersey Financial Services Commission (the “Commission”) with additional powers in relation to certain Jersey funds.  The effect of the Regulations is that the Commission will have the regulatory powers it needs over all funds which are to be marketed into Europe in order to enable the Commission to sign the international agreement and comply with the Directive.

 

Industry has been consulted on an expedited basis in relation to the draft Regulations. At the conclusion of that consultation it was evident that industry, Jersey Finance Limited and a working group of specialist funds practitioners were all in favour of providing the Commission with the regulatory powers required to sign the international agreement. 

 

Resource Implications:

 

There are no financial or manpower implications for the States of Jersey arising as a result of this decision.

 

Action required:

 

The documents to be lodged au Greffe for debate by the States at the earliest opportunity.

 

Signature:

 

 

 

Senator Ian Gorst

Position:

 

Chief Minister acting on behalf of the

Minister for Economic Development

 

Date Signed:

 

 

Date of Decision (If different from Date Signed):

 

 

Alternative Investment Funds (Jersey) Regulations 201- and Financial Service (Amendment of Law) (No.4) (Jersey) Regulations 201-: Lodging

MINISTER FOR ECONOMIC DEVELOPMENT

Report in relation to:

1)     ALTERNATIVE INVESTMENT FUNDS (JERSEY) REGULATIONS 201-

2) Financial Services (Amendment of Law) (NO.4) (jERSEY) REGULATIONS 201-

1. Issue

1.1 The Alternative Investment Funds (Jersey) Regulations 201- and the Financial Services (Amendment of Law) (No. 4) (Jersey) Regulations 201-  (together the “draft Regulations”) make changes which are necessary to enable collective investment schemes connected with Jersey to continue to be marketed into the European Union from July 2013. It is proposed that the draft Regulations be made under the European Communities Legislation (Implementation) (Jersey) Law 1996.

1.2  There is a need to enact legislation in order to enable the Jersey Financial Services Commission (“Commission”) to enter into an international agreement to permit the Jersey funds industry to market into existing European markets from July 2013.  Depending on timescales it may be necessary to ask for an abridgement of time in order to bring in this legislation within the time scales set by ESMA.

2.  Background

2.1  Jersey has approximately 2,000 funds with a net asset value of funds under administration of circa £200 billion of which a number will be affected by the Directive. There are over 200 Managers or Investment Managers and 50 Depositaries or Custodians based in Jersey.

2.2 The aim of the Directive is to create a comprehensive and effective regulatory and supervisory framework for alternative investment fund managers within the EU. The Directive imposes requirements on Member States of the European Union to regulate the activities of the managers of and depositaries to (that is, custodians of the assets of) Alternative Investment Funds (“AIFs”).  An AIF is, essentially, any collective investment scheme which does not come within the EU definition of a UCITS (Undertaking for Collective Investment in Transferable Securities). For the purpose of the Directive a “fund” has a broader meaning than under the Collective Investment Funds (Jersey) Law 1988.  This means that arrangements which are not currently treated as funds in Jersey law may be within the scope of the Directive.

2.3  There is one matter which needs action now.  This arises out of Article 42 of the Directive. One of the requirements of the Directive relates to the marketing of AIFs into any Member State of the European Union. In order to do so, the Commission must have entered into cooperation arrangements in relation to regulatory matters with the regulator of the Member State where it is desired that units of the AIF be marketed.

2.4  The European Securities and Markets Authority (“ESMA”) is co-ordinating the signing of memoranda of understanding (“MOUs”) between the regulatory authorities of the Member States of the European Union and the regulatory authorities of third countries which wish to conclude MOUs with the regulatory authorities of EU Member States. ESMA foresees that many of these MOUs will be in a standard form but the form of any memorandum is ultimately a matter for the parties to it.

2.5   The Commission has recently been informed that the final form of the MOU will, at least in relation to the matters where legislative changes in Jersey are required, be substantially in the form of the current draft.  It should be noted that the requirements have been changing and the process of finalisation has been outside officers’ control.

3. Review of Current Position and Effect of the Regulations

3.1  In preparation for the signing of MOUs, the Commission has reviewed relevant Jersey legislation.  The Commission has worked closely with a specialist group of funds practitioners, Jersey Finance Limited (“JFL”), the Jersey Funds Association (“JFA”) and the Economic Development Department.  The aim is to enable the MOU (in its current draft form) to be entered into.

3.2 The aim of the draft Regulations is to provide the Commission with additional powers in relation to a significant group of Jersey funds.  These powers relate to the regulation and supervision of Unregulated and COBO funds - powers which the Commission currently has in relation to other funds which are AIFs. The effect of the draft Regulations is that the Commission will have the powers it needs over all funds which are to be marketed into Europe – those powers are needed to enable the Commission to sign the international agreement with ESMA.

4.  Consultation Seminar in relation to Proposed Changes

4.1  Industry has been consulted with on an expedited basis due to the need to lodge the draft Regulations. On this occasion, the normal form of consultation was thought not to be appropriate due to the timescale required for the draft Regulations to be lodged.

4.2 The Consultation took the form of a seminar at the Pomme D’Or Hotel on 4 September 2012. The seminar was attended by approximately 150 people from the funds industry. There appeared to be general agreement with the proposal outlined, which included the making of Regulations substantially in the form outlined to the seminar and no disagreement with the proposals outlined has been received by the Commission.

5. Scrutiny Panel

Officers from Economic Development Department and the Commission discussed the background and the need for the Regulations with the Scrutiny Panel on 3 October 2012.  The Panel were satisfied with the need for the Regulations and appreciate the short timescale required for the lodging of the draft Regulations.

6.       Legal Review

The draft Regulations have been reviewed by the Law Officers’ Department and the department have confirmed that, whilst the draft Regulations engage certain Convention rights, the interference is justifiable and proportionate and that the draft Regulations do not breach the Human Rights (Jersey) Law 2000.

7.  Financial and Manpower Implications

7.1 There are no financial or manpower implications for the States of Jersey which would arise as a result of adopting the draft Regulations.

7.2 The draft Regulations will result in costs being incurred by the Commission in dealing with authorisation, supervision and (perhaps) enforcement. The costs are not expected to be significant and it is not currently known whether they will require any increase in staffing at the Commission; however, in accordance with Commission practice, it is contemplated that these costs will be passed on to the relevant part of industry.

8.  Further Legislation

 It should be mentioned, for completeness, that this is only the first part of a package of three sets of legislative change which is envisaged will be necessary relating to AIFs.  These include amendments to various regulatory laws (in particular the Financial Services (Jersey) Law 1998) to accommodate other changes arising from the Directive, and further changes will be necessary in relation to the parts of the Directive which will come into force from 2015.

9.  Recommendation

It is recommended that the Minister approve the draft Regulations and direct that the documents be lodged au Greffe for debate by the States at the earliest opportunity.

 

Director, Finance Industry Development

18 October 2012

 

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