presented by jfa – legal update 24 october 2013 robert milner
TRANSCRIPT
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PRESENTED BY
JFA – Legal Update
24 October 2013
Robert Milner
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LEGAL UPDATE
■ AIFMD
■ New Prospectuses Order
■ Managed Accounts
■ LLPs
■ FATCA and Son of FATCA
■ New Security Interests Law
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FOCUS FOR TODAY – FUNDS PRACTITIONERS
■Background?■Why should you care?■Next Steps?
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AIFMD: BACKGROUND
■ EU legislation seeks to harmonise regulation and marketing of AIFs by AIFMs
■ Ultimately, aims to provide a ‘passport’ to market throughout the EU (per prospectus directive, UCITs, etc)
■ Focuses on the AIFM (although does impact AIFs too)■ Went through many iterations (political dynamite)
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AIFMD: WHY SHOULD YOU CARE?
■ New Jersey laws – apply where any fund is marketing into EU
– Require all AIFs and AIFMs to be regulated
– BUT only if AIFMD applies
■ Existing regulated funds and managers pretty much OK
■ Transitional provisions
■ AIFs – AIF certificate
■ AIFM – FS(J)L registration (consent for “sub-threshold”)
■ Horrible consequences of getting it wrong: criminal offences in EU and Jsy PLUS Art 22 FS(J)L – contracts can be void
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EXISTING AIFS: BRIDGING THE GAP
■ AIFMD rules
■ Consent to marketing
■ Supervision
■ Information
■ Authorisation
■ Permission
Very COBO Regulated Unregulatedprivate only / PPF CIF Fund
AIF Codes of Practice
AIFCertAIF
Cert
Notice
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JERSEY REGULATION: AIFS
* The Alternative Investment Funds (Jersey) Order 2013, Article 2(3)** The Alternative Investment Funds (Jersey) Order 2013, Article 2(1)
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JERSEY REGULATION: AIFMS
*The Financial Services (Jersey) Law 1998, Schedule 2, Part 5, Article 23(3)** The Financial Services (Jersey) Law 1998, Schedule 2, Part 5, Article 23(1)
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NEW STRUCTURES – SPOTTING THE ISSUES
■ What is “marketing”?
■ What is an AIF?
■ What is an AIFM?
Why aren’t the answers clear?
■ 28 interpretations
■ Little guidance outside UK
■ ESMA / EU review
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NEW STRUCTURES: WHAT IS AN AIF?
■ Very broad definition - easier to look at what isn’t caught■ Trading companies – ie commercial activity (not including financial
services) or industrial activity is OK■ Joint-ventures
■ Intra-group: only investors are in manager’s group and none are funds
■ Employee participation schemes
■ Managed accounts
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NEW STRUCTURES: WHAT IS AN AIF?
■ Other things that aren’t caught:
■ UCITS
■ Holding companies
■ Securitisation special purpose vehicles (SPVs)
■ Pension funds, insurance contracts
Concerns about club deals, co-invest vehicles etc
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NEW PROSPECTUSES ORDER: BACKGROUND
■ Collective Investment Funds (Certified Funds – Prospectuses) (Jersey) Order 2012
■All certified funds (unclassified, expert, listed) must comply from November 2013
■Replaces UFPO and CGPO
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NEW PROSPECTUSES ORDER: WHY DO YOU CARE?
■ Transitional provisions about to expire■All open-ended funds will be caught■ Closed-ended funds – impact if they started
marketing before November 2012■Requirement for ongoing revision (can be done by
supplement) if new offer or material change■ Criminal offence- 5ys and/or fine
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NEW PROSPECTUSES ORDER: NEXT STEPS
■Beat the rush!■If UFPO compliant, should be straightforward■Can get derogations – need to be reasoned
and specifically requested
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MANAGED ACCOUNTS: BACKGROUND
■What is a managed account?■Art 2 FS(J)L – distinguishes FSB and IB based on who
the client is■ FSB regime less onerous than IB■ Fund managers prejudiced – need IB as well as FSB
for doing exactly the same job■ Proposed new class of FSB and IB exemption■Hopefully in force early 2014
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MANAGED ACCOUNTS: WHY SHOULD YOU CARE?
■ Can streamline regulation for existing Jersey fund managers
■ Can attract new managers to the Island and encourages substance
■ Provides clarity on tax position■ Potentially neat solution to AIFMD
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MANAGED ACCOUNTS: CRITERIA
■Minimum investment US$1,000,000■Single Individual (includes couples and family
offices) or Corporate client■Discretionary investment management ■Investment policy/restrictions either the same
or substantially similar to existing fund■Subject to change!
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MANAGED ACCOUNTS: NEXT STEPS
■Tell people!■See if suitable for fund manager clients -
MoME’d or otherwise■Convert existing structures?■Develop custody products?
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LLPs: BACKGROUND
■ Introduced in 1997■ Supposed to attract international professional partnerships■ Combination of £5m ‘deposit’ and UK government pressure on
HMRC meant no-one used them■ UK LLPs have since became popular structures for fund
managers■ LLP law changing - £5m requirement already gone - and
wholesale modernisation in progress
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LLPs: WHY SHOULD YOU CARE?
■ Key product for fund managers looking to set up in Jersey■ Combination of separate legal personality, tax transparency
and limited liability■ Other tax advantages in UK■ More flexible than companies - like a ‘general’ partnership but
with limited liability■ More flexible than limited partnerships – every partner can
take part in management without losing limited liability
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LLPs: NEXT STEPS
■Get familiar with the structure – basic filing and solvency requirements
■ Spread the word■Await new LLP law later this year ■New UK proposals may drive existing LLPs offshore
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FATCA/SON OF FATCA: BACKGROUND
■ The US wants the rest of the world to help it collect taxes■ This is done by identifying US investors in local structures and
providing information on their interests or by making foreign financial institutions withhold tax on payments they make
■ If you don’t comply, the US can impose withholding taxes on any US investments
■ Everyone hates FATCA – delayed and possibly diminished – 1 Jan 2015 now deadline for FFIs
■ UK wants in on the act – Son of FATCA■ Stop Press: Jsy/UK IGA signed up this week
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FATCA/SON OF FATCA: WHY SHOULD YOU CARE?
■Withholding tax = very unhappy investors (particularly non-US)
■ Either Fund or Administrator/Custodian will be responsible
■Need to know who your investors are■Deemed compliance ■Data Protection issues?■ Son of FATCA could drive UK investors elsewhere
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FATCA: NEXT STEPS
■ FATCA: Wait for Guidance Notes■ Son of FATCA: IGA details to follow■ In the meantime, identify existing US investors■ Identify new US investors – use subscription agreement reps■ Sort potential Data Protection issues – use subscription
agreement■ New world order on tax network agreements by 2015?
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NEW SECURITY INTERESTS LAW: BACKGROUND
■Old law was old■New law is new■New not necessarily better but coming in on 1
January 2014 anyway
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NEW SECURITY INTERESTS LAW: WHY SHOULD YOU CARE?
■ If your structures lend against Jersey-situate collateral, all security must be taken in accordance with new law from 1/1/14
■ Existing security OK – but could it be improved?■ More certainty on non-sale enforcement ■ Register introduced so need to check when buying Jersey
assets■ If you are a bank or custodian, you may have to be party to
SIAs■ Third party security now officially OK
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This presentation is intended for educational purposes only, is not for circulation and does not constitute legal advice. Legal advice should be sought for specific queries or circumstances.
© Copyright 2013
CONTACT DETAILSRobert MilnerPartner, Carey Olsen
T 01534 822 336