Hedge funds have welcomed a decision by the European Securities and Markets Authority (ESMA) to grant passport facilities for trading to Jersey and Guernsey, the British Crown dependencies in the Channel Islands.
ESMA also noted that Switzerland could be included as an approved jurisdiction under a “delegated act” under the Alternative Investment Fund Managers Directive.
This would be subject to Switzerland’s removal of remaining obstacles with the enactment of pending legislation.
Other jurisdictions – namely Hong Kong, Singapore and the US – had also been under consideration.
However, in their cases, ESMA reached “no definitive view” due to “concerns related to competition, regulatory issues and a lack of sufficient evidence to properly assess the relevant criteria”.
In a data-sheet published in mid-June by the European Commission, Guernsey was listed, out of 30 jurisdictions, as the “non-cooperative” tax jurisdiction most frequently identified by EU member states.
Less than two weeks later, ESMA recommended to the EU institutions that passporting be extended to the Channel Islands jurisdiction.
Neither jurisdiction is part of the UK – hence, both are outside the EU.
The Alternative Investment Management Association (AIMA), while generally welcoming ESMA’s position, said the passport should be granted to all the main asset management and fund jurisdictions.
The association approved ESMA’s intention to assess other non-EU countries, including the Cayman Islands, Canada and Australia.
AIMA also cheered ESMA’s willingness to refine its assessment of Hong Kong, Singapore and the US, although it noted that those countries had not yet received a positive recommendation that the passport would be extended to them.
The association urged ESMA to complete this process as soon as possible.
The Jersey Financial Services Commission states that, as “next steps”, the European Commission will adopt a relevant delegated act within three months.
However, the Jersey body noted that the EU institutions, including the European Parliament, might wish to consider waiting until ESMA has delivered positive advice on a sufficient number of non-EU countries before introducing the passport.
This would be to avoid any adverse market impact that a decision to extend the passport to only a few non-EU countries might have.
Among the list of the top 30 non-cooperative tax jurisdiction listed in the report issued by the European commission is the Cayman Islands jurisdiction.
Elsewhere, it is accused of not publishing data on the ultimate beneficial owners of companies incorporated there.