Regulation of the funds sector globally is likely to get tougher, an audience of funds professionals has been warned.
KPMG brought members of its global and investment management leadership teams to the island for a breakfast seminar exploring the Alternative Investment Fund Managers Directive (AIFMD) and what it called ‘the new regulatory frontier’.
Jersey has made a significant move in confirming plans to operate parallel regulatory regimes for investment funds: one fully compliant with the EU’s AIFMD and one to maintain existing regulations for investors and managers outside the scope of this directive. However, the directive represents a new approach to regulation focusing on the activities of ‘managing’ and ‘marketing’ funds rather than the investment product itself.
Oli Morris, from KPMG in Jersey, who spent time on secondment with the British Private Equity and Venture Capital Association and remains active in private equity markets in London, warned that interpretations of the directive would be hugely important, particularly when its text was translated into 27 different European languages.
‘Some countries have already come out with widely different interpretations of what they consider to represent marketing of funds within the EU. The Channel Island regulatory approach towards the directive appears to satisfy the requirements of the directive but goes no further,’ said Mr Morris.
Andrew Bennett, Managing Director of Nordic Capital Jersey, representing the Investment manager community on the panel, added that despite concerns surrounding the introduction of the directive – which is due to come into force in July this year – AIFMD actually offered ‘substantial possibilities and opportunities for Jersey’. Whilst there is a lot of detail in the directive the outcome for managers and service providers in Jersey will be more of a refinement of current practices rather than a ‘paradigm shift’.
The panel also featured Ben Robins, Partner at Mourant Ozannes. Mr Robins highlighted that Jersey is uniquely placed with an unregulated and regulated fund offering, albeit that unregulated funds marketing into Europe would need be considered further in light of the impending regulation.
The panel also included Neale Jehan, Chairman of the Technical Committee of the Guernsey Investment Funds Association and executive director at KPMG. Mr Jehan noted that the question most often asked is whether the directive could be avoided.
‘The answer is no. You may be able to structure around it, but to do that you need to understand it,’ he said.
Heather MacCallum, executive director at KPMG Jersey, who led the event, said that the time had come for the funds community to act, to assess the impact on their clients and their business, and to seek help to adapt their businesses where required.
‘There remains some uncertainty on interpretation and further clarification will be needed. However, the detailed Level II implementation rules are not going to change and now is the time to act,’ she said.
Category: Finance & Business