AIFMD Approval Boosts Fund Industry in Cayman Islands, BVI and Jersey

GRAND CAYMAN, Cayman Islands, Nov. 15, 2010 /PRNewswire/ -- Walkers, the leading international financial centre law firm, welcomes the confirmation of the final terms of the Alternative Investment Fund Managers Directive ("The Directive") and the removal of uncertainty for non-European Union (EU) fund managers marketing non-EU funds in the European Union, as a very positive development for the investment funds industry in the Cayman Islands, British Virgin Islands (BVI) and Jersey.

The final terms of the Directive, which were approved by the European Parliament on November 11, 2010, allow 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. Those 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."

About The Walkers Group

From offices in the British Virgin Islands, Cayman Islands, Delaware, Dubai, Dublin, Hong Kong, Jersey, London and Singapore, the Walkers Group provides legal and management services to leading FORTUNE 100 and FTSE 100 global corporations and financial institutions, capital markets participants, investment fund managers, and growth-and middle-market companies. The Walkers Group is comprised of leading offshore law firm, Walkers and Walkers Management Services, which specialises in corporate and fiduciary services.

Walkers' expertise has been validated by numerous awards including "Offshore Law Firm of the Year" by Alpha Magazine, The Lawyer, PLC Which Lawyer? and Asian Legal Business. Walkers has also been honoured as the PLC Which Lawyer? Yearbook Leading Cayman Islands Law Firm, Who's Who Legal Law Firm of the Year: Cayman Islands and has shared honours for "Offshore Legal Team of the Year" by the Society of Trust and Estate Practitioners (STEP). Many of Walkers' attorneys have also been recognised by the industry and their peers.

For more information on the Walkers group, visit us on the web at www.walkersglobal.com or contact us by e-mail at [email protected]. To contact Walkers by phone, call our Cayman Islands office at +1 345-949-0100.

SOURCE Walkers Group