Jersey - First for Finance 2016

Published by TIMES Group

Eighth Edition 2016-2017

FUNDS I WEALTH MANAGEMENT I BANKING I CORPORATE SERVICES I LEGAL, ACCOUNTING & TAX SERVICES CAPITAL MARKETS I ISLAMIC FINANCE I DIGITAL I AVIATION SERVICES I MARINE SERVICES I PHILANTHROPY

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Jersey Finance Limited 4th Floor, Sir Walter Raleigh House, 48-50 Esplanade, St Helier, Jersey JE2 3QB, Channel Islands.

T: +44 (0)1534 836000 | F: +44 (0)1534 836001 | E: jersey@jerseyfinance.je | W: www.jerseyfinance.je

N.B. This publication has been produced by the Times Group without any financial contribution from Jersey Finance Limited.

Publication Consultants Louise Ashworth, Head of Marketing, Jersey Finance Limited Joshua Bisson, Marketing Officer, Jersey Finance Limited Editorial Department Wayne Fessey, Editor John Willman, Consulting Editor Production Department Design Vision (UK) Ltd., Design & Production designvision123@yahoo.co.uk Sophie Fullam, Production Coordinator Publisher Kevin Sammon Directors Mark Brown and Kevin Sammon Acknowledgements: The editor would like to thank the following individuals and organisations for their invaluable assistance towards producing this publication: Cathy Keir – States of Jersey • John Harris – Jersey Financial Services Commission Geoff Cook, Louise Ashworth, Joshua Bisson and Claire Lyons – Jersey Finance Limited • Mike Sunier and Adam Riddell – Crystal PR The views expressed in Jersey ~ First for Finance are not necessarily shared by Jersey Finance Limited, nor should they be taken as the views of the editor or Time International Media & Events Services Ltd. (the publishers). Jersey Finance Limited has not sought to dictate the content of the articles appearing within this publication. The views expressed are those of the individual contributors.

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JERSEY- FIRST FOR FINANCE

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BEING BROAD-MINDED WIDENS HORIZONS.

WHEN IT COMES TO INVESTMENT, SEE HOW WE’RE THINKING BEYOND THE OBVIOUS. CALL TIM CHILDE HEAD OF INTERNATIONAL & JERSEY OFFICE

TEL. (0)1534 506 070 OR VISIT WWW.QUILTERCHEVIOT.COM

Investors should remember that the value of investments, and the income from them, can go down as well as up. Quilter Cheviot Limited is registered in England with number 01923571. Quilter Cheviot Limited is a member of the London Stock Exchange, authorised and regulated by the UK Financial Conduct Authority and regulated under the Financial Services (Jersey) Law 1998 by the Jersey Financial Services Commission for the conduct of investment business in Jersey and by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law 1987 to carry on investment business in the Bailiwick of Guernsey. Accordingly, in some respects the regulatory system that applies will be different from that of the United Kingdom.

ADDITIONAL RESOURCES

ADDITIONAL RESOURCES JERSEY FINANCE www.jerseyfinance.je Jersey Finance represents and promotes Jersey as an International Finance Centre of excellence and is funded by members of the local finance industry and the Government of Jersey.

JERSEY GOVERNMENT AND REGULATION

JERSEY

www.gov.je The official website of the Government of the Island of Jersey.

JERSEY FINANCE OFFICES Jersey Jersey Finance Limited, 4th Floor, Sir Walter Raleigh House, 48-50 Esplanade, St Helier, Jersey JE2 3QB Tel: +44 (0)1534 836000 | Email: jersey@jerseyfinance.je

www.jerseyfsc.org The Jersey Financial Services Commission, responsible for the regulation and supervision of the Island’s financial services industry.

London Jersey Finance Limited, 4th Floor, 2 Queen Anne’s Gate Buildings, Dartmouth Street, London SW1H 9BP Tel: +44 (0) 207 808 1145 | Email: london@jerseyfinance.je

www.locatejersey.com The official website of Locate Jersey which assists individuals or organisations looking to relocate to the Island.

Hong Kong Jersey Finance Limited, Room 5, 20th Floor, Central Tower, 28 Queen’s Road Central, Hong Kong Tel: +852 2159 9652 | Email: china@jerseyfinance.je

DIGITAL JERSEY

Shanghai (Launchpad presence with CBBC) Unit 1708, Garden Square, 968 Beijing Road, W Shanghai 200040 Tel: +86 21 3100 7900 Ext.226 | Fax: +86 21 6229 0001 | Email: garry.zhao@jerseyfinance.je

www.digital.je Working alongside government and industry, Digital Jersey coordinates activities towards improving the Island’s environment as a location of choice for digital business.

Dubai Jersey Finance Limited, Level 41, Emirates Towers, Dubai, UAE PO BOX 31303 Tel: +971 (0)4 319 9923 | Email: gary.hales@jerseyfinance.je; richard.nunn@jerseyfinance.je

THE JERSEY DEVELOPMENT COMPANY

Delhi Jersey Finance Limited, (Sannam S4) 3rd Floor, Devika Tower 6, Nehru Place, New Delhi - 110019 Tel: +91 (0)11 3044 6777 | Email: kapil.dua@jerseyfinance.je

www.jerseydevelopment.je The Jersey Development Company (JDC) - wholly owned by the States of Jersey – develops States’ land and property assets no longer required for public service and the Waterfront development.

Mumbai Jersey Finance Limited, 9SE, 9th Floor, The Ruby, 29 Senapati Bapat Marg, Dadar (West), Mumbai 400028 Tel: +91 (0) 22 6716 1031 | Email: pankaj.jain@jerseyfinance.je

INDEX OF ADVERTISERS Abu Dhabi Commercial Bank Ashburton Investments Baker & Partners BDO Limited Collas Crill Deutsche Bank International Limited Equiom First Names Group Hawksford HSBC Jersey Development Company JT Logicalis

7 46 5 17 102 18 21 IFC OBC 10 67 45 13

Moore Management Mourant Ozannes Nedbank Private Wealth Limited Ogier PwC Channel Islands Quilter Cheviot Investment Management Rathbone Investment Management International SANNE Sure International Touchstone Vistra Volaw Group Whitmill Trust

JERSEY- FIRST FOR FINANCE

IBC 14 83 61 22 2 9 62 110 73 96 30 92

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CONTENTS

CONTENTS 11

PREFACE

By Senator Ian Gorst, Chief Minister, States of Jersey

15

34 JERSEY’S RESPONSE TO INTERNATIONAL INITIATIVES

By Colin Powell CBE, Chief Minister’s Adviser (on International Affairs), States of Jersey

FOREWORD

19

By Joe Moynihan, Director of Financial Services, States of Jersey

38 JERSEY FINANCE ROUNDTABLE 2016

INTRODUCTION

JERSEY’S INTERNATIONAL FOCUS

By Geoff Cook, Chief Executive, Jersey Finance

47 JERSEY’S ECONOMY 23 STEERING JERSEY’S ECONOMIC DRIVERS

By Senator Philip Ozouf, Deputy Chief Minister, States of Jersey

INTERNATIONAL OUTLOOK 2016 26 OUTLOOK 2016

By George Buckley, Chief UK Economist at Deutsche Bank (and Andreas Tautscher, Chief Country Officer of Deutsche Bank in the Channel Islands, Deutsche Bank International Ltd.)

JERSEY - PREMIER IFC 31

JERSEY’S FINANCE INDUSTRY: A POSITIVE OUTLOOK

By Robert Christensen MBE, Chairman, Jersey Finance

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JERSEY- FIRST FOR FINANCE

ENHANCING JERSEY’S REPUTATION WORLDWIDE

By Senator Sir Philip Bailhache, External Relations Minister, States of Jersey

50 JERSEY’S ENDURING INTERNATIONAL APPEAL

By Richard Corrigan, Deputy Chief Executive, Jersey Finance

53 JERSEY: FACILITATING INVESTMENT INTO DIVERSE MARKETS

By Peter Bourne, Managing Director, Ashburton (Jersey) Ltd.

55 JERSEY AND ASIA: COOPERATION NOT COMPETITION

By Kevin O’Connell, Group Commercial Director and JP Koolmees, Head of Asia, First Names

Contentious Trusts Solved.

Baker & Partners have been at the forefront of some of the most complex, high value and hostile trust litigation in Jersey. We take the view that no legal problem is insoluble.

For more information contact Stephen Baker: stephenbaker@bakerandpartners.com or visit www.bakerandpartners.com

Midland Chambers, 2-10 Library Place, St. Helier, Jersey, JE1 2BP | Tel: +44 (0) 1534 766 254 | Fax: +44 (0) 1534 737 355 | enquiries@bakerandpartners.com

CONTENTS

CONTENTS JERSEY’S REGULATORY INFRASTRUCTURE 57

REALISING A RESPONSIVE REGULATORY REGIME

75

CONTENTIOUS TRUST PRACTICE IN JERSEY

BANKING

By James Sheedy, Senior Associate, Baker & Partners

77

By Paul Declat, President, Jersey Bankers Association (JBA)

By John Harris, Director General, Jersey Financial Services Commission (JFSC)

FUNDS 63 A DELIBERATELY DIFFERENT APPROACH TO FUNDS BUSINESS

By Ben Robins, Chairman, Jersey Funds Association (JFA)

66 IS JERSEY READY FOR THE NEW AIFMD PASSPORT?

80 RESTRUCTURING BANKING AND FIDUCIARY GROUPS

By Wendy Benjamin, Partner, Practice Group Head, Corporate Department, Appleby

WEALTH MANAGEMENT 82 MAKING THE MOST OF JERSEY’S HIGH VALUE RESIDENCY

By Fiona Waite, Wealth Manager, RBC Wealth Management

By Rhea Hood, Director, Private Equity, Sanne

69 THE GLOBAL OUTLOOK FOR JERSEY PRIVATE EQUITY REAL ESTATE

By Simon Hopwood, Partner and Martin Paul, Head, Investment Funds and Corporate Real Estate, Bedell Group

THE FUTURE FOR JERSEY BANKS

85 A PRIME LOCATION FOR A PRIVATE OFFICE

By Jonathan Giles, Managing Director, Rathbone Investment Management International

PHILANTHROPY

TRUSTS 87 72

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JERSEY’S FIDUCIARY INDUSTRY

CHARITABLE AND PHILANTHROPIC STRUCTURES IN JERSEY

By Ian Crosby, President, Jersey Association of Trust Companies (JATCo)

By Josephine Howe, Advocate, Private Client & Trust Team in Jersey, Ogier

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CONTENTS

CONTENTS ISLAMIC FINANCE 89 ISLAMIC FINANCE IN JERSEY

By Trevor Norman, Chairman, Islamic Finance Community of Interest Group of Jersey Finance

CAPITAL MARKETS 93 JERSEY COMPANIES LISTING ON THE WORLD’S EXCHANGES

By Guy Coltman, Corporate Partner, Carey Olsen

CORPORATE SERVICES 97

THE NATURAL PARTNER FOR MULTINATIONAL CORPORATIONS

By Steve Robinson, Director, Corporate, Hawksford

100 A QUALITATIVE APPROACH TO CORPORATE SERVICES

By Robert Lucas, Director - Head of Funds & Corporate, Vistra

LEGAL, ACCOUNTING & TAX SERVICES

105 JERSEY’S LOW TAX ENVIRONMENT AND THE IMPACT OF INTERNATIONAL DEVELOPMENTS

By Justin Woodhouse, Partner, Head of European Banking and Capital Markets Tax, PwC

107 ACCOUNTING FOR CHANGE

By Chris Stuart, President, Jersey Society of Chartered and Certified Accountants (JSCCA)

DIGITAL 111 THE YEAR OF JERSEY FINTECH

By Tony Moretta, Chief Executive Officer, Digital Jersey

113 JERSEY: EMBRACING THE DIGITAL ERA

By Graham Hughes, Chief Executive, Sure Jersey

115 FINTECH: PAST, PRESENT, FUTURE

By Chris Matthews, Partner and Sam Fuller, Executive - Assurance Services, EY

MARINE SERVICES 117 JERSEY’S GROWING MARITIME BUSINESS SECTOR

By David Capps, Chairman, Jersey Maritime International (JMI)

AVIATION SERVICES 103 JERSEY’S LEGAL INFRASTRUCTURE: FIT FOR PURPOSE – FIT FOR THE FUTURE

By Advocate Jonathan Speck, President, The Law Society of Jersey

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JERSEY- FIRST FOR FINANCE

119 PLANE SENSE – AIRCRAFT REGISTRATION IN JERSEY

By Brian Johnson, Technical Director, Appleby Aviation

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Rathbone Investment Management International is regulated by the Jersey Financial Services Commission.

PREFACE

PREFACE

BY SENATOR IAN GORST

Jersey’s government is preparing for the future. The world around us is changing at an ever increasing pace: the global population is increasing, economic power is shifting and concerns are growing over climate change and future food, energy and water security. This will increase competition for the talent and investment that we need to remain successful. To maintain our position as a leading international financial centre we need to keep our competitive edge.

We also need to meet the challenge of an ageing population and keep Jersey a great place to live, work and raise a family. That is why we are investing in health, education and infrastructure.

Jersey is recognised as one of the world’s premier international finance centres and we are determined to maintain that position. We know that the financial services sector is changing and we understand that the relationship between government and financial services is a vital one that helps safeguard jobs and encourage growth in this important sector. That is why we in government, together with Jersey Finance, undertook a jurisdictional review supported by McKinsey. This led to the first ever governmental financial services framework.

Our framework sets out how we can remain a high quality, well-regulated jurisdiction, protect our core business, explore new markets across the world and build a strong relationship with the UK. Our financial services industry offers a number of compelling reasons for overseas firms to invest, including our expertise and skills base, our robust legal and regulatory framework, our transparency in financial reporting, our geographic position and language. As a result, the industry continues to attract investment from a broad range of overseas investors as well as from businesses based in the UK and EU. It is imperative that we take into account how technology is transforming the way we carry out day-to-day tasks.

Not only does financial technology – or FinTech – make people’s lives easier and promote competition, it can also deliver a major boost to the industry.

Its benefits are fourfold. It makes life easier for the customer. It helps banks offer new services, which is a great way of attracting customers. It is one of the most innovative and rapidly growing sectors and it is a classic

JERSEY- FIRST FOR FINANCE

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PREFACE

With a global approach to these matters we can be confident that the strength of Jersey’s practices will enhance our reputation. As business flows to quality jurisdictions, so Jersey benefits and we will continue to join initiatives that take a global approach to international standards.

Locate Jersey is the government body tasked with attracting inward investment and high net worth residents to the Island. It guides businesses and individuals looking to relocate their European headquarters, helping them through the licencing process and providing after care to ensure a smooth transition.

Photo: Chris George

With a pro-business government and a strong, stable economy, Locate Jersey has successfully raised the profile of Jersey as a place to live and do business, where a healthy work/life balance is an integral part of the package.

example of an activity which can thrive anywhere. The digital revolution is well underway in every corner of the globe and in Jersey we are embracing technology and tech-businesses.

Whether it is FinTech or MedTech, the thread that binds these pockets of innovation is a resilient digital infrastructure. Telecoms operators have rolled out 4G across the Island and more than 15,000 high-speed broadband lines have been connected. Jersey is ranked first in Europe and fourth in the world for fibre access at home.

We are developing a cyber security strategy to keep Jersey a safe place to do business and Digital Jersey is promoting clusters of tech-excellence in our digital economy.

We are drawing up a Digital Policy Framework for Jersey, setting out our intentions and providing specific commitments from Government. We want to see digitally-driven efficiency in public services, a wellconnected Island that benefits Islanders and an innovative private sector driving growth and jobs.

Our eGovernment programme is aiming to reconfigure the delivery of public services around the customer, create a more efficient public sector and in so doing stimulate the local digital economy.

Underpinning everything is the need to adopt an innovative approach: to running public services, to developing tech-businesses and to diversifying our finance industry. A review of our innovation performance has recommended ways to improve existing practices and a review of Jersey’s competition framework has recommended how we can update our competition policies.

This work will establish a stable testbed for FinTech, providing jobs, boosting growth and driving up productivity. In 2016 we hope to implement flexible, enabling regulations for virtual currencies. Regulation is a vital step in enabling innovation while also protecting the Island from the money laundering and terrorist financing risks inherent in virtual currencies.

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JERSEY- FIRST FOR FINANCE

We welcome the global approach that is now central to most tax transparency initiatives. The OECD and G20 have worked together for the past five years and there have been significant reforms to the international tax system.

We believe that the growing international recognition of compliance with agreed standards supports Jersey’s continued success as an international finance centre. We have signed 38 Tax Information Exchange Agreements and 10 Double Tax Agreements. We are part of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters through which information can be exchanged with an additional 21 jurisdictions.

Jersey is fully supportive of the Base Erosion and Profit Shifting (BEPS) programme which helps governments protect their tax bases and our commitment to international standards on money laundering and financing of terrorism have been assessed by the IMF and MONEYVAL. The results show Jersey is in a leading position on compliance with these standards.

Jersey has voluntarily supported the EU’s initiatives on transparency and information exchange through agreements on the taxation of savings income, by meeting the criteria of the Code of Conduct Group on Business Taxation and by joining Member States in the early adoption of the new OECD Automatic Exchange of Information (AEOI) standards.

As we look ahead, there remain uncertainties in the world economy. We are supporting the economy while it is still recovering and recent statistics show our support is working. The number of visitors staying in Jersey is up, retail sales are up, employment is up and unemployment is down. Jersey has one of the lowest ILO unemployment rates in the world and financial services are growing – total net profit went up by 25% from 2013 to 2014 and we saw 5% economic growth in 2014.

We have agreed a strategic plan that funds our priorities – health, education, infrastructure, economic growth and improving our town. We are working to keep Jersey an attractive place to live and to do business while also managing our natural resources responsibly for future generations.

Senator Ian Gorst Senator Ian Gorst is Chief Minister of Jersey.

Senator Ian Gorst was first elected as Chief Minister on 14 November 2011 and re-elected on 3 November 2014. First elected to the States Assembly in 2005, Senator Gorst’s previous role was as Minister for Social Security. He also served concurrently as Chairman of the Jersey Overseas Aid Commission. Previously, he was an Assistant Minister in both the Chief Minister’s Department and in the Treasury Department. Senator Gorst is an accountant with significant experience in private client, private equity and retail fund sectors.

Senator Gorst is actively involved in the church and serves as a Governor at Le Rocquier School.

He has a keen interest in overseas development and he and his wife have travelled to participate in Jersey Overseas Aid Commission projects. He is also an Honorary Fellow of UNICEF UK. Married to Dionne, they have two daughters, Sophia and Lily-Mim.

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FOREWORD

FOREWORD

BY JOE MOYNIHAN

During 2012 Jersey Finance Limited, with the support of the Jersey government, commissioned the international consultancy group McKinsey to review the Island’s financial services industry.

This review was commissioned against the backdrop of a global recession which generated significant international regulatory changes, increased international competition and developments in technology which were affecting all industries. The uncertainty caused by these factors meant that Jersey could not assume that the elements of past success would ensure continued success in the new environment.

The goal of the review was to create a detailed assessment of the status of Jersey as a finance centre, understand the implications of regulatory and other discontinuities, identify opportunities and define a long-term strategy for Jersey’s finance industry. The output from the review was a confidential document ‘Securing Jersey’s future as a leading international finance centre’ delivered by McKinsey in March 2013.

The report was not widely circulated due to competitive considerations but over the past three years there has been significant effort expended in the implementation of the key recommendations. Whilst there are many factors which can explain the recent return to good health of the industry, particularly the growth in employment numbers, the clear direction provided by McKinsey has played a major role in ensuring that Jersey is well positioned to benefit from recent economic upturns and trends.

One of the key recommendations of McKinsey was the need for government, industry and regulator to improve their relationships and for the government to take a stronger lead on key policy decisions which affect the industry. Whilst each party has their own responsibilities and independence, they must work together for the greater good of the industry and of the Island. All parties have contributed at the highest levels to facilitate a significant improvement in recent years. Increasingly, senior international regulatory bodies look to government support of the regulator and clarity of government policy objectives.

Another one of the key governmental recommendations was the need for more active engagement by senior government ministers and officials at political, commercial and agency levels, off Island. This work has been actively progressed with the support of the Channel Islands Brussels Office and more recently with the excellent

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FOREWORD

the Island at the top end of compliance with the FATF standards compared with other jurisdictions evaluated by both MONEYVAL and the FATF. This therefore shows that our AML/CFT framework, which includes, as is noted by the report, that Jersey is an “international leader on beneficial ownership transparency” due to our central register of beneficial ownership and demonstrates Jersey’s full commitment to the global fight against money laundering and financing of terrorism.

The achievement of such ratings come at a significant expense of resource from both the insular authorities and the industry during the MONEYVAL process but the result of such strong international ratings is that Jersey’s position as a high quality international finance centre is both maintained and developed. This activity is critical to our perception on the world stage.

Photo: Chris George

The international challenges for Jersey will continue in the coming years. However, this is not new. The industry has evolved considerably over the past 50 years and this is likely to continue. Many of the changes experienced in recent years would have been unthinkable 20 years ago but the Island has a depth and breadth of talent, experience and commitment to remain a leading international finance centre.

enablers’, ensuring that Jersey’s legislation is both up to date but can also support the development of innovative products and services within the sector.

Working with the regulator and industry, the Financial Services Unit plays a key role in the partnership which drives and delivers change in the industry.

team at the Jersey London Office. Ministers have met senior UK and European politicians, from all parties, to explain Jersey’s role in the international financial services market confirming our position as a cooperative and transparent jurisdiction. These messages were clearly articulated in the government document ‘Jersey Financial Services Industry Policy Framework’ published in 2014.

In the last edition of Jersey ~ First for Finance, I noted that regulatory change continues across the industry driven by global trends and evolving international standards. For Jersey, this means that standing still is not enough – complacency is unacceptable. During the course of 2015 our compliance with one particular set of international standards, namely those set by the Financial Action Task Force in relation to anti-money laundering and countering the financing of terrorism (AML/CFT), were rigorously evaluated by MONEYVAL.

Commercial engagement has also been progressed with off Island senior management of the largest businesses confirming the Jersey government’s support of the industry and the Island’s position as a wellregulated, cooperative jurisdiction which meets international standards. Ministers and officials have also supported the activities of Jersey Finance Limited both on and off Island.

The Unit has a key role in delivering the ‘industry

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JERSEY- FIRST FOR FINANCE

Significant efforts were expended preparing for the onsite assessment of Jersey by MONEYVAL in January 2015 and in a series of meetings with the evaluation team over the summer and in the MONEYVAL Plenary session in Strasbourg in December. Jersey’s report was finally adopted in December 2015 and that report rates

Photo: Chris George

Since McKinsey, responsibility for financial services within government has been centralised in the Financial Services Unit in the Chief Minister’s Department. This Unit has a range of responsibilities including: • Advising Ministers on policy matters as they affect the industry • Creating drafting instructions for the law draftsman to ensure that existing legislation is supportive of the industry and facilitates expansion of the Island’s products and services. This involves closely working with the industry, usually through Jersey Finance Limited and with the Jersey Financial Services Commission (JFSC) • Supporting the promotion of the industry with Jersey Finance Limited • Supporting the development of strong intergovernment relationships with key target markets and influential agencies and bodies • Delivering greater consistency from government and a much more coordinated approach to policy

Joe Moynihan Joe Moynihan is Director of Financial Services, in the Chief Minister’s Department, for the States of Jersey.

He has held this position since 2013, providing advice to government Ministers on all aspects of financial services policy. Working with Jersey’s financial services marketing and regulatory bodies, he is also responsible for helping to ensure that the financial services sector remains globally competitive and is the government participant on the board of the promotional body for Jersey’s finance industry, Jersey Finance.

Prior to his current position he had been with AIB Group for over 35 years working in Ireland and Britain and has been based in Jersey since 1993. He was appointed Chief Executive Officer of AIB Jersey and Isle of Man in February 2007.

He was responsible for running the bank’s offshore operations in both Jersey and the Isle of Man, setting strategic direction and representing the offshore business at AIB Group level. The business included private, expatriate personal and corporate banking, investment, fiduciary and fund services and employed over 250 members of staff.

He is a graduate member of the Institute of Bankers in Ireland and holder of an MBA from CASS University in London. He is a past president of the Jersey Bankers Association and a member of the Jersey branch of the Institute of Directors.

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INTRODUCTION

INTRODUCTION

BY GEOFF COOK

Jersey continues to thrive because it has focused its resources on maintaining the competitive environment that international investors are seeking, whilst meeting the global standards required of all modern, leading International Finance Centres (IFCs).

The industry, supported by the Government of Jersey and the regulatory authorities, has evolved during its 50 year history to meet market demands, while considering the growth in global trade, shifting wealth patterns from west to east and the impact of an ageing population. Alongside these developments, all IFCs, including Jersey, are aligned to the global commitment of major governments to greater transparency and information exchange.

The global trends, which include the huge acceleration of industrialisation and urbanisation in emerging economies, a scale of development that is unprecedented in recent times, are reflected in the strategy adopted by Jersey Finance. We intend to ensure we remain a high-quality jurisdiction with the appropriate regulatory and legislative armoury, while shifting our focus to create greater jurisdictional awareness in new markets.

The industry continues to focus primarily on banking, fund services and wealth management, including specialist sectors such as Islamic finance and capital markets. Its partnership with the City of London, which enables it to act as a gateway to western markets, is a further attraction to investors, especially those based in the emerging economic powerhouses, while the Jersey authorities are investing long term in order to meet new global standards of compliance.

Jersey’s political and economic stability (it has an AA rating from Standard & Poor’s, one of the leading rating agencies), is particularly appealing to international investors. Through ongoing consultation with the regulator, the industry uses this well-respected and stable environment as the platform from which to continue to enhance its offering.

ENHANCEMENTS New legislation, including the Charities (Jersey) Law – which has created a robust and modern legal framework to support all types of international philanthropic and charitable enterprises – and recent amendments to pension legislation, are examples of enhancements designed to allow Jersey to meet the ever more sophisticated demands of the private client investor.

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INTRODUCTION

In a further legislative move in support of the funds sector, the authorities introduced a new exemption in Jersey’s Financial Services Law at the start of last year, which simplified the framework for managed accounts whilst retaining an appropriate level of regulation. It enables hedge fund managers to offer managed account services to non-fund clients alongside fund clients, without the need for further regulation.

VALUE It has also proved helpful to demonstrate the quality of the leading IFCs and the value of their role to the global economy at a time when there is a greater focus on cross-border investments and the tax obligations of firms and individuals. In support of this, Jersey Finance has commissioned a series of independent, evidencebased reports produced by economists and leading academics.

Meanwhile, securing a leading position in relation to the EU Alternative Investment Fund Managers Directive (AIFMD) has been a priority and Jersey has the necessary regulations to ensure it is well- positioned to offer fund services’ clients options to both market funds inside or outside the EU.

Alongside such agreements, Jersey has one of the most advanced systems for capturing the beneficial ownership of companies. It has held such information centrally since 1999 and it is available to law enforcement agencies under information exchange mechanisms. This facility was recognised in a World Bank report, which cited Jersey as a model of good practice in capturing the details of beneficial ownership of corporate and trust entities.

Photo: Chris George

COOPERATION Jersey is committed to international cooperation, striking a pragmatic balance between transparency and confidentiality. Having introduced anti-tax evasion legislation in the 1990s, Jersey has received endorsements from the Organisation for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF) and has a raft of cooperation agreements in place. There are tax agreements with more than 40 countries and both Romania and Rwanda were added to that list during 2015, while Jersey has also signed a number of Double Taxation Agreements including in recent years with the authorities in China, Hong Kong, Singapore and Luxembourg.

This body of academic work has identified the financial benefits Jersey brings to the UK through its financial services; how IFCs help to increase international financial flows and facilitate trade and investment, the potential role Jersey can play in facilitating foreign direct investment (FDI) in Africa and Jersey’s wider contribution to FDI in global markets through its range of investment vehicles. Where developing countries are concerned, quality IFCs such as Jersey can help bring knowledge, solutions and access to much-needed infrastructure investment.

The next significant move in the global drive for increased transparency will be the introduction of the OECD’s Common Reporting Standard (CRS). Planned as a means of improving cross-border tax compliance, the CRS has the support of 90 countries. Jersey is one of a group of ‘early adopters’ who will begin reporting in 2017, with other nations to follow in 2018. Alongside these developments, Jersey has received positive endorsements for its role in the transparency agenda and contribution to EU tax matters from Pierre Moscovici, the European Commissioner for Economic and Financial Affairs and Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration.

Having the frameworks, experience and platforms in place at both a jurisdictional and industry level provides reassurance to investors, as we move forward rapidly towards a new era of tax transparency and compliant confidentiality.

In future, the IFCs that will thrive will be those that can administer and invest international capital at a competitive cost, without dislocating tax systems, while also providing the investment vehicles and expertise to support the investment strategies of increasing numbers of high net worth private clients. Jersey continues to evolve its offering so that it is well-positioned to meet that demand.

CONCLUSION Jersey has longstanding political and economic stability, a highly skilled workforce, a reputation for probity and a sound financial market infrastructure, as well as links to the City of London. These attributes, combined with a mature legal system, bespoke investment vehicles and an available network of experienced professionals, keep Jersey at the cutting edge of developments in the finance sector.

Geoff Cook Geoff Cook is the Chief Executive of Jersey Finance.

Photo: Chris George

Geoff Cook joined Jersey Finance as Chief Executive in January 2007. In promoting the finance industry of Jersey, Geoff visits many of the world’s leading finance centres on a regular basis, highlighting the strengths of Jersey as a financial jurisdiction and updating government officials, regulators, finance professionals and international investors on legal and regulatory developments and service innovations offered by Jersey. In addition to speaking at Jersey Finance hosted events, Geoff is a regular speaker and contributor to conferences and seminars around the world and he writes frequently on the issues affecting Jersey and other finance centres in leading publications.

Geoff is a Fellow of the ifs School of Finance, a Fellow of the Chartered Institute of Securities & Investment, a Member of STEP and a Chartered Director.

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JERSEY’S ECONOMY

STEERING JERSEY’S ECONOMIC DRIVERS

BY SENATOR PHILIP OZOUF

After nine years of global financial turmoil, it is a mark of Jersey’s resilience and resourcefulness that it retains such a buoyant economy driven by our long established and dynamic financial services industry.

Over the past year, Jersey’s economic foundations have improved dramatically as we continue to build for the future. As Assistant Chief Minister with shared responsibility for financial services, digital, competition and innovation, 2015 has been one of the most exciting I can remember.

Over the last few years we have set ourselves four key areas for developing Jersey’s economy, which will enable us to deliver on the Government’s Financial Services Policy Framework. These were to sustain Jersey’s existing business, to enhance our business enablers, to capture adjacent growth and to explore more ambitious

opportunities in new geographic locations. We are already putting this framework into action to deliver a prosperous future for the entire jurisdiction.

SIGNS OF IMPROVEMENT Jersey’s economy grew by 5% in real terms in 2014, as Photo: Chris George

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JERSEY’S ECONOMY

Photo: Chris George

Poor’s confirmed Jersey’s credit rating of AA, while the 2015 Global Forum on Tax and Transparency rated Jersey as ‘largely compliant’, which puts us on the second highest footing alongside major nations such as the UK, USA and Germany.

Last year Jersey’s financial services industry spent £350 million on local goods and services and £720 million employing 12,800 people on-Island. However a successful economy does not sit still and bask in former glories; it constantly adapts using dynamism and flexibility to seek out new opportunities and become a driver of change.

The relationship between our government, the Jersey Financial Services Commission (our independent regulator) and Jersey Finance (our industry promotional body) continues to prove vital for safeguarding jobs and encouraging business growth. In the last year our team has worked closely with these agencies to deliver over 15 legislative changes in areas such as investment funds, financial crime and Companies Law. There is just as much work in the pipeline for 2016 including: a consultation on proposed enhancements to Jersey’s funds regime, regulatory guidance on electronic client due diligence and proposed legislation on bank recovery and resolution.

We must also keep an eye on evolving international developments such as the Markets in Financial Instruments Directive II (MiFID II) and the EU’s introduction of bank ‘bail-in’ rules.

JERSEY - FIRST FOR FINANCE The sustained quality of Jersey’s finance industry allows us to punch above our weight time and time again, and continues to enhance our international reputation and experience. The jurisdiction’s high standards of financial expertise, its regulatory approach, political stability, location and relations with nations around the world, makes us the ideal destination for many companies and individuals looking for a base with a global outlook.

Our international standing as a compliant neighbour is also key to our continued success. Recent news continues to encourage us on this front; Standard and

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Photo: Chris George

measured by gross value added (GVA); this is the first time since 2007 that we have recorded above-inflation growth. The resurgent finance sector is the main driver, accounting for 44% of growth and 51% of all economic activity, aside from private rental income.

Looking further abroad, we must continue to explore more ambitious opportunities in new geographic locations. The regular government support behind Jersey Finance’s key marketing trips into foreign

JERSEY’S ECONOMY

Government of Jersey on how we intend to enhance the contribution of digital technology in Jersey. A key part of this is embracing FinTech. By working to combine our financial and digital industries, we will become a stable testbed for FinTech developments, which will provide highly skilled jobs, boost business growth and drive up productivity.

The thread that binds pockets of innovation in Jersey’s economy is a resilient digital infrastructure. In the latter part of 2015, telecoms providers finished rolling out 4G and over 15,000 high-speed broadband lines had been connected. To put that in context, Jersey is now ranked fourth in the world for fibre access at home. The digital team are also developing a cyber-security strategy to ensure critical national infrastructure and government systems are secure, enabling Islanders to be safe online.

LOOKING AHEAD There is no doubt that Jersey will remain, for many years, first for finance. We continue to prove ourselves as an international finance centre of substance, with strong and improving trade links to business from countries all around the world. Our stability, financial expertise and supportive business environment, makes us a natural draw for companies looking for a base.

Whilst the finance sector is powering ahead, our potential for growth in the financial-tech sector will make us the natural home for innovative FinTech companies and entrepreneurs.

Senator Philip Ozouf virtually cost-free. Regulation is a vital step in not only enabling innovation and signposting Jersey as a FinTech hub but also protecting the jurisdiction from the most prominent money laundering and terrorist financing risks that are presented by virtual currencies in their current form.

markets brings the government, regulator and industry bodies together as a unified force, supporting the growth of our financial sector. Jersey’s international reputation further allows us to pioneer agreements with friendly nations in Europe, Africa and elsewhere on trade, taxation and information exchange. These agreements, along with our excellent financial stability and expertise, make us the perfect gateway for investment flows into and out of emerging markets.

This is particularly true in Africa where the growth potential is significant. Jersey’s long-term strategy must be to establish a symbiotic relationship with African countries based on technical cooperation and a desire to increase bilateral trade while improving governance.

Following the recommendations of the recently completed Innovation Review, our team will later this year publish a Digital Policy Framework for Jersey. The framework will contain commitments from the

This year Jersey will be leading by example as one of the few jurisdictions in the world to implement flexible, enabling regulations for virtual currencies. These technologies have the potential to make money transfers more transparent, almost instantaneous and

Photo: Chris George

AHEAD OF THE TECHNOLOGY CURVE The digital revolution is already well underway in every corner of the globe and Jersey is no different. We are embracing technology and financial-tech businesses (known as FinTech). We are a pioneer of innovationfriendly financial regulation, which allows businesses to be more productive and opens up new opportunities.

Senator Philip Ozouf is the Assistant Chief Minister with special responsibility for financial services, technology, competition and innovation.

Born in Jersey, he was educated at Victoria College and went on to the European Business School in London, Frankfurt and Paris. He then worked for one of the world’s largest multinationals on a range of projects across Europe, Africa, Asia Pacific and the United States.

In November 1999, he topped the poll in the Deputy elections in the Island’s largest constituency. In the 2002 Senatorial elections, Senator Ozouf topped the poll again and has since held numerous roles including: Vice Chairman of the Finance and Economics Committee, President of the Environment and Public Services Committee and Economic Development Minister.

In December 2008, he was re-elected as Senator and appointed Minister for Treasury and Resources and Deputy Chief Minister. He was reelected in 2011 as Minister for Treasury and Resources, re-elected for a further term in the October 2014 Senatorial elections and subsequently appointed Assistant Chief Minister responsible for financial services, technology, competition and innovation.

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INTERNATIONAL OUTLOOK 2016

OUTLOOK 2016

BY GEORGE BUCKLEY

Twelve months ago we started the year with Europe once again in crisis mode, thanks to the election of an anti-austerity government in Greece. Yet Europe stood resilient – a referendum and another election in Greece were not enough to derail what remains a modest but resilient euro area growth recovery. On the other side of the Atlantic, the Federal Reserve contemplated raising interest rates for much of last year.

While this was put on the backburner at its September meeting thanks to the global financial market repercussions of China’s currency devaluation, the delay proved only temporary – the financial disruption did not stop the Fed three months later finally starting the process of monetary normalisation. Oil prices fell further in the second half of 2015, bad news for producing countries such as Russia (which remains mired in recession) but good news for net consumers of

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oil like the G7. In the UK, headline inflation has been close to zero for much of the past year as a result of falling energy prices, the Bank of England once again leaving interest rates on hold for the entire year.

We cannot yet describe the response to Europe’s crisis as ‘mission complete’, though the authorities have come a long way over the past few years to improving Europe’s lot.

What about the outlook for the year ahead? Given the uncertainties of recent years it is important we approach economic forecasting with a considerable degree of humility. First, let us consider the euro zone.

A combination of collapsing energy prices, action by the European Central Bank (ECB) to lower interest rates and continue with its quantitative easing programme and a much improved banking sector/credit provision

INTERNATIONAL OUTLOOK 2016

should help underscore the recovery in mainland Europe. We expect growth of around 1.5% this year – this may not sound like much but it is a good outcome for the euro area relative to past form. Inflation remains well below target but as long as we do not slip into deflation this may not be a bad thing, allowing the ECB to retain its remarkably stimulatory policies to keep the recovery alive. Still, if our generally upbeat forecasts are right then there may yet be talk of asset purchase tapering before the year is out.

In the US, the Fed tells us that it is intent on raising rates a further one percentage point this year, twice that expected by the financial markets. The recovery in US growth has been stronger than that of many of its competitors but relative to the aftermath of previous recessions what we have seen so far is not so impressive.

Thus it seems reasonable that the Fed should undertake the process of normalising policy in a careful, considered and gradual manner. Even with rates 1% higher by the end of 2016, policy would remain very loose by historical standards – particularly with quantitative easing still in the system. For US households who are used to borrowing money at long

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INTERNATIONAL OUTLOOK 2016

IMPLICATIONS FOR JERSEY

BY ANDREAS TAUTSCHER

As an international finance centre, Jersey will inevitably be impacted by global macro trends and developments in overseas markets, particularly as firms continue to diversify and extend their geographical reach.

has become increasingly important not just as a source of private wealth business but increasingly for crossborder alternative investment fund structuring too, will be important for Jersey in 2016.

Within that international landscape, regulatory shifts will continue to have a significant say on how firms and wealthy investors operate and this could provide opportunities as well as challenges for Jersey.

Ongoing instability in countries right across the Middle East may heighten the need amongst high net worth individuals and families and institutions in the region for a robust, professional jurisdiction to manage their affairs.

This instability is prompting Middle East investors to diversify their wealth and investment strategies too. As investors look to other markets and sectors, in particular the alternative investment space, this will play to Jersey’s strengths and give firms operating in crossborder structuring some significant opportunities.

Photo: Chris George

With the OECD’s Common Reporting Standard and US FATCA now operational, firms are finding that there is a real interplay between economic success and regulatory compliance. In addition, the implementation of MIFID II and Basel III looks set to place further pressure on firms with a European connection on both market access as well as liquidity requirements. The reporting requirements under these various regimes are likely to put real pressures on firms both in understanding how to deal with them as well as implementing the process and systems required.

Overall, given Jersey’s proactive approach to overseas markets, it is in a good position to take advantage of the economic and regulatory opportunities global developments are presenting this year.

However, these regulatory developments could present firms in Jersey with something of an opportunity in positioning themselves as compliance, reporting and governance specialists. The jurisdiction has been on the front foot in addressing international regulatory shifts, including maintaining its programme of international cooperation, rolling out a test platform for FATCA reporting in advance of its launch and providing firms with comprehensive guidance surrounding CRS reporting and this can all place Jersey in a commanding position.

In particular, Jersey has in recent years seen a spike in real estate investment business, supporting overseas financial institutions and corporate clients with their commercial and residential property investment structuring into the UK. Figures collated by the Jersey Financial Services Commission show that the value of real estate funds being serviced through Jersey maintain an upward trajectory, rising year-on-year by 16% (September 2015).

In addition, firms in Jersey have made numerous commitments to innovate their service offering and invest heavily in addressing the regulatory and compliance requirements, to manage the increasingly complex regulatory changes and handle more bespoke structures in the investment and wealth management sectors.

A buoyant UK property market in 2016 will be good news for Jersey. However, this should be tempered by adopting a realistic approach as to whether this buoyancy is sustainable. Pressures on affordability and political measures relating to ‘non-doms’ may dampen the London market and herald a slowdown in property investment structuring. Yet it remains to be seen whether either of these factors will impact the investors who are not looking to reside in London.

Meanwhile, the fate of the UK economy is also set to be a major factor for Jersey’s success this year. Jersey continues to be seen as a valuable partner in managing transactions by London lawyers and advisors, as research undertaken by Capital Economics (‘Jersey’s Value to the UK’, 2013) was able to highlight. It found that Jersey is a conduit into London for £1/2 trillion of foreign investment, representing around 5% of the entire stock of UK foreign owned assets.

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At the same time, the UK’s fortunes in 2016 look set to be defined by a key referendum on EU membership.

Uncertainty as to the outcome may cause overseas investors to delay their decisions or divert their attentions elsewhere and this will have an impact, albeit temporary, on business flows for Jersey firms too.

Finally, developments in the Middle East, a region that

Andreas Tautscher Andreas Tautscher is CEO, Deutsche Bank Channel Islands.

Andreas Tautscher is the head of Financial Intermediaries for Deutsche Bank Wealth Management, EMEA region and is Chief Country Officer for Channel Islands; he also sits on Deutsche Bank’s UK regional governance committee.

He joined Deutsche Bank in 1995 and was previously Chief Operating Officer Channel Islands, Cayman and Mauritius, Chief Financial Officer Channel Islands, Cayman and Mauritius and Head of Client Trust Services. Prior to Deutsche Bank he worked for PWC as Senior Auditor. He is a Chartered Accountant (ICAEW) and has a BSc Honours degree from Kingston University London.

INTERNATIONAL OUTLOOK 2016

So where does all of this leave the UK? Growth has slowed of late but is expected to run at a decent clip this year of around 2.5%. Inflation too is expected to turn upwards thanks to base effects (the prices of energy and food are falling at a slower rate than a year ago) but more fundamentally a narrowing output gap.

That combination may yet be sufficient for the Bank of England to begin raising rates this year – though recent comments from the Bank’s Governor once again suggest a delay in the first hike. With UK households highly geared to short-term interest rates; high levels of house prices and household debt must be taken into account when considering the speed and timing of policy normalisation.

Household debt is not the only sizable risk on the horizon for the UK. Much of the growth we have seen in recent years has been consumer driven. While that is not necessarily unusual (after all, consumer spending represents the lion’s share of spending within GDP) it is not healthy for economies to be overly dependent on one particular source of growth.

Government spending is unlikely to come to the rescue with such significant austerity planned, while the combination of a fragile global economy and strong exchange rate (sterling up nearly 15% during the past three years against a basket of other currencies despite recent declines) could limit exports/boost imports.

One of the biggest tests the UK faces over the coming year relates to the referendum on EU membership.

Not only are the polls tight but whatever the outcome of the vote it seems likely that overseas investors in the UK may delay – or worse divert elsewhere – their capital spending in the meantime. Of course the vote may not happen until next year; much will depend on what Mr Cameron is able to broker with the European Union in the way of concessions in the coming months.

tenures the rise in interest rates this year may not pose such a big problem. Yet it may cause more sizable fallout elsewhere around the globe.

Even before the Fed raised rates in December, emerging markets were growing at their slowest pace in over a decade (outside of the financial crisis) and the recovery we expect in 2016 is primarily the result of fading recessions in Russia and Brazil rather than a broadbased recovery across EM. Higher interest rates in the US and an appreciating dollar might even help by putting downward pressure on EM currencies but that in turn would also imply a flow of capital away from emerging markets. In short, the days of cheap EM funding might be coming to an end.

Emerging market troubles are also home-grown.

China’s structural reforms – to make the economy more consumer/market focused – must be lauded but any resultant benefits are more likely to be seen over a longer horizon. As a result, we now think that Chinese economic growth will remain below 7% in the nearterm, with the risks skewed to the downside. Weaker growth in China is more impactful now than ever

before, with output worth between a fifth and a sixth of global production (in purchasing power parity terms).

Also, China’s recent decision to change the way it manages its exchange rate, in generating bouts of global fear and volatile financial markets, may end up risking the global recovery outlined in this article.

George Buckley George Buckley is Chief UK Economist, Deutsche Bank.

As Deutsche Bank’s Chief UK Economist, he also covers Scandinavia and Switzerland. He has 17 years experience as an analyst at Deutsche Bank having joined in 1998, following a PhD at the University of Bristol (housing & mortgage markets). While at Bristol George lectured and taught tutorials in macroeconomics and econometrics. He holds an MSc in Economics and Finance, also from the University of Bristol, and a BA in Economics from the University of Wales, Bangor. George is a published author (What You Need to Know About Economics, Capstone, 2011) and won the Society of Business Economists’ annual essay prize on the topic of spare capacity.

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JERSEY - PREMIER IFC

JERSEY’S FINANCE INDUSTRY: A POSITIVE OUTLOOK

BY ROBERT CHRISTENSEN MBE

Jersey’s enduring status as a leading International Finance Centre (IFC) has been underlined in recent times through its ability to remain at the forefront of the global finance industry.

Jersey was able to weather the impact of the global recession effectively, remaining one of the pre-eminent jurisdictions in providing quality, robustly regulated cross-border financial services to the international investment industry. Furthermore, it is meeting the evolving demands of the market, having introduced new measures in 2015 to further develop its industry offering. By adding legislation and strengthening regulation, it has broadened its appeal as both a centre

for wealth management and as a leading European funds jurisdiction.

Statistics* collated by the financial regulator, the Jersey Financial Services Commission (JFSC), give an indication of the scale and diversity of Jersey’s financial services proposition. In addition to the long-established banking industry, where deposits held in Jersey total circa $190 billion, there are 108 Jersey companies listed

on global stock exchanges with a market capitalisation of $230 billion, a reflection of Jersey’s prominent role as a centre for both international banking and capital markets and listings activity.

Growth is also evident. The alternative asset classes within the funds sector, which form around 70% of Jersey’s total funds business, which itself is valued at $317 billion, continues to stride ahead. Total alternatives

Gorey Castle, Jersey. Copyright Kay Patrick

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JERSEY - PREMIER IFC

business including hedge, private equity, real estate and infrastructure funds is growing by 15% annually, while there were more than 33,000 live companies on Jersey’s company register, the highest figures for six years. It was also telling that the finance industry workforce increased to 12,820 in 2015, the highest figure in the last four years and yet another further signal of business growth.

OPPORTUNITIES The ageing global population and the growth in global trade have been identified by commentators as two dominant trends going forward, which will have a transformational effect on the demand for infrastructure investment and in wealth patterns around the world. For example, on current trends, developed economies will have twice as many older people as children by 2050**, which will inevitably impact on the pensions industry and government services.

Photo: Chris George

These trends and others are expected to prompt global demand for infrastructure investment to increase by over $50 trillion by 2030, (‘Brave New World’, PwC, 2014). Growth on this scale will lead to demands for

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safe and efficient international financing and capital management. A stable, secure and highly regarded IFC such as Jersey has the experience and expertise to tap into the increasing cross-border trade flows which will arise from these underlying trends.

Meanwhile, the increasing globalisation of the financial services industry, the continuing rise of the emerging economies in regions such as the Far East and India and the potential emergence of Africa, is opening up a range of new opportunities for the industry, alongside the more traditional, mature markets.

For example, a growing ultra-high net worth population in new markets has resulted in increasing demand from Jersey practitioners for complex family and estate planning. Although Jersey’s suite of investment vehicles already provides the bespoke range that trust and estate professionals require, there is no complacency and discussions continue to enhance the all-important trust law, which has been at the heart of Jersey’s wealth management offering for more than 30 years. In fact, the law has been amended on only a few occasions during those three decades and it has been a blueprint for legislation in other jurisdictions. This is

JERSEY - PREMIER IFC

FURTHER GROWTH As a result of the measures it has taken, Jersey is wellpositioned in 2016 to further develop business in both traditional and the newer, emerging markets. Its political and economic stability, sophisticated legal and fiscal infrastructure, a longstanding partnership with the City of London and its commitment to expanding its presence in new markets, is balanced with its effective response to the challenge of greater transparency and an increasing volume of global compliance. Clients and their advisers, including financial institutions, intermediaries, families and individuals will find that Jersey remains an innovative, rapidly evolving jurisdiction, with the highly skilled workforce and expertise required to provide crossborder solutions to support their international investment objectives and plans.

Footnotes: * Quarterly statistics for the period ending September 2015 ** McKinsey

Robert Christensen MBE Robert Christensen MBE, is the Chairman of Jersey Finance.

testament to the scope and quality of the original legislation.

Jersey’s long-term economic and political stability is increasingly valued.

OVERSEAS ENGAGEMENT Mindful of accelerating wealth accumulation in many of the growing economies, Jersey Finance has continued to extend its programme of engagement internationally to a number of overseas locations. Having successfully hosted conferences in London for many years, Jersey Finance began a programme of ‘roadshows’ devoted to private client cross-border structures and services and the international funds market in key locations in the Gulf and Asia. In 2015, we extended that series further, returning to the Middle East and Far East, as well as adding key locations in Africa to the programme.

GLOBAL STANDARDS While the industry has been active in new markets, it has also worked closely with the Government of Jersey and the JFSC, to ensure that we have remained on the front foot in meeting new global standards for regulation and cooperation on taxation and compliance matters.

These events, designed to appeal to a broad cross section of private client practitioners, lawyers, investors, advisors and other finance professionals, help to bolster Jersey’s appeal, with key contacts in markets where this new quality business is emerging. With investors placing increasing importance on security and asset protection,

During 2015, there was recognition for Jersey’s regulatory framework for alternative funds from the European Securities and Markets Authority (ESMA), which is a positive development in meeting the requirements of the EU’s Alternative Investment Fund Managers Directive (AIFMD). Jersey has invested in the necessary resources so that it will be among the first adopters of the new Common Reporting Standard (CRS), the new Organisation for Economic Cooperation and Development (OECD) global standard for automatic exchange of financial information in tax matters.

Robert originally joined the law firm then known as Michael Voisin & Co. in 1981 and was subsequently appointed as a director of its associated company, Volaw Trust & Corporate Services Limited, when it was first incorporated in 1982. Robert, who has over 35 years of experience in trust and company management services within Jersey, was appointed Managing Director of Volaw in 1988. Whilst he is responsible for clients administered in all departments of Volaw’s business, his principal area of work centres on ensuring the effective management and control of entities established by Volaw’s clients.

Robert is widely respected for his knowledge and expertise on the corporate governance issues, especially in the area of fund administration.

Since the 1980s, he has been at the forefront of the development of Volaw’s Middle East client base and has been much involved with innovative Islamic finance projects. Robert was instrumental in setting up Jersey Finance Limited, the promotional body for the finance industry in Jersey, of which he was appointed Chairman in June 2014. He is a member of the Society of Trust & Estate Practitioners and holds the Trustee Diploma of the Chartered Institute of Bankers.

Robert was honoured in the Queen’s New Year Honours list for 2015 by being appointed a Member of the Order of the British Empire (MBE) for services to charity.

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JERSEY’S RESPONSE TO INTERNATIONAL INITIATIVES

BY COLIN POWELL CBE

International focus on Jersey – and similar jurisdictions – can be said to have started when the OECD produced its report on harmful tax competition in 1998. Subsequently the OECD published a list of so-called tax havens in its 2000 report ‘Towards Global Tax Cooperation’ and in 2002 called upon these jurisdictions – which included Jersey – to enter into a political commitment to support an international initiative on transparency and information exchange through the negotiation of tax information exchange agreements to an agreed international standard.

In 2008, this initiative was given further impetus when the G20 announced that lack of transparency was one of the root causes of the global financial crisis. At the London summit in April 2009, the G20 called for action against non-cooperative jurisdictions, including tax havens, and stated that the era of bank secrecy was over. As a consequence in September 2009 the OECD restructured the Global Forum on Transparency and Exchange of Information for Tax Purposes which set the standard for exchange of information on request (EOIR) and introduced a peer review process for assessing compliance with the standard.

The OECD and G20 have worked hand in hand over the past five years and the result has been significant reforms to the international tax system, from eliminating strict banking secrecy, to improved tax transparency through stronger international cooperation and, most recently, addressing the type of tax avoidance which sees multinational companies’ profits separated from the underlying economic activity and value creation. However, international efforts have not been restricted to the tax initiatives. The focus has also been on enhancing financial regulation and the fight against money laundering (AML), terrorist financing (CFT) and other financial crimes.

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Photo: Chris George

From the outset Jersey’s response to these international initiatives has been one based on the strongly held view that international recognition of compliance with the standards set can make – and has made – a very positive contribution to Jersey’s continued success as an international finance centre. This policy is exemplified by the position adopted in respect of the following key initiatives promoted by the G20 and the OECD. The policies pursued by the EU have also been an influence given the Island’s close proximity to the EU and its commitment to a good neighbour policy.

TRANSPARENCY AND INFORMATION EXCHANGE FOR TAX PURPOSES Jersey has been an active member of the Global Forum since it was restructured in 2009. From 2010 till 2013 Jersey was a vice-chair of the Global Forum’s Peer Review Group that assesses and monitors compliance with the OECD’s EOIR standard with which Jersey is rated as largely compliant, in common with the UK, the USA, Germany and others.

Photo: Chris George

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At the time of writing, Jersey has signed a total of 38 Tax Information Exchange Agreements (TIEAs) and 10 Double Taxation Agreements (DTAs), of which 33 TIEAs and eight DTAs are in force. In addition, since June 2014 Jersey has been party to the Multilateral Convention on Mutual Administrative Assistance in Tax

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standards. This degree of cooperation is expected to be reflected in the removal of Jersey from the historic black lists of a minority of Member States, something that is also expected of other countries that have maintained such lists.

Matters through which information can be exchanged with an additional 21 jurisdictions.

AUTOMATIC EXCHANGE OF INFORMATION (AEOI) For many years countries have been engaging in AEOI in order to tackle offshore tax evasion and other forms of non-compliance but there was no single international standard expected to have global application. In 2013 G20 leaders, in addition to calling for the completion of the current schedule of the Global Forum’s peer reviews and allocation of ratings, endorsed the OECD proposal for a new global standard for the automatic exchange of information and mandated the Global Forum to establish a mechanism to monitor its implementation.

In 2014 Jersey joined an ‘early adopters’ group for the implementation of the new international standard for AEOI and in October of that year signed a Multilateral Competent Authority Agreement (MCAA) together with some 50 other jurisdictions committing to the implementation of the standard from the 1 January 2016. Jersey is also a Vice Chair of the Global Forum’s AEOI Working Group that has been tasked with assessing and monitoring compliance with the international standard. Jersey’s commitment has played a particularly important part in furthering favourable international attitudes towards Jersey as an international finance centre.

BENEFICIAL OWNERSHIP In 2013 the G8 set out its objectives for enhancing beneficial ownership transparency and Jersey joined with the G8 countries in setting out an Action Plan.

Since then the G20 has produced a statement of key principles and the EU has incorporated beneficial ownership transparency in the 4th AML Directive. In both cases the aim has been to establish central registers of beneficial ownership to which law enforcement authorities can have ready access. Jersey has long had such a register which, combined with the regulation of trust and company service providers (TCSPs), has put Jersey in an internationally acknowledged leading position in meeting the international standard of having adequate, accurate and timely information on beneficial ownership available for law enforcement authorities. Increasingly the Island’s reputation in this and related aspects is proving to be a positive feature for the attraction of quality business and access to financial markets.

BASE EROSION AND PROFIT SHIFTING (BEPS) The G20–OECD BEPS Action Plan sets out 15 key elements of international tax rules to help governments protect their tax bases. Jersey is fully supportive of the BEPS programme and is ensuring that it remains fully informed on the progress in implementing the Actions making up that programme. Early action is being taken by the UK and other OECD member countries to implement Country by Country reporting of profits by Multi-National Enterprises. While there is expected to be limited application of this to Jersey based enterprises, the finance industry is being consulted on what action it would be appropriate to take. As Jersey has relatively few DTAs, it is not used for profit shifting and transfer pricing in the way and to the extent experienced by other jurisdictions. However, what legislation Jersey will be required to enact in order to participate in the BEPS

Jersey has welcomed the global approach that is now central to most if not all of these initiatives. In the past there was a tendency to focus on so called ‘tax havens’ or ‘offshore centres’ as if they were the sole or main source of the problem. As a result, the Island often felt it was being discriminated against. Now the world at large is being expected to respond to the initiatives and a critical light is being shone on jurisdictions generally.

programme will become clearer with the implementation of the Actions by the OECD Member States.

Of particular interest is Action to revamp the work on harmful tax practices with a priority on improving transparency, which explicitly recognises the need to involve third countries to ensure a level playing field.

The OECD has made it clear however that the work on harmful tax practices is not intended to promote the harmonisation of income taxes or tax structures generally within or outside the OECD, nor is it about dictating to any country what should be the appropriate level of tax rates. Rather it is said the work is about reducing the distortionary influence of taxation on the location of mobile financial and service activities, thereby encouraging an environment in which free and fair tax competition can take place. Jersey has seen no reason to fear that this Action will threaten its present low tax structure and policy of tax neutrality.

AML/CFT Jersey’s commitment to the international standards on AML/CFT set by the Financial Action Task Force (FATF) has been assessed by the IMF in 2002 and 2008 and more recently in 2015 by MONEYVAL. The results have shown Jersey to be in a leading position on compliance with the standards.

FINANCIAL REGULATION On financial regulation Jersey has been recognised through independent assessment as having a high level of compliance with the standards set by the international regulatory bodies responsible for banking and fund management. It also is recognised as a leader in the regulation of TCSPs. The standards of financial regulation achieved, combined with AML/CFT and tax information exchange, are increasingly being required to ensure market access.

EUROPEAN UNION (EU) In applying its policy of good neighbour, Jersey has voluntarily given support to the EU in its initiatives on transparency and information exchange through agreements on the taxation of savings income, in meeting the criteria of the Code of Conduct Group on Business Taxation and most recently in joining with the Member States in the early adoption of the new AEOI

The OECD still headlines the attack on offshore tax evasion but OECD officials have emphasised that the word ‘offshore’ now has a generic use relating to activities that take place in a jurisdiction other than the jurisdiction in which the taxpayer is resident. It is not being used, as previously, to focus specifically on socalled tax havens.

With a global approach, it is believed the Island’s competitive position will continue to be enhanced because of the strength of its current practices, which others are expected to emulate. There are now fewer and fewer opportunities for business to be attracted to centres engaging in regulatory arbitrage and a greater desire on the part of reputable businesses to be associated with those financial centres, like Jersey, that have the required international standing for compliance with the relevant international standards.

Colin Powell CBE Colin Powell CBE is Adviser on International Affairs, Chief Minister’s Department, States of Jersey.

From 1969 to 1999 Colin was Adviser to the States of Jersey on the Island’s economic development including as an international finance centre. From 1999 to September 2009 he held the position of Chairman of the Jersey Financial Services Commission, the body responsible for the regulation of all financial services in Jersey.

He is currently Adviser on International Affairs to the Chief Minister of the States of Jersey in which capacity, among other things, he is engaged in negotiating tax information exchange agreements between Jersey and other jurisdictions. Colin represents Jersey on the Global Forum on Transparency and Exchange of Information for Tax Purposes and is a vice chair of the Forum’s AEOI Working Group.

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All Photos: Chris George

JERSEY’S ROUNDTABLE 2016

PARTICIPANTS Chairman: John Willman, former UK Business Editor of the Financial Times.

Geoff Cook: Chief Executive of Jersey Finance.

John Harris: Director General of the Jersey Financial Services Commission (JFSC).

Ian Crosby: President of the Jersey Association of Trust Companies (JATCo) and Managing Director of Stonehage Fleming Trust Holdings (Jersey) Limited.

Ben Robins: Chairman of the Jersey Funds Association (JFA) and Partner of Mourant Ozannes.

Paul Declat: President of the Jersey Bankers Association (JBA) and Director of Offshore Personal Banking for Barclays in Jersey.

Louise Bracken-Smith: Managing Director of Fairway Group.

Zillah Howard: Partner of Bedell.

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ROUNDTABLE Below: (left to right) Ian Crosby, Zillah Howard, Paul Declat, Geoff Cook, Louise Bracken-Smith, Ben Robins, John Harris and John Willman.

John Willman: The global economy is still being buffeted by a variety of crosswinds and the flow of legislation on international financial regulation continues. So I’d like to start by asking each of you how Jersey’s financial services industry fared in 2015?

Geoff Cook: I think that 2015 was actually a very strong year for Jersey. The growth that we started to see in 2013 after the long slowdown following the financial crisis has continued to gather pace. We’ve seen good growth in employment, which reflects increasing business confidence and an improving market environment, with particularly strong growth among fiduciary services providers and in corporate areas – trust funds, private clients, company formation and the like.

And banking is finally emerging from some very challenging times. There’s been a kind of reset which involved dealing with a host of major international regulatory challenges, as well as with measures such as the ring-fencing for UK banks. The local industry has been gently slimming down and although this has not been dramatic, I would say that Jersey has benefitted from being a go-to centre for some big names consolidating their international operations.

don’t really see any particular let-up in that any time soon. Every time that you think there is going to be a regulatory pause, something else happens. A very good example is the way in which UK regulators have been looking to raise the accountability of people who run complex financial institutions with the new covered persons regime.

innovative, safe and reputable, which is a great credit to our regulators who have led us towards that success. It has forced some change on us all to become far more multi-disciplinary than we used to be but we had to make those changes. Our sector is growing very nicely.

I’ve often described us as price-takers. We’re not pricesetters who initiate regulation that can be applied anywhere else. We are required to look at what regulation has arisen elsewhere and to adapt it to Jersey’s circumstances in ways that are seen to match international standards without hobbling firms operating on the Island. That was true in 2015 and it will be true again in 2016 and beyond.

Ben Robins: Funds were certainly very busy in 2015, the busiest since before the financial crisis. Employment levels have risen and we have had to work hard to find the staff we need. Jersey funds are investing all around the world, attracting investors from the US and sovereign wealth funds as well as the UK and the rest of Europe. And our ability to market into Europe under the Alternative Investment Fund Managers Directive [AIFMD] is developing well, while preserving our freedom to operate outside the European Union.

Ian Crosby: Operating in the fiduciary sector, I agree with Geoff that 2015 was a really good year. We’ve put a bit of blue water between ourselves and other centres, becoming a clear jurisdiction of choice. We’re seen as

Louise Bracken-Smith: I think there’s a mood of optimism in the finance industry – certainly in funds, trusts and pensions. We have faced challenges in the last year, in particular from developments in UK legislation

We continued to burnish our brand in reputational terms, with two more evidence-based advocacy reports – one on Jersey’s Value to Africa and the other on the role of international financial centres in facilitating foreign direct investment around the world. I think these reports have a positive impact on those who influence policy and regulation, such as international fora and global regulators. And our leadership role on transparency on reporting standards and beneficial ownership has been recognised by UK policymakers and the OECD. John Harris: I agree that 2015 was a good year for the Island. The international regulatory environment continues to be complex, dense and demanding and I

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Geoff Cook: We saw two big breakthroughs in 2015, both in speeches by European policymakers. Pascal Saint-Amans, Head of OECD tax policy, described Jersey at our Private Client Conference in May as ‘one of the best and first’ in shaping the international tax agenda. And then Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, praised Jersey’s ‘active engagement’ in fighting tax evasion. These were very powerful endorsements by external regulators which validated what we have been saying.

That was followed in the summer by the decision of the European Securities and Markets Authority (ESMA) to recognise Jersey as a fund jurisdiction of sufficient quality to be one of the first non-European Union countries deemed ready to seek authorisation to market its funds throughout the EU under the AIFMD. I thought that was a major milestone. in areas such as the treatment of non-domiciled individuals and the annual tax on enclosed dwellings (ATED). But interestingly, these have created more work as clients have restructured. We have tripled our size as a firm over the last three years and I think Jersey is wellplaced to adapt and tailor its offering.

One example of that is pensions, where a working party on which we are represented has shown how the Government and industry can work together. The modernisation of income tax law has helped reposition Jersey in the international and multi-jurisdictional pension scheme market.

Paul Declat: The commercial agenda is challenging for the banking sector, with continuing low interest rates and the UK’s ring-fencing regulations likely to impact on the upstreaming of funds gathered in Jersey. But we got through 2015 in better shape than many thought at the start of the year and we’re all looking to diversify our income streams. I’d add to the challenges the technological revolution facing all banks industry-wide, which is fundamentally changing how clients engage

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with us. But of course that too can be an opportunity as well as a challenge – it’s a full agenda.

Most of the banking groups have carried out fairly objective and dispassionate reviews of the centres they operate from and they’ve all said that Jersey is absolutely the place they need to be. Its reputation is one that enhances our brand.

Zillah Howard: In the private client sector, we work in an environment of increasing globalisation and sharpening competition, so we will never be lacking in challenges. But Jersey has a lot of very positive and strong factors to attract those clients who are increasingly our typical clients – people looking for robust structures of substance. And it is easier as a small jurisdiction to be nimble in shaping and modifying our legislation in an appropriate and measured way as we did quite recently on trust law in relation to mistake and Hastings/Bass relief.

John Willman: How does the panel think that Jersey is now seen by its international critics?

John Harris: I believe there has been progress in the way that the international community sees Jersey – particularly among European institutions where we have seen signs of marked breakthroughs for the Island. For the first time since I became regulator here, we have been differentiated from what some see as our natural peer group of smaller IFCs, putting us in the same bracket as larger centres such as Singapore, Hong Kong, Switzerland and even the USA. What those institutions have realised is that we live up to our commitments. When we say we wish to embrace and match international standards, we actually do it. Often it’s a pain but it is necessary to do even better than other mainstream centres to get the tick in the box that allows us to continue to play in this game. The latest international evaluation of our anti-money laundering regime, for example, has once again demonstrated that we outperform competitors, as does our approach to sharing information with the international community and other forms of cooperation.

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Ben Robins: Market access is fundamentally important for Jersey and the minimum standards required by tests and assessments conducted by international regulators and tax authorities are creeping into legislation.

The European funds directive is a good example. To obtain an AIFMD passport giving third-country managers access to markets throughout Europe, Jersey must be able to show that it is a cooperative centre from an anti-money laundering perspective and that it has a framework for the exchange of tax information.

Willingly adopting international transparency standards may mean we lose some business but it is business we don’t want because it would undermine our long-term sustainability as an IFC. People are realising that Jersey has a sustainable business model which meets international regulatory standards, so they can do business here knowing that they won’t have to move on after a few years because access has suddenly been denied or an assessment has been negative.

credible source of information for UK politicians, people in and around the City and the British media – I haven’t seen any meaningful critique of its findings.

While it acknowledged there might be some tax leakage, it demonstrated that it was considerably outweighed by inflows of investment into the UK. John Willman: Another Jersey Finance report on Jersey’s Value to Africa was published at the end of 2014. What has been its impact, Geoff?

Geoff Cook: It has been very well received in Africa and

by Africans. We launched it in London which attracted a lot of African institutions and people doing business there. We also presented it to the House of Commons all-party Africa group. And then we staged market launches in South Africa, Kenya and Nigeria, using the British High Commissions in those centres. So it had a very positive impact, I think, on our reputation and our engagement with Africa.

Its strength was that it focused first and foremost on

what Africa needs to be prosperous and successful, with the assessment of what Jersey could contribute as a byproduct rather than a centrepiece. It identified an $11 trillion investment shortfall that must be filled if Africa is to achieve its potential and employ the 600 million young people who will need jobs over the next 20-25 years.

African countries saw Jersey as a jurisdiction interested in helping them to identify their challenges and then to devise solutions as a partner.

John Willman: Let’s turn to banking, which has probably been the sector facing the biggest upheavals since the financial crisis. How does it look from inside the sector, Paul?

Paul Declat: I mentioned earlier that the banks have been facing some tough commercial challenges. The move of UK banks into a ring-fenced world is one of them and we have all been working to adapt to the likelihood that the interest rates we can offer our clients

Louise Bracken-Smith: With private clients, we do face questions about different jurisdictions, why they should base their structures here and how we benchmark ourselves against other jurisdictions. But it’s easy to provide answers because of Jersey’s incredible track record and the hundreds of years of expertise on the Island – we can demonstrate the breadth and depth of our expertise and experience.

Media attacks do lead to questions from the City of London and lawyers and that creates debate. But it also gives us the opportunity to draw on the great research that Jersey Finance has published which shows that Jersey is a huge contributor to the UK economy.

Ben Robins: The Jersey Finance report on Jersey’s Value to Britain, prepared by Capital Economics, made a fantastic contribution in that respect. It was a very

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will come under pressure once ring-fencing is in operation. Another challenge is the increased risk aversion among some banks following heavy criticism from regulators and hefty fines.

John Willman: Moving on to funds, what are the emerging trends, Ben? Ben Robins: One that might surprise people is that we’re now the sixth largest hedge fund hub in the world.

Although there are not many hedge funds domiciled in Jersey relative to, say, the Cayman Islands, the servicing of them here is increasing all the time. And there’s a very healthy trend of reasonably large hedge fund houses such as Blue Crest and Brevan Howard creating large Jersey offices from which they’re managing their funds.

But there are also opportunities to restructure and diversify into new services for UK banks. In that respect, we welcome the ‘Future of Banking’ project launched

by Jersey Finance in 2015 which will bring in external expertise that the individual banks would find hard to organise on their own.

Geoff Cook: The ‘Future of Banking’ project is designed to look at how Jersey can protect the core of what we have in the sector and at how we can capture what we call ‘adjacent opportunities’ to make sure the Island is seen to be a go-to jurisdiction as banking consolidates globally. We’re seeking to be a beneficiary of that trend, rather than being damaged by it.

Our aim is to protect Jersey’s core banking activities while looking for new opportunities. We have around £130 billion of deposits here but only a quarter to a third of that is lent from here. Most of the rest is upstreamed to parent banks, so the project will ask whether more of that value could be retained here, by lending to adjacent opportunities and creating greater diversity in our offering.

An example might be Jersey’s asset managers who leverage their funds by borrowing money to amplify their returns. We ought to be able to fund more of such business locally – providing we preserve the inherent character of the jurisdiction which I would say is lowrisk, conservative and cautious. Other interesting areas to explore are FinTech [financial technology], digitisation and newer forms of credit such as loan origination funds which take equity and convert it to debt.

Paul Declat: As a lifetime banker, I’ve never seen such change in so many areas and it is important that people

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understand that. But with some high quality input from Jersey Finance’s initiative here, the banks are ready to capitalise on any opportunities it identifies.

John Harris: Banking in Jersey has been the aggregator of the finance industry, banking the trust sector and the funds sector, which means they’re inextricably linked. It would be very regrettable if the banking sector didn’t continue to be able to service the wider financial services community in Jersey. But with an intelligent strategy intelligently deployed, there should be no particular reason why different types of banking model shouldn’t take root.

However, there could be consequences for the way that we regulate banks here. For example, we might want to insulate the retail banking component serving individual customers from slightly riskier banking activities which could be allowed in the jurisdiction. We would need to develop a better regulatory approach than ‘one size fits all’.

On other asset classes, real estate is incredibly active, much of it connected with investment in UK real estate, including the London developments which are filling the capital’s skylines with cranes. There is also a lot of inward investment in infrastructure coming through Jersey for infrastructure projects such as Battersea power station and nuclear energy. And there’s a huge amount of deal-flow in private equity with new fund promoters coming to Jersey.

John Willman: And where are the interesting hotspots in private wealth, Ian? Ian Crosby: I think one very interesting change in my 25 years in the sector is the growth of interest among private clients in philanthropy. The organisation of family wealth these days almost always has a significant chunk set aside for philanthropic activities. Often it’s to provide missions for younger family members, which is novel.

Bill Gates is an interesting example in saying that it is a responsibility of wealth to address society’s big challenges and putting together some very ambitious initiatives to tackle malaria. In the old days, it was a case of passing wealth on to the children but now wealthy clients say that if there’s enough for the children, they want to do something else with the rest of it.

Philosophies change, and it’s fantastic to see.

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Zillah Howard: We are at a very exciting stage in Jersey’s development as a centre for philanthropic wealth structuring with the introduction of a Charities Law and a clear Government commitment towards developing the Island as a centre of excellence. As Ian says, many wealthy people want to use a significant amount of their wealth for philanthropy and we are very well-placed to help them do that. We have legislation which is modern and flexible and allows trusts and foundations to be structured to pursue philanthropists’ chosen goals, whether or not those goals are wholly charitable in a technical sense.

only for the benefit of future generations, some of it is now being deployed into new asset classes such as social impact investment funds.

We can also point to Jersey’s stability (economically, politically and geographically), which is so important when instability is a concern in other parts of the globe today; our robust and highly regarded regulatory regime; the quality of our judiciary and the extensive body of case law which provide certainty and predictability for our clients; and the breadth and depth of experience among our professional advisers. These are all very positive and compelling factors when compared to other jurisdictions.

Louise Bracken-Smith: As entrepreneurs in business move into philanthropy, they want to use their entrepreneurial skills to further their favourite causes, whether it’s combatting malaria or something else. But as well as demonstrating broader responsibility towards the wider community in the third sector, we’re seeing philanthropy increasingly used by many of the families that we advise as a learning place for the next generation to develop skills that can be applied to the family’s business.

It’s a trend that has come full circle because if you think back to Victorian times, wealthy benefactors used to do a lot for the public good because governments didn’t have the wherewithal to do it at that time. Today, governments have less and less money to deploy, while wealthy private citizens have more. It’s another funding source that deserves its place in the sun, and Jersey is part of making it happen.

John Willman: Do firms advising private clients need new skills to advise on philanthropy?

Ian Crosby: There are a lot of people in our office who are now specialising in providing such advice. They look at the amount the causes have given to them, how they address their chosen cause and how much is spent on administration. It’s another aspect of the service that private client advisors increasingly offer.

Geoff Cook: Just as there are experts advising investment fund managers and trustees on specialist areas, there are firms now that will help philanthropists make sure their funds have the impact they’d hoped for.

Younger entrepreneurial wealth creators who have made their money themselves do not want to just hand over a cheque without having a clear idea about how it is spent. This is especially so if they want to use that activity to teach their children how to be responsible about wealth. That’s been a real emerging trend.

Zillah Howard: Measuring the impact of philanthropic donations or investment is not always easy and that’s

But we are working in an increasingly competitive environment and other IFCs continue to change their legislation, looking across the waters and often emulating what is being done in Jersey. Sitting on the trusts, the foundations and the charities working groups as I do, I’m aware that we are always looking at possible amendments to our legislation. As Geoff has said, we need to be mindful of the need to be conservative and cautious in what we do, while identifying and responding to the need for change where appropriate. I think we’re doing that and we can move where we need to do so in order to remain competitive.

John Harris: Jersey is ideally placed to be a family office centre, a centre for philanthropy. We have almost 300 foundations now and I think more than a third have philanthropic objectives. So the vehicles are here and the expertise is here. Rather than stewarding wealth

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another specialism that is growing in importance. The way you measure the impact of a donation or investment in relation to poor children in Africa might be very different from the way that you would measure impact in relation to malaria.

Philanthropic entrepreneurs won’t just hand money over and not want to see what happens with that money.

John Willman: We started this roundtable discussion by mentioning the torrent of regulation washing over the international financial system. Has Jersey been able to absorb the latest developments on, for example, Common Reporting Standards [CRS] and automatic information exchange?

Geoff Cook: Our strategy throughout has been to show Jersey as a responsible part of the international community in advancing international standards and their early adoption. We have done that on automatic information exchange, by creating one of the most developed systems for capturing and sharing information anywhere in the world. Indeed, our beneficial ownership register has been praised by international regulators and Jersey already has a central register for oversight of companies.

Ian Crosby: A good example of how we work was the adoption of CRS, which we planned for meticulously. We made sure that firms were aware of the initiative and did a lot of training with workshops and seminars. That’s part of the reason why we are a successful jurisdiction – we take these things seriously.

Ben Robins: The OECD recognised that Jersey was an early adopter on CRS and has used us as an example. It has encouraged others to catch up by saying that if Jersey can prosper as an international finance centre with complete transparency, why can’t they – which is a question we like.

The latest development is the OECD’s Base Erosion and

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Profit-Shifting [BEPS] project. This is clearly targeted to a large extent at activities such as sweetheart tax deals for large multinationals and treaty shopping that simply don’t happen in Jersey because we don’t have the wide double tax treaty network that facilitates such deals.

There is some uncertainty about sustaining tax neutrality for fund investment and whether some funds are really managed in Jersey or by outsiders. But I’m cautiously optimistic that as a jurisdiction of substance, BEPS shouldn’t to be too disruptive for us.

John Harris: I think that Jersey has been good at recognising the fundamental nature of change since the financial crisis and trying to work hard with it. And on beneficial ownership, other jurisdictions have a long way to go to catch up with us. But although we’re a market leader, there is political impetus behind greater disclosure for a variety of reasons. A forthcoming UK conference in May on corruption generally is likely to revisit the notion that everybody should know who owns what. So we will have to refresh and revise how we preserve our leadership position as this develops.

John Willman: I’d like to conclude by asking Geoff what is coming next with Jersey Finance’s research agenda?

Geoff Cook: We’ve commissioned a report called Jersey’s Value to Europe, which will calibrate Jersey’s contribution to the European Union in terms of jobs and growth. It will also refresh the ‘Value to Britain’ work to bring it right up to date, focusing additionally on the value of the non-dom community to Great Britain in economic terms.

The report is probably two-thirds or three-quarters of the way to completion, and we believe that it will be very timely at a time when the European Union will be making announcements on its reaction to the OECD’s BEPS initiative, its own common consolidated corporation tax base review and revisiting codes of conduct on business taxation. It’s very important in that process that they realise that Jersey is a responsible contributor to their economic prosperity, which is what I believe the report will show.

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Ashburton Investments is a registered business name of Ashburton (Jersey) Limited. Registered business address: PO Box 239, 17 Hilary Street, St Helier, Jersey, JE4 8SJ. Ashburton (Jersey) Limited is regulated by the Jersey Financial Services Commission.

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ENHANCING JERSEY’S REPUTATION WORLDWIDE

BY SENATOR SIR PHILIP BAILHACHE

Institutional reputation is part of the bedrock of society. Trust in a country’s institutions – the judiciary, the banks, the professions, in government even – is a fundamental reason for the internal stability of all well-ordered states. It is no different internationally.

The reputation of a state for being well regulated and responsible and for complying with international standards, is very important. One does not have to align oneself necessarily with Cassius who laments in Shakespeare’s Othello – “Reputation, reputation, reputation! Oh, I have lost my reputation! I have lost the immortal part of myself and what remains is bestial.” – to understand that a

country’s international reputation for honesty and stability is good for business.

Protecting Jersey’s reputation internationally is one of the core functions of the Ministry for External Relations. As Minister, I have made it one of my key tasks to work towards Jersey’s removal from the socalled ‘blacklists’ of a number of countries around the world.

The ‘blacklists’ are different in character. Some are based upon alleged lack of cooperation while others are based upon tax rates. All of them are nonetheless damaging to Jersey’s interests. In some cases, companies and individuals in these other countries suffer higher rates of taxation if engaging in trade with Jersey. More generally, foreign business is deterred from engaging with a ‘black-listed’ country for fear of damaging its own reputation.

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Ministers and officials have been working hard over the last 12 months to explain Jersey and our policies of transparency and compliance with international standards. There is no justification, in my view, for Jersey’s presence on any ‘blacklist’. Often it results from historical misperceptions or from assumptions that upon analysis are without foundation.

Occasionally it is possible to persuade another state to revise its stance with relative speed. In 2015 Jersey was added to a new blacklist created by the District of Columbia in the USA. The action was taken on the assumption that an OECD list created more than 15 years ago was still current. After governmental intervention with the responsible body in the District of Columbia the list was revised and Jersey was removed from it. More often the process of persuasion takes longer and is sometimes dependent upon the completion of tax agreements. When the Government signed a Tax Information Exchange Agreement (TIEA) with Colombia in 2015, Jersey was then removed from the Colombian ‘blacklist’.

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More recently, Italy has removed the Island from its list of uncooperative jurisdictions, again following the ratification of a TIEA signed some two years ago.

On a related front, negotiations led to the signature of a Double Taxation Agreement (DTA) with the Seychelles and, more significantly, with Rwanda. Ministers and officials have been developing synergies with that small African state to the advantage – it is hoped – of both countries. During 2016 the intention is to build upon this important relationship and to seek other markets in the African continent in accordance with the advice contained in a report from Capital Economics. My Ministry is seeking an entrustment from the UK government to negotiate and sign Bilateral Investment Treaties with a number of countries in Africa and elsewhere and it is expected that this will come to fruition in 2016.

Developing the Island’s reputation abroad led to Ministerial visits to China and the UAE during 2015, both of which involved meetings with highly placed

members of government and officials. The importance of such meetings cannot be overemphasised. Personal contacts with government and business leaders create the trust which is fundamental to all successful relationships and in some places is a necessary prerequisite to the undertaking of business at all.

Negotiations on a Jersey/UAE DTA began in January 2016 and our relationship with China continues to deepen. The President of China was present at a ceremony in London to mark the designation of Hautlieu School as 1,000th Confucius School, following its link with the President’s alma mater, Bayi School in Beijing. The opportunities for financial services are legion.

Burj Khalifa, Dubai.

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Senator Sir Philip Bailhache Senator Sir Philip Bailhache is Minister for External Relations and Assistant Minister for Education, Government of Jersey.

Sir Philip was educated at Pembroke College, Oxford, obtaining an honours degree in jurisprudence, was called to the English bar in 1968 and admitted to the Jersey bar in 1969.

In 1972 he was elected to the States of Jersey as Deputy of Grouville, subsequently resigning upon his appointment as Solicitor General for Jersey in 1975. In 1986 he was appointed Attorney General and in 1989 was made a Queen’s Counsel. Appointed Deputy Bailiff in 1994, he became Bailiff of Jersey in 1995. In 1996 he was knighted and made an Honorary Fellow of Pembroke College.

Balancing the potential significance of different markets and weighing in that balance the political and diplomatic implications involved in doing business in such countries, is another important task of the Ministry of External Relations. We do not ignore Europe. Although outside the EU, Jersey is geographically and culturally part of Europe. A new Head of the Caen Channel Islands Office, Aurélie Leroy, has been appointed and strong relationships with the recently unified Region of Normandy and with Brittany are in prospect. Changing outdated prejudices about Jersey in our closest neighbour is a high priority.

Another new appointment is that of Sam Gibbs as head of the London Office. Huge strides have been made in the last two years through the London Office in cementing Jersey’s good relations with the UK government. There can be few members of government or opposition at Westminster who are unaware (unless determined to be ignorant) of the value to the UK of the financial services industry in

Jersey and the corresponding importance of the City of London to Jersey. Nurturing relationships at every level is of vital importance and our London Office is well placed to do that work.

Clearly the referendum on the nature of the UK’s relationship with the EU is of huge significance to Jersey and the study of possible outcomes – and their effect upon Jersey – has been one of the principal work streams of the Ministry of External Relations. The Government of Jersey’s broad policy has been to support the UK’s efforts to seek reform in Europe, while at the same time giving close consideration to the potential consequences of a BREXIT. There is no doubt that a decision by the UK to leave the EU would impact upon Jersey in the sense that the Protocol which governs Jersey’s relationship with the EU would fall away. There would certainly be challenges but it is possible that new opportunities would open up. All the implications are being carefully studied by the External Relations team.

Sir Philip founded the Jersey Law Review in 1997 (now Jersey and Guernsey Law Review) and been editor since its inception. As Bailiff, he chaired the Jersey Legal Information Board since its establishment in 1999, spearheading efforts to make the law and legal processes more accessible, particularly through IT (e.g. www.jerseylaw.je). In 2008 he founded the Institute of Law which teaches Jersey law to aspiring advocates, as well as offering an LLB in association with the University of London. He remains Chairman of the Institute’s Governing Body.

Playing an active role in Commonwealth organisations, he was, as a Commonwealth Parliamentary Association representative, a member of the group of experts responsible for the Latimer House Guidelines on Parliamentary Supremacy and Judicial Independence in 1998.

Sir Philip retired as Bailiff in June 2009 and was appointed as a Commissioner of the Royal Court and a judge of the Court of Appeal in July 2009. He stepped down in July 2011 to run for office and was elected on 14 November 2011 and subsequently appointed Assistant Chief Minister. In September 2013 he was elected as Jersey’s first Minister for External Relations and re-elected in the October 2014 Senatorial elections. He was appointed as Assistant Education Minister in November 2014.

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JERSEY’S ENDURING INTERNATIONAL APPEAL

BY RICHARD CORRIGAN

In the past twelve months, Jersey Finance has continued to make considerable strides in enhancing its international engagement and in strengthening jurisdictional awareness in a broad range of sectors and markets worldwide.

Of course London, the world’s most important global structuring hub, remains a key centre for Jersey, right across the private wealth, banking, funds and capital markets sectors, and Jersey has worked hard to retain strong links with gatekeepers in the city.

Beyond London and the hugely important European markets, Jersey continued to expand its international financial services activity to markets further afield throughout 2015.

Figures consistently reinforce that wealth is migrating east, with more than £11 trillion now held by high net worth individuals (HNWIs) in the Asia Pacific region (World Wealth Report 2015). Wealth is also increasing

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at above average levels in the Middle East (by 8.2% to £1.6 trillion) and in Africa (by 7% to £1 trillion).

Such global shifts in wealth are prompting investors to seek efficient means of deploying investment capital into diverse areas and markets. Investors, institutions, intermediaries and HNWIs are all looking for access to Western and emerging markets through well-regulated, established centres and this is giving Jersey an excellent opportunity to demonstrate its strengths around the world.

ACTIVITY Against the backdrop of these global trends, during 2015 the overall focus for Jersey Finance has been on

increasing its investment in key growth markets in order to deepen relationships in the GCC, the Far East, Africa and the US. This has included hosting, for the second consecutive year, a hugely successful roadshow programme in Asia, where delegate attendance was up by as much as 32% compared to the previous year. Jersey has also been fortunate to have a government that sends senior representatives to visit key markets on a regular basis and a proactive regulatory authority that is committed to dialogue with their counterparts around the world.

All of these efforts combined give Jersey a strong platform to communicate its 50+ year pedigree in

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delivering quality cross-border and asset protection services, and those messages are being well received.

Particular success was seen in the Gulf in 2015. Jersey Finance has had a presence in the UAE for a number of years and bolstered its presence in Dubai in 2015, whilst regular engagement at ministerial, regulatory and industry levels, continues to have an extremely positive impact on business flows with the region.

Whilst Jersey’s reputation for robust wealth management services in the region are well known, recent months have seen Middle East investors looking increasingly at diversifying their strategies towards broader sectors and markets. Exacerbated by ongoing political instability in the region, investors are also seeking support from a stable partner jurisdiction and this is all playing to Jersey’s strengths, particularly in alternative investment and sophisticated cross-border investment structuring.

Meanwhile, the Far East remains a key focus. Jersey Finance has been represented in Hong Kong now for six years, whilst a launchpad presence in conjunction with the China-Britain Business Council was established in 2014 in Shanghai.

Corporate structuring from the Far East through Jersey remains strong; around one third of all Chinese companies being listed in London having done so through Jersey and Jersey companies listed on the Hong Kong Stock Exchange have a market capitalisation of £20 billion.

Further, the rapidly changing Asian landscape, where the size of the HNW population increased by 8.5% during 2014 (World Wealth Report 2015),

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JERSEY’S INTERNATIONAL FOCUS Gate of India in New Delhi.

placement regimes (NPPRs) are working well, Jersey’s position as an alternative funds centre was greatly enhanced in 2015 by the decision of the European Securities and Markets Authority (ESMA) to recommend that Jersey have access to a Europe-wide passport under the AIFMD. Being approved so early in the process has given Jersey considerable added certainty as to its long-term sustainability as a funds jurisdiction. As a result, there has been a steady flow of alternative fund managers establishing a presence in Jersey to bolster their substance. It was also encouraging that Japanese bank MUFG made a significant investment into Jersey in 2015, through the acquisition of the fund services arm of UBS. REGULATION It is now undoubtedly the case that investors and their advisers in overseas markets are increasingly looking not only to jurisdictions that can demonstrate high levels of stability, substance and expertise, but also to those that can demonstrate a robust approach to regulation.

means that Jersey is also witnessing growth in private wealth management business and, in particular, growth in complex Asian multi-generational and multijurisdictional family and estate planning, using a combination of Jersey trust, foundation and corporate vehicles.

number of mining and natural resource companies establishing a presence in Jersey has meant that firms are now able to offer significant experience in the natural resource, mining and energy sectors, as well as in other areas including corporate, funds, project and infrastructure work.

In India, the focus has been on wealth management services for the growing middle-class population and the significant non-resident Indian population around the world, with business flows evolving in this market too.

Jersey’s role as a conduit for FDI into Africa is now really coming to the fore too. The Value to Africa report, commissioned by Jersey Finance and published by Capital Economics in 2014 highlighted that Jersey can play a crucial role in helping African nations to access the investment funds they so vitally need, if the continent is to realise its growth ambitions by channelling FDI to where it is most needed.

The concept of the family office, for instance, is gaining traction and firms in Jersey are reporting greater demand amongst Indian family clients for sophisticated investment advisory services, as well as other key services such as family governance.

Indian enterprise and innovation is also creating a growing need for international corporate services and, as a growing number of Indian companies look to tap into investment capital in overseas markets, Jersey has seen increasing success in this area. With the Indian Government’s liberalisation of certain sectors designed to encourage foreign direct investment (FDI), crossborder investment is vital in an Indian context. This is requiring an appropriate approach to achieve secure and efficient cross-border capital management. Jersey company and investment structures are being more frequently used to facilitate the efficient flow of international capital for various infrastructure projects, both into, and out of India.

Meanwhile, Africa has been a considerable success story for Jersey in recent months and a number of Jersey firms now have well-established links in advising clients on wealth management and estate planning. Approximately 9% of assets looked after by trusts in Jersey have come from African sources and several African banks have a presence in the jurisdiction.

Firms are however broadening their scope to advise clients on a range of transactions. A rapid rise in the

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In this respect, the findings of the 2015 report Jersey’s Contribution to FDI, commissioned by Jersey Finance, are particularly pertinent. The report found that Jersey distributed in excess of $75 billion in FDI in 2012, flowing to a diverse range of countries including many emerging markets. This global dynamic of investment structuring is something that is resonating clearly with investors right across Jersey’s target overseas markets.

FUNDS SUBSTANCE Complementing this focus on overseas markets is a strategy to cement Jersey’s position as a global centre for alternative fund servicing and management.

Market access, particularly into Europe in light of the Alternative Investment Fund Managers Directive (AIFMD), has been a key issue in recent times and Jersey is incredibly well positioned in this respect to provide solutions for managers in Europe, Asia and increasingly, the US. Consequently, this forms a key part of Jersey’s messaging platform in overseas markets and Jersey Finance strengthened its capabilities last year by appointing a dedicated resource to help communicate the level of market access that Jersey can offer fund managers.

Whilst existing access arrangements for national private

Against a backdrop of concerted international efforts to crack down on financial crime, Jersey has frequently been praised by international bodies for its commitment to international cooperation, whilst retaining a firm focus on data security. This approach is consistently finding favour across the Far East, Gulf and Africa.

Jersey’s message is being extremely well received in major markets around the world and it is Jersey Finance’s intention to continue to highlight the scope of Jersey’s expertise across the private wealth, banking, fund and capital markets sectors through its programme of activities in major overseas markets in 2016.

Richard Corrigan Richard Corrigan is Deputy Chief Executive of Jersey Finance.

Richard joined Jersey Finance as Global Head of Business Development from Barclays, where he was most recently a Director within the Wealth and Investment Management division. Through his extended team in London, the UAE, Hong Kong and the India representative offices, Richard helps to support Member firms in a number of international growth markets and to foster closer working relationships with a wide group of industry stakeholders.

A qualified banker, Richard has extensive experience in managing business units, coverage teams and clients within international corporate banking and wealth management businesses.

During his career, Richard has acted as board director for trust company, fund services and investment management businesses.

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JERSEY: FACILITATING INVESTMENT INTO DIVERSE MARKETS

BY PETER BOURNE

Jersey has embarked on a strategic drive to leverage its capabilities as a leading international finance centre away from its more traditional Eurocentric roots into newer emerging territories such as Asia and Africa. This ambition is underpinned by the territory’s already significant foothold in Africa in the private wealth, resources and mining sectors, while its experience and close proximity to the UK and European markets, structuring expertise and strong legal and regulatory environment are proven attractions to both Asian and African markets.

As has been well documented elsewhere, Jersey’s value lies not only in enabling and providing a highly regarded platform for external or outward focused investment flows but also to facilitate inward investment to those countries where capital is in short supply.

By the close of 2015, however, it might have seemed that this strategy was facing some challenges. A decade-long ‘golden era’ in developing market growth hit the wall rather abruptly. China’s transition to a more consumption-led economy has proved to be a hazardous path, with the excesses of a multi-year

investment spending boom coming home to roost.

A linked collapse in commodity and energy prices and currency dislocation compounded the woes of many countries in these targeted areas. Fearing the limited ability of policy makers to respond and in the absence

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JERSEY’S INTERNATIONAL FOCUS Indian Parliament building.

Great Wall of China.

Cape Town, South Africa.

of natural buying support, global capital markets went into something of a tailspin. Fireworks of an entirely different kind brought the New Year in.

more visible and tangible than in many of its peers.

Jersey is working to build relationships with this future powerhouse.

In our view, these events, unwelcome as they may have been as they played out, highlight some ongoing but distinct shifts in market behaviour which lend themselves to, rather than detract from, Jersey’s positioning.

In China, however, the past twelve months has raised some serious questions about its supposedly infallible march to becoming the world’s largest economy. The country was beset by political machinations, indications of reactive and inept policy decisions and a lack of transparency on their currency strategy. Clearly, investors also increasingly distrust official statistics which belie a relatively swift cooling of growth. Yet once again, it is important to focus on the long-term trends where urbanisation, productivity gains and the rising importance of the consumer, notwithstanding short-to medium adjustments, will no doubt drive a sustainable growth path. It would be folly to bet against this.

Unsurprisingly, global flows in 2015 reflected the underlying concerns of investors; capital flows out of emerging markets accelerated while the allocation of developed market investors to these areas contracted significantly. The severity of market and currency dislocations will have served to confirm the need for portfolio diversification, emphasising demand for multi asset products, trends which are likely to remain in place for some time. Financial services providers in offshore centres such as Jersey have undoubtedly benefited as natural facilitators and custodians of this reallocation of wealth towards developed world currencies and markets.

The second disruptive trend, probably underway for some time but has shown up even more clearly in the aftermath of 2015, is the need to be selective about emerging market investments. There are few destinations of choice left out of the acronym rich bunch that strode ahead of the emerging market pack in 2010; as we know BRICS and CIVETS gave way eventually to the Fragile Five and other less complimentary descriptors (not exclusively limited to developing countries of course). Now we must look to individual countries where real growth prospects are not booby trapped with structural economic and institutional impediments such as deficit funding, corruption and socio-political risk issues.

This is not to say that the rise of the emerging market block, the so-called megatrend shift from West to East, is derailed. India is a country rich in demographic and reform potential where future growth prospects are far

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What about Africa, where Jersey has a rich legacy and substantial recognition on the continent and where existing and new players continue to build ties? Political disruption, falling commodity and energy prices have sent many countries reeling and raised fresh concerns amongst investors. However, it is telling that whereas demand for listed capital market instruments has collapsed in the short-term, also reflecting something of a scramble for liquidity, demand for real assets remains intact.

Sub-Saharan Africa’s rapidly expanding cities, burgeoning middle class and growth rates often exceeding 5% have led to a strong demand for commercial and retail real estate. With international investors targeting Africa for expansion and growth opportunities and less than 2.5 million square metres of A grade commercial and retail space available across the sub-continent (excluding South Africa), a compelling need for top-end developments has emerged. Demand for high-end space comes from global retailers, finance companies, hoteliers and resource companies, all of which have identified sub-Saharan Africa as a highgrowth region over the long-term.

Africa’s growth potential is clearly enormous on a number of fronts. The attraction of investing in early stage developing economies is of course underpinned by consumption and investment growth. Encouragingly, there are signs of increased focus on corruption; witness reforms and action against senior officials in countries such as Tanzania, Senegal, Nigeria and Kenya. In addition, with much discussion about the ‘Fourth Industrial Revolution’ post Davos, it is worth highlighting how fast the dynamic can shift in this era of technology-enabled disruption. Africa is a strong adapter of new technologies. A simple example of this is in the telecommunication industry, which bypassed traditional fixed lines to go straight to mobile technology, in the process providing internet access for millions and enabling the launch of mobile money platforms, bringing financial products to masses of people previously excluded from this area of the formal economy.

In conclusion, Jersey will not be immune to short-term market gyrations and the impact of what are serious global issues. However, what asset managers seek to do in achieving their mandates is realise the importance of establishing long-term views and know that staying the course remains key, whilst remaining flexible in the implementation of these ideas. Notwithstanding recent events, Jersey remains well positioned to grow off a relative position of strength into these new jurisdictions.

Peter Bourne Peter Bourne is Managing Director of Ashburton (Jersey) Limited and is responsible for Ashburton Investments’ International operations.

Peter has extensive experience in the asset management industry, having worked as an investment professional in both private client and institutional businesses within the FirstRand Group since 1987. Prior to moving to Jersey in 2007, Peter was responsible for the Portfolio Management division of the FirstRand Group’s Wealth Segment. He holds a B.Com degree in Accounting and Economics from the University of Cape Town.

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JERSEY AND ASIA: COOPERATION NOT COMPETITION

BY KEVIN O'CONNELL AND JP KOOLMEES

In the midst of the prevailing push to benefit from lucrative emerging markets in Asia via Singapore and Hong Kong, it is important for fiduciary providers to take the time to think whether a presence in the region is truly beneficial or simply a case of ‘me too’.

EASTERN PROMISE Singapore and Hong Kong are seen as the gateway investment hubs for emerging markets in South (East) Asia and the People’s Republic of China / North Asia, respectively.

Singapore is one of the premier investment destinations and not just in the developing world, and the fourth leading financial centre1. Moreover, the traffic is twoway – the Lion City is one of the largest investors in foreign countries through its sovereign wealth funds.

Meanwhile, Hong Kong is already the world’s second most competitive economy (behind America according to a ranking by the IMD World Competitiveness Centre2), thanks to high efficiency levels and businessfriendly policies like zero export tariffs. Tellingly, the first six months of 2015 saw the Hong Kong Stock Exchange become the world’s largest initial public offering (IPO) market in terms of funds raised, with IPO proceeds hitting $17.3 billion, a 45% increase onyear and around eight times higher than rival Singapore’s performance.3

Both locations are also in the top 10 list of countries for ease of doing business, with Singapore taking top ranking.4 It is no wonder then that both jurisdictions are the focus of attention in the financial world.

THE SUN ALSO RISES (IN THE WEST) These days it is fair to say that there is intense competition between International Finance Centres (IFCs). Indeed, IFCs and industry competitors spend significant time and energy trying to lure clients and their advisers away from where they may have

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traditionally undertaken activities to those jurisdictions that they argue have better regulatory and legislative framework backed by solid judicial precedent and a highly qualified workforce. Given the intensity of this competition it is easy to see how an IFC could become hell-bent on trying to be all things to all men.

IT IS A MATTER OF CHOICE By having a foothold in both regions and the capability to offer real substance and mind and management, both Asian hubs (Singapore and Hong Kong) and Jersey benefit. In fact, with the advent of global initiatives like BEPS (Base Erosion and Profit Shifting), the ability to provide clients with services in the IFC that best meets their specific requirements at a given moment in time, may well prove to be a differentiating factor. Ultimately it comes down to keeping your options and your clients’ options, open. One size – and one IFC – does not fit all.

We believe that this strategy is intrinsically short-sighted and limiting. It frequently fails to take a realistic view of the logistical obstacles – time zones, ease of access and ability to travel to key markets with relative ease – that still need to be overcome notwithstanding the advent of the digital age. It also assumes that all IFCs are equal when it comes to providing ‘best-fit’ solutions for clients, when the truth of the matter is that the choice of IFC should always be dictated by the individual needs of clients.

Footnotes: 1 http://www.nasdaq.com/article/emerging-marketssingapores-remarkable-50-years-cm496488 2 http://www.imd.org/wcc/news-wcy-ranking 3 http://www.cnbc.com/2015/09/16/china-marketshelp-cement-hong-kong-as-global-financialhub.html 4 http://www.doingbusiness.org/rankings 5 www.jerseyfinance.je/china 6 It is the fourth consecutive year Jersey has been awarded the accolade, this year being selected by the panel of judges above other shortlisted jurisdictions; Guernsey, Isle of Man, Bermuda, Malta and Singapore.

HORSES FOR COURSES Given the size of market opportunity and the need for logistics to work, IFCs in Western Europe such as Jersey and the key centres in Asia have much more to gain by working together as complementary centres rather than fighting each other over target markets. Being able to offer clients a choice of an Asian and a Jersey offering is a powerful incentive for clients and their advisers.

In the past 12 months, we have seen the Jersey – Asian interplay work exceptionally well in several instances.

• A Jersey private trust company (PTC) structure for an entrepreneurial family based in Hong Kong was established but with family members spread around the globe. The family patriarch wanted to create a multi-generational succession vehicle to hold various assets across the world. Following discussions with the principal and his advisers, the decision was taken to establish a Jersey PTC because of the strength of Jersey’s trust law and strong bank of judicial precedent.

Kevin O'Connell Kevin O’Connell, Group Commercial Director, First Names.

Kevin has been with First Names Group since 1995. Since 2012 he has been Group Commercial Directorship and is responsibility for the organic growth strategy of the Group.

• A Chinese syndicate of investors looking to acquire a major investment in the hospitality sector in the UK, has formed a Singapore holding company, which in turn will hold a Jersey company to acquire the UK asset. This is a popular structure for Chinese corporations investing into UK commercial real estate as part of their long term diversification strategy.

However it is not limited to investment in the UK. Chinese investors are increasingly using Jersey limited partnership structures to invest in non-Chinese assets with overseas investment partners.

• In 2015 a Jersey-headquartered, specialist real estate group was looking to expand its footprint into the Asia-Pacific (APAC) region. Following a detailed review, Hong Kong was chosen as their regional APAC hub while Singapore holding companies were established to further the group’s investment into Japan and beyond.

• In Singapore, we have seen an increasing appetite (via our European offices) from sovereign funds looking to invest in private equity ventures alongside global investors. This is frequently driven by Singapore’s favourable double taxation agreements.

Meanwhile, Jersey companies remain the vehicles of choice to raise funds for expansion (frequently through an IPO) to gain access to capital markets, especially for

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He has a law degree from the National University of Ireland, a diploma in property tax and is an Irish qualified solicitor.

Chinese companies. Since the first Chinese company registered in Jersey in 1994, one third of the Chinese companies that have listed in London have done so through Jersey.5 The Island continues to be very well perceived in the Far East – a reputation that can only be enhanced by awards such as the recent International Financial Centre (IFC) of the Year award in the 2016 annual Citywealth IFC Awards.6 Given the aforementioned factors, it is particularly encouraging to see Jersey actively looking ahead to ensure it is well equipped to meet the future needs of Asian clients. Some practical examples that spring to mind are the creation of a Mandarin language version of the Jersey Finance website and an increased focus on teaching Mandarin in Jersey schools.

JP Koolmees JP Koolmees, Head of Asia, First Names.

As Head of First Names in Asia, JP Koolmees oversees First Names Group operations in Singapore, Hong Kong and Japan.

Originally from The Netherlands, JP is based in Singapore. He holds a Master’s degree in Law from Leiden University and has over 16 years’ experience in professional services.

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REALISING A RESPONSIVE REGULATORY REGIME

BY JOHN HARRIS

The Jersey Financial Services Commission (JFSC) and the financial services industry in Jersey continue to operate in an environment characterised by challenges and opportunities in a wide range of areas. These include the ongoing evolution of key international regulatory frameworks, the volatile global economy, the rise of new technologies to provide financial services (FinTech) and rapidly evolving risks such as cybersecurity.

The financial services sector in Jersey continues to improve gently, following the difficult years immediately following the global financial crisis. The funds sector continues to show strong growth in all asset classes, particularly hedge, private equity, real estate and infrastructure funds and the banking sector continued to stabilise. The number of companies incorporated also continues to grow strongly. However, profitability in the financial services sector remains some way below historic highs and the continued

growth is contingent on the sectors ability to respond to some of the aforementioned challenges and opportunities.

One key area generating significant challenges and opportunities – and one in which the Commission is heavily involved – is the impact on Jersey of developments in the international regulatory environment. These developments have the potential to limit the fundamental ingredient in the success of the

Jersey financial services sector: access to international markets.

The JFSC works hard to maintain and develop access to these markets. In order to achieve this we engage with the relevant bodies in key jurisdictions such as the UK, European Union, other international finance centres and other key markets, and with international standard setters, such as IOSCO, Basel and IAIS. The form this engagement takes is important. We listen to identify and

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Photo: Chris George

understand the impact of significant issues for industry at an early stage.

We make contributions to the debate on new regulations and assessment frameworks, which raises Jersey’s profile as a respected and well regulated jurisdiction. We also fight Jersey’s corner as a well regulated and respected jurisdiction that meets key international standards and can make a significant and valuable contribution to global growth.

During 2015, the JFSC made significant progress in facilitating market access and meeting international standards. Two key headlines stand out. First, a positive assessment of Jersey’s AML/CFT systems by the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (known as ‘MONEYVAL’). Second, Jersey made significant progress towards obtaining a ‘third-country’ passport under the European Union Alternative Investment Funds Directive (AIFMD); in July 2015, the European Securities and Markets Authority (ESMA) recommended to the European Parliament, Council and Commission that Jersey should be granted a third-country AIFMD passport.

The MONEYVAL evaluation, which began in 2014, has been a critically important issue for Jersey and for the JFSC. Demonstrating that we have a robust and effective regime to combat money laundering and the financing of terrorism is a prerequisite for international market access and helps to dispel some of the myths that some remain keen to foster about Jersey and its financial services industry.

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The evaluation was demanding, all the more so because it followed a recently enhanced methodology with a focus not just on whether appropriate legislation and regulation is in place but also that it is applied effectively.

Although we were confident of our actions on both of these counts, it can

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In addition to these headline achievements, the JFSC has been actively involved in a number of other projects that have significant implications for the financial services industry in Jersey. Three key areas stand out: in banking we have been working to adopt the latest set of international bank prudential standards set under the Basel III process and we have been working with individual banks on their strategic response to the UK ringfencing of retail banks. In the funds area, we are continuing to review the funds regime and we have been consulting with industry on our approach to MiFID II, an issue that primarily effects investment business but will affect other parts of the industry too.

sometimes be difficult to gather sufficient evidence to prove this to a third party. The final evaluation report was discussed at a plenary meeting on 9 December 2015. Although the report has not yet been published, I expect that it will reflect positively on the JFSC and Jersey as a whole.

The positive ESMA assessment required lots of hard work behind the scenes by the JFSC, working together with both Government and the funds industry. The recommendation reflects positively on Jersey’s robust AIFMD framework and fully compliant regime which has been introduced. The process for obtaining a passport has more stages to go, however we are currently very well placed and we are already seeing the benefits of the positive recommendation through an increase in alternative fund managers authorised to market into Europe through national private placement regimes.

Photo: Chris George

Although we expect to receive a positive assessment, there will be areas where Jersey needs to reconsider or strengthen its approach. This work will be progressed in 2016 alongside an already full AML/CFT agenda, which will include the development of a National Risk Assessment and an assessment of the impact of the European Union’s fourth Anti-Money Laundering Directive.

More information about these priorities is set out in our 2016 Business Plan, which highlights 10 key priorities for the JFSC in 2016. One of the other priorities I should mention here is the JFSC’s role in ensuring that the financial services industry is in a position to benefit from growth in FinTech. This is an area in which the JFSC saw increased activity during 2015 and we played an active role by providing guidance on the use of electronic customer identification tools, working with Government to consult on the regulation of virtual currencies and engaging with industry on new technology developments more generally.

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Photo: Chris George

JERSEY’S REGULATORY INFRASTRUCTURE

The nature of Jersey as an international financial centre carries with it other responsibilities, particularly in terms of cooperation with overseas regulators. This is a responsibility that we take very seriously and as part of this we have signed up to Memorandums of Understanding (MoUs) with regulators in over 90 jurisdictions. Each MoU provides a formal framework for the exchange of regulatory information and the provision of mutual assistance for the purpose of ensuring compliance by financial service businesses with regulatory requirements in Jersey and the overseas jurisdiction. In addition, these agreements support the important work that the JFSC does to develop and maintain market access to overseas markets by Jersey firms, especially so where the existence of a regulatory cooperation agreement is a precondition to Jersey firms being granted market access. In 2014 and 2015 we signed up to new or enhanced MoUs with regulators in Denmark, Gibraltar, Labuan, South Africa, Switzerland and the UK. The work done by the JFSC to ensure access to international markets is a core part of our function, however I must also cover an equally important part of our remit; to protect the public. The JFSC pursues this objective through a wide range of programmes.

The primary tool to protect the public is through setting appropriate regulatory requirements and supervising firms to ensure that these are being adhered to. This is the ‘bread and butter’ work of a regulator. We back this work up through efforts to improve financial literacy and reduce fraud.

We have focused our financial literacy work on the investors of the future and the elderly and vulnerable. In 2014 we launched an outreach programme to schools in Jersey. We worked closely with teachers in schools to provide a long-term foundation for this project and we helped to make financial literacy a part of the national curriculum. In 2015 we helped to launch the Fraud

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Prevention Forum, raising awareness of fraud risks in vulnerable groups and providing tools for people to report suspected scams.

Finally, a brief mention in this review of Jersey’s launch of an aircraft registry in 2015. The aircraft registry builds on the Company Registry which is part of the JFSC. The new register enables local company service providers to broaden their offering and illustrates the Registry’s position as a leading provider of efficient registry services. Throughout 2016 the Registry will continue to explore other similar opportunities to leverage its existing systems and resources.

I end my remarks this year by focusing on the JFSC itself. In June 2014 Lord Eatwell was appointed as the new Chairman of the JFSC and he has brought a range of ideas to the table to reflect a rapidly changing and developing world. He has made the case that all regulators need to be increasingly agile, listening, responsive and essentially more thoughtful, with decisions increasingly driven by internal and external research developed in order to keep pace with the astonishing range of international regulatory developments that have come to pass since the financial crisis. In this respect the JFSC has made significant progress in executing its Change Programme to maximise the effectiveness and efficiency of its own resources.

As part of this programme the JFSC has begun the rollout of a portal for communication with industry, reviewed and reorganised its supervisory approach with an increasing focus on an embedded risk-based approach, whilst also making improvements to our IT infrastructure and ensuring that the JFSC is an employer of choice that recognises and rewards performance. These changes are necessary to ensure that we continue to adapt effectively to the challenges and opportunities facing the industry, achieve our functions, meet the expectations of international

assessors such as MONEYVAL and the IMF, and of course to meet our Chairman’s expectations.

I hope these few lines have provided some insight into the challenges and opportunities with which Jersey is faced. At the JFSC we are proud to play the part that we have in Jersey life and look forward to continuing to be able to do so into the future.

John Harris John Harris is the Director General of the Jersey Financial Services Commission (JFSC).

From 2002 to 2006, John Harris held the position of Director - International Finance in the States of Jersey Chief Minister’s Department where he had responsibility for all aspects of the government’s policy on the maintenance and enhancement of Jersey’s position as an international finance centre.

From 1998 to 2002 he was Chief Executive Officer for NatWest Offshore with responsibility for offices in Jersey, Guernsey, Isle of Man, Gibraltar, Cayman, Bermuda and the Bahamas.

He spent 22 years working for NatWest Bank during which time he held management positions in France, Switzerland and Singapore amongst others.

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FUNDS

A DELIBERATELY DIFFERENT APPROACH TO FUNDS BUSINESS

BY BEN ROBINS

Having been at the heart of Jersey’s finance industry for almost 50 years, the funds sector remains one of the most prominent and successful elements of the jurisdiction’s range of financial services.

Recent years have seen funds centres globally having to contend with a growing raft of global regulation and policy initiatives, from tax reporting initiatives through to the EU Alternative Investment Fund Managers Directive (AIFMD).

Nevertheless, macro trends continue to suggest that as a centre that specialises in funds business and provides a swift but appropriate response to regulatory and market changes, Jersey has the opportunity to play an increasingly important role in global fund structuring.

Estimates indicate, for example, that the global asset management industry will grow to in excess of $100trn within the next five years and that alternative investments specifically will exceed $13 trillion (‘Asset Management 2020’, PwC).

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Further, a shifting business environment for fund managers and recent recommendations from the OECD relating to Base Erosion and Profit Shifting (BEPS) are prompting some fund managers to reconsider where they domicile themselves. Jersey, with its commitment to transparency and its long-standing status as a jurisdiction of substance, is likely to benefit.

Against this backdrop, Jersey’s funds industry has continued to perform well in 2015. Figures from the Jersey Financial Services Commission (JFSC) show that the net asset value of regulated funds being administered in Jersey peaked at £227 billion in 2015, with the latest figures as at September 2015 showing an annual growth of 6.5%.

The alternative asset classes, which account for around 70% of Jersey’s total funds business, continued to do particularly well, with total alternatives business including hedge, private equity, real estate, infrastructure and debt funds growing annually by 11.5%.

EVOLUTION The international funds landscape in which Jersey finds itself in 2016 is, of course, very different from the retail orientated focus of the 1970s and 1980s when Jersey’s success was largely based on fund groups making use of

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redeemable share capital companies, accumulation and distribution share arrangements and early umbrella funds for more retail investors.

managers showing increasing confidence in the Island.

The jurisdiction is now home to around 125 fund promoters, up from 70 five years ago, an upward trend that is expected to continue this year, with hedge and private equity fund managers leading the inward charge.

As financial centres within the EU began to move into the same retail area under the UCITS directive, Jersey’s fund offering gradually shifted towards alternative funds for institutional and expert investors.

FUTURE In an increasingly complex global funds environment, maintaining flexibility and developing innovative products remains crucial and, with this in mind, Jersey is focused on innovation within its funds sector.

This prompted the highly successful introduction in 2004 of Jersey’s much copied Expert Fund regime, which helped position Jersey strongly within the alternative investment funds market. This was complemented further by the introduction of the Private Placement Fund regime in 2012 and the availability of a lightly regulated regime for very private investment structures (such as club, coinvestment and carry arrangements).

There are plans to look at enhancing Jersey’s funds regime further in due course to make the authorisation process even more streamlined, whilst the industry continues to work closely with the Government of Jersey and the regulator to implement the positive recommendations of the recent Finance Industry Strategic Jurisdictional Review.

The result of this evolution is a full spectrum of fund solutions, from highly regulated, widely-offered retail funds, to lighter touch options for smaller groups of sophisticated or institutional investors.

Today, Jersey’s success is based on a number of factors and a key issue in recent years has been that of market access, particularly into Europe post-AIFMD. Jersey is also well positioned in this respect.

Jersey’s future success will also depend on efforts to engage with markets overseas and promotional activity in key locations through its highly effective promotional bodies, Jersey Finance and Locate Jersey. Also, the continuing commitment and ability of Jersey’s government and regulator to sign regulatory cooperation and information sharing agreements with counterparts around the world, is proving vital.

Using existing National Private Placement Regimes (NPPRs) to access professional investors in European Member States continues to work well, giving Jersey managers a welcome element of operational flexibility, without suffering the complications and costs of full compliance required for AIFMD ‘passporting’.

With managers still considering the full impact of global regulation and transnational policy, Jersey offers a compelling solution. Its commitment to innovation, regulatory standards, highly skilled workforce and a first class infrastructure means that Jersey can continue to give investors, promoters and managers the confidence they need in the long term.

As at December 2015, according to figures from the JFSC, 104 Jersey fund managers had received private placement authorisation from the JFSC, and 230 Jersey funds were being marketed into Europe through NPPRs. With ESMA recommending in July 2015 that Jersey, with its opt-in AIFMD regime, is one of only a handful of third countries technically ready to be granted EU-wide passporting access too in due course, Jersey continues to offer managers the dual benefits of maximum optionality and long-term sustainability of EU market access.

Meanwhile, Jersey’s continued ability to offer a regime outside the scope of AIFMD for structures targeting non-EU investors has also positioned it strongly and uniquely as a jurisdiction within the European time-zone that can cater for funds targeting both assets and investors in non-EU growth markets.

SUBSTANCE A number of additional developments are set to put the issue of ‘substance’ increasingly at the heart of domiciling decisions made by managers this year and these look likely to make Jersey’s appeal even stronger.

Whilst the AIFMD has already brought the issue of substance into the spotlight, particularly where fund managers seek to operate in full compliance with the Directive, the 15 point action plan set out as part of

the ‘BEPS’ agenda is likely to result in further fundamental changes to international tax standards and the taxation of global economic activity.

Although not targeted specifically at the asset management industry, the scope of BEPS is broad and means that fund managers may well be impacted to some extent, with certain action points placing a greater emphasis on managers being able to demonstrate substance in the jurisdictions in which they operate.

For many years regulated fund managers in Jersey have had to attain a reasonable level of substance in the Island so as to demonstrate local management and control for local regulatory and international tax (i.e. permanent establishment) purposes. That pedigree means the jurisdiction is well placed to deliver the substance likely to be required of asset managers under the BEPS initiative and AIFMD. Jersey has never been a ‘letter box’ location for alternative funds business.

Unlike certain other IFCs, Jersey also has, in relative terms, a significant infrastructure of highly experienced and regulated fund service providers supporting alternative asset managers, including a broad network of experienced non-executive directors, specialist administrators, custodians and depositaries, all backedup by a responsive and accessible regulator.

In fact, the trend evidenced in recent years is one of building greater management substance in Jersey, with

Ben Robins Ben Robins is Chairman of the Jersey Funds Association (JFA).

A partner and former head of the funds practice area at Mourant Ozannes, Ben has extensive experience in investment funds, offshore capital markets and structured finance. Having qualified as an English solicitor with Speechly Bircham in London, he returned to Jersey to join Mourant Ozannes (then Mourant du Feu & Jeune) in 1997. He became a partner at the firm in 2002 and headed its Jersey and global funds practice areas from 2008 to 2014.

Ben has been a frequent participant in local industry working groups looking at key regulatory changes, including most recently the implementation of the EU Alternative Investment Manager’s Directive (AIFMD). He was appointed Chairman of the Jersey Funds Association in July 2013.

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IS JERSEY READY FOR THE NEW AIFMD PASSPORT?

BY RHEA HOOD

This year fund jurisdictions like Jersey are no doubt asking themselves ‘when will we be given an AIFMD passport’?

Last year provided a positive step towards this milestone, with the European Securities Markets Authority (ESMA) recommending to the European Commission that a number of jurisdictions including Jersey, Guernsey and Switzerland (subject to some impending legislative changes in Switzerland) have suitable regulatory and oversight infrastructure to be considered for a third country AIFMD passport.

Some clarity was received in January regarding the European Commission’s process in the form of a letter published by ESMA from the European Commission setting out a number of invitations to deliver advice during the course of 2016. Notably, the European Commission invites ESMA to review and assess the

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remaining three countries (USA, Hong Kong and Singapore) in the ‘first wave’ of third countries under consideration, and review a further six countries (Japan, Canada, Isle of Man, Cayman Islands, Bermuda and Australia) by 30th June 2016.

The publication asserts a commitment to move forward with the review of the framework surrounding the third country passporting. In light of this, is a jurisdiction like Jersey ready for the passport and able to take up the mantle of providing fully compliant AIFMD structures once the passporting is awarded?

In July 2013, Jersey implemented an AIFMD opt-in regime and was one of the first jurisdictions outside of

the EU to adopt the codes of practise of AIFMD on a line-by-line basis. Jersey’s regime gives fund managers the option to opt-in to the regime and – until the passporting is extended further – fund managers have shown their early commitment to this regime with 232 individual funds opting in to the AIF regime.

One of the key considerations of ESMA in the review of third countries will be whether the regulator in the third country is compliant. To show compliance, a regulator must have regulatory and legislative recourse. Jersey is globally recognised as being a jurisdiction that offers robust and compliant frameworks, so in that sense the foundations are already set for the provision of AIFMD structures. Jersey’s framework not only regulates the

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wave of non-EEA countries? Jersey continues to be attractive to the European fund market and with the activities of the last few years supporting the fact that many of those key players who were already using the Channel Islands to structure their funds continued and continue to do so. Jersey has been proactive in supporting this client base by ensuring that there is an AIFMD compliant structure available to them once NPPR is replaced with the passport. The Channel Islands are well positioned to gain even greater worldwide coverage once the passporting regime is in place. Ultimately they are safe, trusted and wellregarded international finance centres. Their historic ties to Europe are strong and they offer the flexibility of opt-in or opt-out arrangements, providing managers from outside of the EU a springboard to market into Europe through a well-regulated and recognised jurisdiction.

AIFM but also the AIF too which sets it aside from the competition of many of the onshore EU jurisdictions.

Jersey has been a successful funds jurisdiction for decades. During the turbulent times of increasing changes in regulation, the Island has seen the opportunities that these changes have brought and capitalised on them. Jersey’s engagement between government, industry and the regulator has been at the epicentre of these initiatives, ensuring that Jersey stays on the map for funds and their ancillary support requirements.

Establishing a fund in Jersey is still a frequently chosen path for fund managers. A huge advantage of doing so is the optionality of the regulatory framework. At the outset a manager will have a feel for the regions they will be marketing to but this is never set in stone. The ability to opt in to an AIFMD compliant regime gives managers, in particular those from outside the EU, flexibility to market to EU investors or to avoid the obligations of compliance with AIFMD. At the moment this is governed by the National Private Placement Regime (NPPR), however when the passport is extended, Jersey will provide fund managers with the flexibility to add on AIFMD compliance when they need it and therefore manage the costs and benefits to their investors.

A positive consequence of this flexibility is that structuring a fund in Jersey allows managers to use parallel fund vehicles, with one of the fund vehicles being used to market to EU investors, whilst the other remains outside of the scope of the AIFMD. This structuring method has been used for many years for US and Non-US structures. Could this be the rise of a three-legged structure – US, Europe and the rest of the world?

The use of parallel structures allows managers to manage specific investor geographical requirements and therefore the costs incurred by a specific vehicle, in particular in terms of compliance with relevant regulation, tax reasons or investor restrictions.

The directive has led to managers seriously considering the adoption of parallel vehicles in order to manage the additional cost burden of compliance, direct costs of depositary or Annex IV reporting, or the indirect time

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costs in terms of increased scrutiny over policies and procedures. The use of separate investment vehicles ensures that non-EU investors do not have to incur the additional expense of being compliant.

Some managers are already establishing onshore / offshore structures using multiple jurisdictions (e.g.

Cayman / Luxembourg). Jersey, on the other hand, can act as a single jurisdiction solution allowing US, nonUS and EEA investors to invest under a single legal framework with a common regulator adopting the different regulatory regimes required to gain access to those markets.

Service providers, whether third party fund administrators or advisory firms, have all had to improve their offering as a result of the implementation of AIFMD. Administrators must be able to consider even more complex structures and understand the different reporting requirements of non-EU versus EU AIFMs and AIFs. In many cases they have become trusted advisors to clients by assisting them with the implementation of risk and oversight frameworks and remuneration committees at the AIFM level.

Clearly ESMA has a lot to achieve before the 30th June deadline. With no visibility beyond that date of the timeframe of the extension of the passport to third countries, Jersey remains attractive and in a strong position to attract fund managers. NPPR is working well and Jersey funds are finding that on the whole, access to markets is about the same as it was preAIFMD. There are further challenges and changes on the regulatory and reporting horizon with the OECD’s BEPS (Base Erosion Profit Shift) initiative and CRS (Common Reporting Standards, or commonly dubbed ‘Global FATCA’) and therefore jurisdictions need to ensure that they can cope with the environment of continual change that we are facing.

Jersey is internationally recognised as a leading international finance centre. It has a large and deep talent pool and has taken a leading role in engaging with international regulators to help them achieve their objectives. This approach makes Jersey well placed to benefit from these additional complexities.

Depositary teams have been established and infrastructure implemented to ensure that service providers can furnish their clients with a complete AIFMD compliant service for their fund.

The question remains, what must Jersey do to remain attractive when passporting is switched on for the first

Rhea Hood Rhea Hood is Director, Private Equity, Sanne.

Rhea is a director within Sanne’s private equity business with over 15 years’ experience in the international financial services industry specifically administering private equity and listed alternative investment funds. Rhea is responsible for private equity client relationships and service delivery as well as being an integral part of the management team determining the key strategic growth and direction of division. Rhea started her career in 1999 with EY Guernsey as a trainee auditor and went on to hold senior management roles within the offshore private equity industry. rhea.hood@sannegroup.com

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THE GLOBAL OUTLOOK FOR JERSEY PRIVATE EQUITY REAL ESTATE

BY SIMON HOPWOOD AND MARTIN PAUL

Jersey has a long-standing and enviable reputation as a leading and well-regulated offshore financial centre, particularly for those establishing private equity real estate funds and other real estate investment structures. In considering recent trends in the Private Equity Real Estate (PERE) sector, it is worth focusing on why Jersey continues to be the destination of choice for international investors and PERE fund managers as a platform for international real estate investment.

REAL ESTATE MARKET OVERVIEW As an international crossroads for cross-border investment, Jersey has direct visibility on the international real estate markets.

Since the financial crisis the continued low interest rate environment and the background of quantitative easing, has prompted a search for real investment returns. Post-crisis opportunities (arising from deleveraging and initial risk aversion) and the cyclical

nature of real estate markets, have drawn opportunistic and value-add players into the real estate markets. As economic stability has increased and risk appetite from investors and institutions has grown, a broader pool of investors have been drawn back to real estate as an asset - with its relative safe haven and inflation-proofing characteristics.

In recent years, a number of private equity and hedge funds have established real estate investment platforms

to diversify into the real estate sector, taking full advantage of the distressed sale of real estate portfolios or loans. Following swiftly on their heels has followed an abundance of capital from sovereign wealth funds, pension funds, institutional investors, family offices and high-net worth investors, mainly from the US, Middle East and Asia. The re-emergence of the availability of debt finance has further contributed to an increased demand for, and competitive pricing of, core real estate.

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Large portfolio real estate transactions have been common, principally driven by demand from overseas investors, and ‘trophy’ buildings have been in demand (and consequently in increasingly short supply at attractive pricing levels).

An increasingly broad group of fund managers and investors have latterly been searching for opportunistic or value-add investments in the regions and the secondary cities in the UK, and more further afield, across Europe and more globally, including in the US and the Asian markets.

In terms of sectors, as well as offices and retail investments, fund managers have also focused on the industrial and logistics, hotel and leisure, and student accommodation sectors. Infrastructure funds have also been active.

PERE FUNDS In 2015, closed-ended PERE funds raised $107 billion globally, according to Preqin statistics. North American focused funds led the way, raising $71 billion (67%), with European focused funds raising $23 billion (21%) and Asia focused funds raising US$11 billion (11%). Blackstone Real Estate Partners VIII alone raised a staggering $15.8 billion.

In the UK, commercial property investment levels were anticipated to exceed £70 billion by the end of 2015. In the first three quarters, nearly £50 billion of transactions had been completed. Nearly 50% of this capital for that period, £24.2 billion, originated from overseas investors (www.practicallaw.com).

In Jersey, according to statistics from the Jersey Financial Services Commission (JFSC), as at 30 September 2015, the net asset value of all

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alternative funds administered in Jersey grew by 12% year-on-year to £159 billion, which includes rises of 2% in private equity and 16% in real estate funds. In addition, around 230 specialist real estate funds are regulated by the JFSC, with a total net asset value of £35 billion.

REGULATORY AND TAX CHALLENGES Despite many regulatory complexities facing the funds sector, including the European Union’s Alternative Investment Fund Managers Directive (AIFMD) regime, US and UK Foreign Account Tax Compliance Act (and the Common Reporting Standard) and the intricacies of the OECD’s Base Erosion and Profit Shifting (BEPS) initiative, PERE fund establishment activity remains buoyant and continues to grow at a strong rate.

The JFSC and Jersey’s funds industry has been able to respond quickly, and to proactively adapt, to the international regulatory environments. Jersey, being outside the EU, offers a flexible regulatory regime which allows PERE funds and their fund managers to choose, if raising capital in the EU, to achieve an attractive balance between regulation (and the attendant compliance costs) and market access through the National Private Placement Regimes (NPPRs), or to sign up to full AIFMD compliance. For those focused on non-EU capital, or undertaking joint venture or proprietary investment structures, the option is there to remain outside of the AIFMD regime.

In 2015, according to JFSC statistics, there were 104 Jersey authorised alternative fund managers marketing, and 230 alternative investment funds being marketed into the EU through the NPPRs. Looking ahead, the European Securities and Markets Authority (ESMA) recommended that Jersey should be considered for EUwide passporting, which is a vote of confidence in Jersey’s regulatory and fiscally transparent framework and augurs well for continued access to EU capital in the future.

A key focus for AIFMD and BEPS is the question of substance. An important factor in the success of Jersey’s funds industry is the ability to have real substance in respect of funds and other structures managed and administered in Jersey. The depth and expertise within Jersey’s financial services industry, particularly in respect of corporate governance (with a strong community of non-executive directors) is a significant factor in this success, ably supported by Jersey fund management and administration service providers, who have the necessary specialist expertise and personnel who really know and understand the PERE asset class.

including real estate in the office, logistic, hotels and student accommodation sector in the UK and panEurope.

A wide variety of the PERE fund structures are able to be established in Jersey, including private/joint venture funds, syndicated or ‘club’ fund structures, collective investment funds, listed REITs and fund of funds.

Apart from the traditional limited partnership PERE funds focusing on office, retail or industrial sectors in the UK or across the EU, there has been a growth in pan-European or global debt funds, infrastructure funds and global student accommodation funds, as fund managers look for value-add investments in different geographical areas.

CONCLUSION Jersey represents a stable, well-regulated and internationally-recognised environment for international capital flows, providing a tax neutral platform for investment by PERE funds in real estate, and is the destination of choice for investments into UK and pan-European markets.

The depth of expertise and experience in Jersey of cross border investment structuring – and the real estate sector – and Jersey’s engagement with and ability to meet international standards of governance and compliance, means that Jersey should be well placed to continue its role in the effective and efficient allocation of international capital into the real estate sector for many years to come.

Development activity has increased as funding became more readily available. A number of transactions have involved structuring ‘developer and funder’ joint ventures for large scale developments and regeneration projects. Existing investors have also sold interests in development projects, which have been acquired by overseas institutions or pension funds.

With the influx of Middle Eastern and Asian capital, the Jersey funds industry has adapted to offer innovative Shari’a-compliant fund and joint venture fund structures, principally UK and EU-focused. The postcrisis trend away from blind pool fund arrangements and the desire from institutional, sovereign wealth and family office investors to have closer involvement with the investment process, has led to an increased number of joint venture and club investment arrangements. It has also seen the emergence of certain ‘hybrid’ fund structures allowing investor discretion in respect of individual investments – for example funds which are structured as segregated cell companies offering investors segregation of assets and liabilities between cells and the ability to choose in which cell they wish to invest.

Certain joint venture funds have been converted into Real Estate Investment Trusts (REITs) and listed on the Channel Islands Stock Exchange (CISE), being an attractive option for investors wishing to enjoy the benefits of REIT status but not necessarily requiring liquidity or wishing to incur the costs associated with, for example, a London listing. Although a REIT must be UK tax resident, there is no restriction on the place of incorporation and Jersey companies are being chosen as the REIT vehicle.

JERSEY FUNDS WORK Jersey provides a stable, well-regulated and internationally-recognised environment, providing a tax neutral platform for investment by PERE funds in real estate and is the destination of choice for investments into UK and pan-European markets.

There has also been a growth in the PERE secondary funds market, where funds have focused on acquiring interests in other real estate or debt funds which provides a certain amount of liquidity to investors.

Global ‘tactical’ funds have also focused on acquiring established property companies including taking private listed property companies with a view to consolidation and subsequent exit.

Real estate structuring activity and transaction levels in Jersey have been high, particularly in relation to investments in the UK and Europe. In 2015, there were some notable ‘trophy’ building transactions in London and certain prime cities in Europe and a number of billion or multi million pound transactions in relation to same assets portfolio or diversified portfolio sales,

In relation to debt funds, whilst the cost of finance remains low and loan-to-value ratios are relatively conservative, as a consequence there are a number of debt-focused PERE and hedge funds that focus on ‘gap’ funding opportunities by offering stretch senior or mezzanine finance over and above the bank’s senior debt LTV levels.

Simon Hopwood Simon Hopwood is a Partner in the Investment Funds and Corporate Real Estate group at Bedell Cristin.

He has considerable wide-ranging experience in structuring offshore private equity and real estate funds and real estate acquisition and investment structures. Simon has particular expertise in structuring Shari’a-compliant investment structures and Islamic financing. He advises a wide range of clients ranging from well-known and blue-chip property companies, asset managers, investment funds, financial institutions to family offices and ‘high net worth’ investors. simon.hopwood@bedellgroup.com

Martin Paul Martin Paul, is a Partner and Head of the Investment Funds and Corporate Real Estate group at Bedell Cristin.

He has extensive offshore finance experience, in property funds and private equity funds and in general commercial work and regulatory advice.

Martin regularly speaks and participates in leading industry events and is a member of a number of key industry working groups. He also sits on the Jersey Funds Association committee and chairs its education committee. martin.paul@bedellgroup.com

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JERSEY’S FIDUCIARY INDUSTRY

BY IAN CROSBY

The past year has been another productive one for the Jersey fiduciary industry with the efforts of regulator and trust practitioner alike paying off with a marked increase in client activity and new instructions, improved profitability within the industry and an increase in the number of staff employed by fiduciary businesses in Jersey. These are all hallmarks of a successful and thriving fiduciary industry.

However, key to maintaining Jersey’s position as the leading trust jurisdiction of choice requires a combination of ensuring Jersey has the finest reputation for governance and security of assets; that it has a fiduciary industry that is responsive, skilled, innovative and dynamic; that the relationship between government, regulator and business is symbiotic; that the jurisdiction has modern and comprehensive legislation; and that its courts are skilled, efficient, accessible and sensible. Each one of these factors has a significant role to play in the continuing success of the Jersey fiduciary industry.

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REPUTATION Jersey’s reputation as a secure fiduciary jurisdiction remains absolutely pivotal to attracting clients who justifiably require that their matters and, most especially their assets, are safeguarded within an industry that is subject to comprehensive trust regulation and codes of practice, backed up by periodic scrutiny and assessment by the Jersey regulator. It is only in this way that clients can be content that Jersey is the preferred jurisdiction for administering their fiduciary structures. In contrast then to many competitor jurisdictions that may only have, at best, domestic trust law but without

supervisory regulation, Jersey’s practitioners operate under rigorous codes of governance, requiring that they operate in a transparent and fair manner to their clients and ensuring that they manage their businesses in a financially prudent and expert manner.

Such regulation and comprehensive governance comes at some cost but it is the hallmark of a reputable, secure jurisdiction. Whilst the reputation of the jurisdiction in the eyes of its clients is vitally important to Jersey, it is equally important that Jersey operates as a ‘good neighbour’ to the wider world. To this end, Jersey

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Photo: Chris George

by governments and international supervisory bodies but it has also remained mindful of the importance of not stifling the fiduciary industry with regulation that is inappropriate or unreasonable. Consequently, the JFSC consults and interacts closely with industry to ensure that there is an understanding for the necessity of various aspects of fiduciary regulation, whilst it explains the broad outcomes and findings from its examinations of firms and listens to feedback from industry participants and industry bodies, like JATCo, on the regulatory process. This relationship and understanding is assisted too by the States of Jersey and the financial services industry’s promotion body, Jersey Finance Limited, the non-profit making organisation formed to represent and promote Jersey as an international finance centre of excellent. It is the dynamic and innovative relationship between the States of Jersey, Jersey Finance and the industry, together with interaction with the JFSC, which ensures the success of Jersey as a trust jurisdiction.

LEGISLATION The States of Jersey has been mindful of industry’s requirement that the laws which facilitate the fiduciary industry should be world class. In particular the trust law in Jersey (the Trust (Jersey) Law 1984) has been the envy of many other trust jurisdictions, evidenced by several other jurisdictions using it as a model for their own trust legislation. The States recognise that this law (and others) needs to be kept up to date and necessary amendments both to that law and that relating to Jersey companies is regularly enacted on the back of close consultation with industry.

Above: Jersey’s legislation and legal process is greatly assisted by the Royal Court.

Le Hocq Martello Tower, Jersey.

continues to embrace the initiatives emanating from various countries (such as FATCA from the USA) and from global bodies such as the OECD, EU, FATF and G8, regarding matters such as tax information exchange agreements and the newly introduced Common Reporting Standard (CRS), often as an early adopter.

Jersey has also willingly opened itself to inspection by monitoring bodies like MONEYVAL and ensured that its standards are world class.

JERSEY TRUST PRACTITIONERS A defining feature of Jersey continues to be the quality of staff found within its fiduciary industry. That expertise, backed by obligatory qualifications and continuing professional development, has ensured that Jersey has readily been able to deal with the increasing complexities of administering structures for clients. The breadth of skills required of trustees particularly includes a high level of financial acumen; a clear understanding of sometimes complex legal issues relating not only to trust and corporate entities but also to the types of transactions a structure may be engaged in; an ability to mediate between opposing interested parties, beneficiaries and settlors; a ready and current understanding of wealth management so as to ensure the preservation and enhancement of assets under fiduciary administration; and an ability to understand

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and react to the increasingly complex taxation laws within multiple jurisdictions.

It is these attributes found within Jersey fiduciary employees, assisted by the availability of expertise from Jersey law firms, accountancy practices and wealth management operations, which sets Jersey apart from many of its competitor jurisdictions. It is also the reason no doubt for the number of fiduciary operations that have in recent times headquartered their global operations in Jersey to take advantage of the locally available expertise. The Society of Trust and Estate Practitioners (STEP) and the Jersey Association of Trust Companies (JATCo) have extensive membership and assist in training, education, and interaction with both regulator and government.

REGULATOR AND STATE As mentioned earlier, the reputation of the Jersey fiduciary industry has to a significant degree being assisted by the high standard of regulation that prevails in Jersey. Sensible regulation to a globally accepted level is to Jersey’s advantage, satisfying both client and interested international bodies and is a business enabler, rather than inhibitor. The Jersey regulator, the Jersey Financial Services Commission (JFSC), has sought to ensure that Jersey as a jurisdiction is respected globally

Jersey’s legislation and legal process is greatly assisted by the Royal Court which has a breath of expertise and is well known for its accessibility and its sensible and wellreasoned judgements. In the course of this last year, landmark decisions relating to matters such as jurisdictional clauses in trusts, the ‘insolvency’ of trusts, trustee liens, powers to appoint and remove trustees and protectors, have been handed down and serve to clarify the manner in which the fiduciary industry must operate.

In summary, Jersey, by its careful nurturing of the various attributes that make up its successful fiduciary industry, continues to maintain its position as the trust jurisdiction of choice.

Ian Crosby Ian Crosby is President of the Jersey Association of Trust Companies (JATCo).

Ian is a Partner with the Stonehage Fleming Group and is the Chairman of its Jersey operation.

In addition to his Group responsibilities, he acts extensively on trust, family office and private client structuring and is the chairman of a number of family councils, funds and fund management companies.

TRUSTS

CONTENTIOUS TRUST PRACTICE IN JERSEY

BY JAMES SHEEDY

The foundation of Jersey’s modern trust law; the Trusts (Jersey) Law 1984, has, for over 30 years proved highly attractive for those looking for international wealth management solutions but has also become a beacon to which other offshore jurisdictions around the world look. Such has been the workability of Jersey’s legislation that it has only needed to be amended six times since it was enacted.

As well as its comprehensive governing legislation, Jersey boasts an extremely well developed body of case law from which Jersey’s Royal Court is readily able to draw in order to provide appropriate and practical remedies for trustees and beneficiaries as the context requires. The central role of the Royal Court in developing workable and pragmatic solutions for parties before it requires specialist and skilled litigators to unpick often factually and legally complex issues.

Decisions of Jersey’s Royal Court are increasingly used as a source of guidance internationally as being on the cutting edge of important developments in trust law. Many of the most important decisions are on, for example; • the principles governing the withholding (as well as the disclosure) of trust information by trustees, • the protection of trustees from liability,

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the removal and replacement of trustees and other fiduciary power holders, the variation of trusts and enforcement of onshore decisions against trustees in the context of divorce have emanated from Jersey.

There are a wide number of factual circumstances in which the Royal Court can accept jurisdiction in a trust dispute including where the trust is a Jersey trust, there is the presence of a Jersey based trustee, the presence of trust assets or they are under administration in Jersey.

The demands placed upon Jersey trust law are constantly evolving. Modern contentious trust practice in Jersey encompasses a broad spectrum of trust proceedings. A significant proportion of the

Gorey Castle walls and keep, Jersey.

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Another important recent development for trustees and settlors of Jersey trusts was the enactment of the Sixth Amendment to the Trusts Law in October 2013. This preserved the Royal Court’s power to grant a no-fault form of discretionary relief, allowing a trustee to reverse a wide range of transactions where the trustee has made an error in the use of their powers. The amendments also permit a settlor to reverse a transfer of assets into trust where he or she made a serious mistake. As has been well publicised, such relief has been narrowed in England by the UK Supreme Court. The Sixth Amendment articulates Jersey’s commitment to continuing a flexible approach to such questions in the future which will likely ensure Jersey continues to be a leading light in the development of the law relating to challenges to trustee decision making (whether by settlors, beneficiaries or trustees themselves).

CONCLUSIONS Jersey’s international reputation as a jurisdiction in which to establish and run offshore trusts is matched by its reputation as a jurisdiction adept at dealing with trust dispute resolution. It is an inevitable feature of a jurisdiction in which the use of trusts is so pervasive that where, as sometimes happens, a dispute arises that requires the court’s attention, beneficiaries, trustees and other power-holders can be sure the Royal Court is well equipped to take a fair and pragmatic approach in granting appropriate remedies.

Lady Justice on top of the Old Bailey in London.

Right: Steps at Mont Orgueil Castle in Jersey.

combat two circumstances, often deployed by fraudsters, which on orthodox English law principles would be fatal to the possibility of a proprietary claim: • Tracing funds through an overdrawn account; and • Tracing funds where the order of payments in which money in deposited into an account has the effect of thwarting a plaintiff’s efforts to show how his money was used.

proceedings before Jersey’s Royal Court, may not in reality involve any hostile dispute at all but are proceedings in which the trustee seeks the court’s guidance or blessing for taking a particular step in order to safeguard the position of the trustee and beneficiaries. This jurisdiction is highly prized by the Island’s professional trust industry.

Trust proceedings can arise from a genuine disagreement as to the administration of existing trust structures – from remedying breaches of trust to identifying and chasing down the proceeds of international fraud and illicit funds that may have a Jersey connection.

Jersey law has also led, where English law has followed, in the provision of practical remedies under trust law principles to combat the squirreling away of bribes and secret commissions. It is now settled law that bribes and secret commissions are subject to a trust and can be traced and recovered by way of a proprietary claim at the insistence of a defrauded party. These important developments help to maintain the integrity of Jersey’s financial services industry and ensure the Island is not a safe harbour for nefarious funds.

An important and developing area of international trust practice – in which Jersey is taking a central role – is the developing interface between traditional trust law principles and cross-border insolvency (either of individual entities within a wider trust structure or of the whole structure itself).

Jersey remains a friendly jurisdiction in which to litigate trust disputes. The Royal Court is adept at understanding and dealing with even the most complex trust structures and disputes concerning them and will do so with an open mind. It is not uncommon for Jersey trust structures to be regarded with a degree of suspicion, sometimes scepticism and even outright hostility by some onshore courts that will lack the Royal Court’s expertise. That experience may ultimately prove to be an important – if not decisive factor – for trustees and beneficiaries in considering where they wish any trust dispute to be argued. © James Sheedy

James Sheedy

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James Sheedy is a Senior Associate with Baker & Partners.

Photo: Chris George

Jersey has also been at the forefront of developments in the application of trust law principles concerning asset tracing and proprietary remedies. In Federal Republic of Brazil v Durant [2015] UKPC 35, in which Baker & Partners act on behalf of the Federal Republic of Brazil, concerned the recovery of misappropriated funds by the former mayor of Sao Paulo. The decisions of the Privy Council in 2015 approved the approach of the Royal Court and Court of Appeal, which is concerned with executing practical justice between the parties with the possibility of sidestepping the complex conceptual restrictions that have developed over the years in the English law of asset tracing. The Privy Council’s endorsement of the concept of reverse or ‘backwards’ tracing provides the Jersey court with the tools to

James is an English barrister and joined Baker & Partners in January 2014. He undertook his training in a specialist Chancery chambers in Lincoln’s Inn, London, and has a busy Jersey practice with a particular focus on contentious and non-contentious trust work.

James also advises in relation to a broad range of contentious commercial and company law disputes.

BANKING All Photos: Chris George

THE FUTURE FOR JERSEY BANKS

BY PAUL DECLAT

One of the historic strengths of Jersey as an international finance centre and one that helps differentiate it from its competitors, is the size and sophistication of its banking industry. Banking has been at the heart of Jersey’s success since its formation and we have 33 registered banks managing client deposits of £132 billion.

Banking remains the dominant industry within the Jersey financial services sector which in turn is the dominant industry in the Island contributing 42% of its GVA*.

Whilst the effects of the banking crisis of 2008 have taken their toll on some of the headline numbers, the substantive heart of the industry remains and it

continues to be the cornerstone of the Jersey finance industry.

Jersey has attracted a number of the leading banking groups from the United Kingdom, Europe and Africa, whose clients use Jersey as a safe location for their wealth as well as a gateway for capital moving to and from their home jurisdictions, principally via the UK.

International banking groups are comforted by the strength and quality of the Jersey finance industry being based on its world class regulation, its robust, independent and proven legal framework, and political stability, as well as the professionalism of its people.

The Jersey Bankers Association (JBA) represents the banking groups located in the Island and in acting as a

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consultancy forum for a wide range of issues and topics is in regular dialogue with the States of Jersey, our regulator and other industry bodies. The JBA will also lobby for members’ interests and help inform on forthcoming regulatory and legal changes.

JBA members provide a spectrum of banking and investment services from transactional payment and reporting services, sophisticated treasury and multi currency deposit taking, wealth management and private banking, custodian and discretionary and advisory investment services.

Most of the larger banking groups have been in Jersey for several decades and they have developed considerable expertise and understanding of the sectors which comprise Jersey’s finance industry. The size and substance of these sectors has enabled banks to develop bespoke products and services, all of which help enhance the quality of the overall Jersey proposition.

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BANKING

As the needs and requirements of clients change, reflecting the market opportunities which come and go, banks must respond. The growth in demand for sophisticated deposit aggregation products which provide enhanced rates and counterparty diversification is one such example.

The commercial agenda for banks is changing. We continue to operate in a period of low interest rates and whilst we have seen the initial signs of upward movement in the US, there is little expectation that these will return to past levels any time soon. Regulatory changes, driven by the need to ensure that banks can withstand any future economic seismic shocks, also impact.

The local population is important and a number of banks provide branch banking and retail products including transactional and savings accounts, as well as mortgage and consumer finance.

Banks now assume greater outflows of funds during times of extreme stress and are also required to support their activities with much higher levels of capital. These changes erode traditional income streams, particularly for the typical Jersey bank which will be principally liability led. How banks are compensated for the services provided – and for the risks incurred in this new changing environment – will also need to evolve. Each bank will have its own commercial priorities and agenda but the costs which are incurred in providing complex client arrangements, which requires ongoing monitoring and which bring reputational risk, are significant and will require some certainty of income. How this achieved is a challenge for the Island and its banks.

The global banking industry continues to work towards restoration of its reputation and demonstration of its value to its clients, regulators, legislators and wider stakeholders. Banking groups have become increasingly sensitive to anything which may threaten this and are naturally keen to avoid activity which could lead to media or public criticism.

Jersey bankers play an important role in ensuring they fully understand the types of business undertaken and truly know their clients and in so doing protect both the Island’s reputation and that of their own business.

They require detailed knowledge of their clients including the rationale for why they use Jersey, where and how they have derived their wealth and what purpose their accounts are to be used for. Whilst collecting such information is not always an easy process, technology is providing assistance and we are constantly looking to find ways to work smarter and ease the onboarding experience.

It is clear that the future for Jersey banks will be very different to the past. In many ways it was forever thus and Jersey bankers have proved over many years that we have the capability and desire to evolve and adapt to the demands of our clients and legislators. The ability to change and reflect the much changed world in which we live is essential to the long term survival of any successful business. History provides too many examples of those that failed to recognise that once accepted norms no longer exist. The pace of change is likely to be unrelenting but I am confident that Jersey’s banks will continue to be at the heart of its financial services and lead the world in creating true client value, delivering fast technological change in an era of global transparency of data and uncompromising standards of risk control.

Jersey has led the way in being open and transparent about what can be deemed as acceptable to the jurisdiction in the complex area of tax planning. Most banks will have a similar code which recognises legitimate and tax neutral structuring whilst making it clear what is outside of appetite.

The past has been bright for banks in Jersey but what of the future? There are a number of obstacles and challenges coming our way but Jersey faces these from a position of strength which will be envied by many of our competitor centres. The number and diversity of banks operating here, the expertise and agility of our people, as well as the close working relationship we have with our regulators and legislators, are genuine grounds for optimism.

One of the more immediate challenges is to ensure that UK based groups evolve their operating model so that it continues to deliver value in a post ring-fenced world. The UK (ring-fencing) legislation is intended to protect its UK retail bank clients from any future bank insolvency crises and rules that Jersey (alongside all other Crown dependencies) should not form part of the protected, or ring-fenced, parts of their banks. The traditional widely utilised up streaming model, whereby its UK treasury will pay for the funds deposited in Jersey so it can fund its commercial loans and retail mortgage and consumer lending, will change for some banks that may need to find other ways to leverage their balance sheets.

However what at first appeared to be a threat to Jersey may prove to be an opportunity. The need for certain activities to be outside the ring fence offers the ability to banks to diversify product set and provide valuable support.

Footnote: * States of Jersey Statistical Unit 2014.

Similarly the rapid advance in technology and the growth in the digital agenda offer exciting opportunities, even if they threaten some of our traditional ways of doing things. We are all now much more comfortable in interacting directly through a computer, phone or tablet, particularly for the simple, non complex matters. Online capability and digital technology are revolutionising banking services. The way in which banks deliver information and interact with clients – particularly those that manage high volumes of bank accounts – is changing rapidly.

The traditional barriers which discouraged new players to the industry are falling, with new providers entering the market for specific products and services.

We are seeing a number of bespoke payment providers, peer to peer lenders and specialist foreign exchange brokers, which all compete on what were once traditional bank products.

Paul Declat Paul Declat is President of the Jersey Bankers Association (JBA) and Platform Director for Barclays in the Channel Islands, based in Jersey.

Paul has spent 38 years in banking, the last 24 of which have been in the Channel Islands. He has undertaken a variety of roles for Barclays including working within the UK branch network as well as regional and head office roles. Paul has extensive experience in managing client relationship teams and is currently responsible for business management, front office risk control and the implementation of strategic change across the Channel Islands.

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RESTRUCTURING BANKING AND FIDUCIARY GROUPS

BY WENDY BENJAMIN

Changes to the international regulatory and commercial landscape have prompted many financial institutions to review their operations and product lines and, where appropriate, consider restructuring initiatives to minimise the impact of those changes. This has been of particular relevance within the Jersey financial services market with a number of institutions changing their local operations.

Whilst each institution has a unique suite of issues, there tend to be common objectives which include: • Simplifying group structures by merging and/or consolidating vehicles and regulatory licences; • Satisfying revised capital adequacy and solvency requirements; • De-risking by effecting disposals of non-core business, clients or portfolios; • Developing core business and associated infrastructure through investments and acquisitions.

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There are a number of potential options available for corporate restructuring in a regulated environment including: • Contractual assignments of business portfolios; • Corporate Schemes of Arrangement under Part 18 A of the Companies (Jersey) Law 1991 (the Companies Law); • Corporate Mergers under Part 18 B of the Companies Law; • Private laws;

• •

Segregated Trust/Account Schemes; Transfers under the Banking Business (Jersey) Law 1991 (the Banking Law).

Many institutions restructure on a multi-jurisdictional basis, particularly banking groups with presences in the three Crown dependencies or elsewhere offshore.

Therefore some of the options may be used on a crossborder basis, for example, in combination with redomiciliation of corporate vehicles or utilising similar

BANKING

options available in other islands. However, the following analysis focuses on statutory banking transfers which until recently were unique to Jersey in the offshore world (similar provisions have been introduced in the Isle of Man).

applied when considering sanctioning a scheme under the Banking Law include: • the absolute discretion of the Court must be exercised by giving due recognition to the commercial judgment entrusted by the companies’ constitution to its directors; • the Court is concerned whether an interested party or group (including customers, employees and creditors) will be adversely affected by the scheme; • the Court will pay close attention to the views of the regulator; • the scheme, whilst being fair, does not have to be the best possible scheme in the Court’s view as that is a matter for the directors; and • the details of the scheme are not a matter for the Court provided the scheme as a whole is fair.

STATUTORY BANKING TRANSFERS The Banking Law allows Jersey banking business (technically deposit-taking business) to be transferred from one licensed bank (whether a subsidiary or branch) to another by means of a court-sanctioned scheme similar to UK transfers under Part 7 FSMA. When Standard Chartered consolidated its two Jersey banking entities (Standard Chartered (Jersey) Limited and Standard Chartered Bank, Jersey branch) into a single operating platform for its Jersey business in September 2013, it used the Banking Law in a novel way to effect the transfer of both its banking and investment business. The Royal Court of Jersey confirmed in Re Standard Chartered (Jersey) Limited [2013] JRC172 its jurisdiction to transfer investment business alongside banking business under the scheme in appropriate cases.

The Court must satisfy itself that the required formalities under the Banking Law have been met (including the provision of an independent auditor’s report and client notifications). A number of matters could be taken into account in assessing the fairness of the scheme overall including the financial standing of the transferee and the operational impact of the scheme on clients.

Since then in 2014 and 2015 Jersey banking schemes have been used by other banking and fiduciary groups to transfer not only investment business but also funds services, general insurance mediation, money services and other current and historic regulated business alongside banking business. The Court has confirmed that provided the non-deposit taking activities are integral to the business to be transferred and have not been artificially grafted on to a deposit-taking activity in order to get through the jurisdictional gateway, the Court can exercise its discretion to sanction the scheme.

KEY PROCEDURAL STEPS AND DOCUMENTS Transfers under the Banking Law are subject to various procedural requirements including: • two court hearings, one being a directions hearing initially for derogations from client notices and subsequently a second hearing, to consider sanctioning the scheme; • publication and distribution of notices to clients and members of the transferor and transferee (unless derogations have been obtained) including a summary of the scheme; • obtaining an auditor’s report on the terms and likely effects of the scheme on transferring clients; and • an opportunity for any interested parties including the regulators, clients, employees and creditors to be heard at the sanctions hearing and to object on the basis that they would be prejudiced by the carrying out of the scheme.

Provided that the scheme involves no compromise or arrangement, the more complex provisions applicable to corporate schemes of arrangement under Jersey company law will not apply.

The key legal documents required include the scheme document itself; the independent auditor’s report; a

Photo: Chris George

Banking Law transfer schemes are very flexible. They can be used not only to transfer banking business alongside other regulatory activities but can also be used to separate banking business from other business whilst minimising the potential impact on clients.

OBJECTIONS The Court will also take note of the absence (or existence) of any objections to the scheme by clients or creditors. The Abbey National case illustrates the Court’s approach to considering client objections made on the basis that they may be adversely affected by the scheme. Taking all matters into account, the Court needs to be satisfied that the scheme is fair as between the different persons affected by it and is fair overall before sanctioning it. Thus the Court is prepared to sanction schemes even where there are some client objections.

summary of the scheme; legal notices for the Jersey Gazette; client, employee, member and creditor notifications (subject to court derogations); the court application and various affidavits.

PRINCIPLES TO BE APPLIED IN SANCTIONING In each of the three recent cases, the Court sanctioned the transfer of banking business and other regulated business (where applicable) from local subsidiaries to the existing Jersey branches of other group entities – for example in both the Standard Chartered and Abbey National cases to the Jersey branch of a UK public limited company.

The Court judgment in the Standard Chartered case contains helpful guidance on the principles to be applied by the Court when considering an application to sanction a scheme given the lack of statutory guidance in Jersey.

In each of the cases, the Court considered Re AXA Equity and Law Life Assurance Society and AXA Sun Life Plc [2001] 1 All ER (Comm) 1010, noting that it had been transposed by the Court into the Jersey context for long term insurance business transfers. In summary, following that case the principles to be

As banking groups consider strategic reorganisations involving offshore subsidiaries and branches particularly to meet ring-fencing requirements and to achieve capital and operational efficiencies, the ability to employ flexible court-sanctioned schemes in Jersey to transfer banking, investment and other regulated business is to be welcomed.

Wendy Benjamin Wendy Benjamin is a Partner and leads Appleby’s Corporate team in Jersey.

She specialises in banking, corporate and commercial law. As well as working regularly with top tier UK and US law firms on cross-border transactions, and restructuring and insolvency work, Wendy’s client base encompasses significant, financial institutions public bodies, international and local companies.

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MAKING THE MOST OF JERSEY’S HIGH VALUE RESIDENCY

BY FIONA WAITE

Jersey is a dynamic and vibrant Island and a great place to call home. For those of us who work in financial services, we also know of course that Jersey has established itself as one of the preeminent and internationally respected international financial centres.

Recognised for its beautiful beaches and strong cultural roots, Jersey continues to be a fantastic tourist destination and a wonderful place to live. In light of this, Jersey is an attractive relocation destination, with many appealing factors especially for those who may qualify as a high value resident.

LOCATION, LOCATION, LOCATION One of Jersey’s great assets is its geographic location,

La Corbiere Lighthouse, Jersey.

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with very close proximity to both the UK and mainland Europe. Ease of doing business on the Island and internationally is increased by its ideal placement in the English Channel. In addition, being in the GMT time zone means that over the course of a normal working day, there is crossover with the normal business hours of other major financial centres and locations around the world, from the west coast of the US to China and the rest of Asia.

The location also helps in that for those considering a move to Jersey, there are numerous domestic flights daily that connect the Island to London and other UK cities, along with connections to major European and global centres.

For people who have chosen to relocate, they will no doubt be aware that Jersey’s beautiful coastline, beaches and bays provide plenty of respite after busy working days.

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The value of investments and the income from them can fall as well as rise and you may not get back the original amount invested. Exchange rate changes may affect the value of investments.

Nedbank Private Wealth is a registered trade name of Nedbank Private Wealth Limited. The parent of Nedbank Private Wealth Limited is Nedbank Group Limited, which is incorporated in South Africa and is regulated by the South African Reserve Bank. The ultimate parent of Nedbank Private Wealth Limited is Old Mutual plc, which is incorporated in England and Wales. The latest audited report and accounts, and details of the credit rating are available at www.nedbankprivatewealth.com. Nedbank Private Wealth Limited is licensed by the Isle of Man Financial Services Authority and is a participant in the Isle of Man Depositors’ Compensation Scheme as set out in the Compensation of Depositors Regulations 2010. For full details, please see www.iomfsa.im. Registered office: St Mary’s Court 20 Hill Street Douglas Isle of Man. The Jersey branch is regulated by the Jersey Financial Services Commission and is a participant in the Jersey Banking Depositor Compensation Scheme. See www.gov.je/dcs for full details of the Scheme and banking groups covered. The London branch is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registration No: 313189. Your eligible deposits with Nedbank Private Wealth Limited, London branch, are protected up to a total of £75,000 by the Financial Services Compensation Scheme, the UK’s deposit guarantee scheme. Any deposits you hold above the £75,000 limit are unlikely to be covered. Please ask for further information or visit www.fscs.org.uk. The UAE representative office in Dubai is licensed by the Central Bank of UAE. Licence No: 13/191/2013. Representation in South Africa is through Nedbank Limited. Registered in South Africa with Registration No 1951/000009/06, an authorised financial services and registered credit provider (NCRCP16).

WEALTH MANAGEMENT

This incentive offers eligible parties the chance to move to Jersey, subject to meeting qualifying criteria. These include a minimum income tax contribution of £125,000, based on sustainable worldwide income of at least £625,000, a flat 1% rate on earnings beyond this figure and being able to satisfy the local government that residency will indeed benefit the Jersey community.

Various other factors may also be taken into account when reviewing high value residency applications, including volunteer work or business contributions to the local community, as well as the potential impact of publically available information.

BECOMING A HIGH VALUE RESIDENT For those who decide to relocate to Jersey, the first step is to speak to a relocation specialist, such as one of the directors at Locate Jersey (www.locatejersey.com), the government-owned body mandated to advocate for the Island’s benefits globally and to high net worth individuals.

Photo: Chris George

For individuals who have decided to relocate to Jersey, there is personalised support through professional relocation specialists. Relocation specialist support can include housing searches and help with acquisition – regardless of whether an individual is buying, leasing or renting – and ongoing aftercare for those moving to Jersey as part of a corporate or private relocation. Local estate agents will do their utmost to welcome high value residents and they benefit from already established relationships with banks, investment houses and other financial service providers. Other relocation services include tours, assistance with school and childcare options, support for spouses or partners and even introductions to the local community. No matter what type of professional service, be it accountant, lawyer, tax advisor or private banker, a relocation specialist will be able to connect you with a trusted adviser.

STRENGTH AND STABILITY Jersey is a British Crown Dependency and boasts a strong economy, a history of long-term political stability and independent legal, fiscal and administrative systems.

While we see many countries embroiled in divisive party politics, Jersey avoids this spectacle by having our local government instead be comprised of 51 independent members and five non-elected members.

Executive powers within the States of Jersey, the Island’s legislative assembly, are exercised by a Council of Ministers made up of the Chief Minister and nine other ministers.

Although Jersey is not part of the European Union (EU), it does benefit from a special relationship with it and is treated as part of the European Community (EC) with respect to trade.

In addition to the trade links that Jersey has with the rest of Europe, it shares a rich historical and cultural heritage with many parts of Europe, creating a unique blend of British, French and other cultures. Its strongest cultural links, however, remain with the UK, which has the advantage that those seeking high value residency from the UK will feel at home with English as the

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dominant language, both for business and society, and local schools following the UK national curriculum.

JERSEY’S BUSINESS IS DOING BUSINESS Jersey’s experience and skilled workforce is largely represented by the 12,800 workers in the Island’s finance industry – the largest workforce of any British offshore centre. The capabilities of its workforce, coupled with the Island’s business-focused legislation and an internationally recognised and proactive approach to regulatory compliance, enables Jersey to deliver a wide range of specialised services such as corporate structuring, legal services, fund management and specialist accountancy.

The tax regime for individuals is highly competitive, with a flat 20% rate of income tax accompanying zero rates of inheritance and capital gains taxes. Social security, Jersey’s National Insurance equivalent, is set at 6% for employees, while employers pay 6.5% with a fixed maximum.

HIGH VALUE RESIDENCY As a jurisdiction which is very supportive of wealth creation, it seems logical that Jersey has for many years encouraged wealthy individuals to immigrate to the Island by offering mutually beneficial financial incentives, including high value residency.

NOW IS THE TIME With the many benefits of living in Jersey, it is a compelling place for those who may qualify for high value residency to consider.

When you move to Jersey as a high value resident, not only will you be able to tap into a host of advantages including the Island’s location, accessibility, economy, culture, history and infrastructure, you will also be assured a warm welcome.

Fiona Waite Fiona Waite is a Wealth Manager at RBC Wealth Management.

Fiona has 27 years’ experience in the banking, investment and trust industry and is a member of both the Chartered Institute for Securities and Investments and the Society of Trust and Estate Practitioners.

WEALTH MANAGEMENT

A PRIME LOCATION FOR A PRIVATE OFFICE

BY JONATHAN GILES

Lord Samuel is often attributed with the quote “location, location, location”, and undoubtedly this can be pivotal. Jersey’s reputation in family office services is significant and growing, benefitting from the existing infrastructure across leading practitioners in banking, investment management, accountancy, custody, trust and fund administration, and legal services.

Jersey was the first international finance centre to be placed on the OECD tax white list and is rated as one of the best international financial centres globally by the IMF. It has the stability of a democratically-elected government, follows common law principles wrapped up in well established regulation and provides a ‘best practice’ framework, which some families may view as offering them greater comfort over the preservation of their assets.

Communication remains key and, notwithstanding current transport links, there is significant ongoing investment in fibre-optic systems alongside a government-supported digital industry delivering FinTech innovation. With 50 years of private wealth management experience, Jersey is regularly used by wealthy families for asset and estate planning, family governance and by UK resident non-domiciled individuals to manage their tax affairs in the UK.

Location – and the services provided – is only the start and given the potential rewards for getting it right, it is perhaps unsurprising that there are so many models for advising the super wealthy on their investments.

To some extent, of course, this reflects the diverse nature of high-end wealth and the endless ways that it can be accumulated and held, as well as the changing needs of wealthy families over time and across generations.

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Yas Island in Abu Dhabi.

Family office, multi-family office, boutique or global private bank, or multiple professional advisers, maybe with a ‘first among equals’: in each case, the structure that surrounds a family has often been dictated by how the wealth was initially accumulated and the head of the family’s needs at that stage. Each has its merits and will suit specific situations but there may come a point where it is no longer the best solution for the wider family.

As an example, family offices struggle to survive the transition from the second to third generation, possibly because younger family members have a different relationship to the wealth and what it can bring to (or, sometimes, detract from) their lives.

Whatever the reason, there are times where a new solution is needed. To put it a different way, which structure would work best if the family were to start with a clean piece of paper?

To be clear, I am talking about investment services, not concierge services, although the terminology often overlaps. A full family office established by and dedicated to, the needs of a single family, is perhaps the best place to start. It may have grown out of a private company and be managed by the head of the family’s most trusted advisor. Over time, however, the advisor’s skills and energy might wane. It is also expensive. There are no rules to follow but a dedicated office is likely to be inefficient unless the family is worth at least £200300 million.

Another solution – the multi-family office – is to be looked after by another family’s office and benefit from its expertise, though this more efficient solution can struggle in practice if it becomes clear that the families’ interests are not aligned. Understandably, the super wealthy rarely like compromises or being second best, particularly where their financial affairs are concerned.

A different solution altogether is offered by private banks. These may be discreet boutiques or global banks, often connected to investment banking businesses. In the latter case, the family will have a dedicated banker who brings interesting opportunities from the investment bank, including currency hedging, structured products and portfolio protection. When they work well these relationships are impressive but, with many families multi-banked, this may be an indication that the ‘one-stop shop’ model has changed.

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specialists in property, art, cars, yachts, wine and other highly prized assets. The platform should offer independent access to the best investment banking ideas and execution, so the adviser is not rewarded by selling a particular product.

Jersey is the ideal location for private office services, with providers that can offer a better way to look after wealthy families, having decades of experience in managing families’ investments. Many of these relationships are multi-generational and have been sustained through many years and very different investment environments.

From this experience, there is an understanding of exactly what clients demand from a private office. In simple terms it is a combination of capabilities and values. They will have an affinity for a business that has been successfully built by putting client interests first while maintaining the highest standards of conduct and governance.

At the core should be a platform that gives the family a clear view of its assets, valued and reported on in a clear and consistent basis. This offers a holistic approach to the family’s wealth, across properties, investment assets, private holdings and illiquid assets. This is not about concentrating assets under, for example, single management, however, as it should include all assets, whether managed directly by the investment company or not.

In this way, the family can understand its assets in their entirety and analyse the risks in the way it holds its wealth. These may be currency-based or from over exposure to a particular asset class. Identifying these risks makes it far easier to design effective investment strategies, and tax or currency hedging plans.

Risk analysis and very high standards of reporting are only the starting point. Clients demand more than just an administrative hub. The family’s representative should also be able to advise on and access specialists in: liquidity, credit, tax and inheritance planning, alongside

Warren Buffet once said: “The difference between successful people and very successful people is that the very successful say ‘no’ to almost everything.” In a world where you continually feel you must try to be all things to your client, here in Jersey we are not bound by such constraints. The family will have access to tried and tested networks of professional advisers, bringing to bear the best available advice or expertise to address its requirements. Similarly, there is no need for, or expectation of, full control over a family’s assets – with an ability to work with a range of other advisers if so required.

Jersey’s approach to private office services is flexible and given its concentration of knowledge and capability, clients receive the very best advice and support available on the Island or, on rare occasions, from further afield.

Jonathan Giles Jonathan Giles is Managing Director of Rathbone Investment Management International.

He manages a range of private client, trust and charity portfolios and for the past five years has been included in the Citywealth Honours List, which recognises professionals in the private wealth management industry who have ‘technical expertise, trusted status, integrity and reputation’.

Jonathan has 30 years’ private client management experience, is a Fellow of the Chartered Institute for Securities and Investment and chairs the company’s Investment Committee Jonathan is also an Adjunct Lecturer at the Jersey International Business School.

PHILANTHROPY

CHARITABLE AND PHILANTHROPIC STRUCTURES IN JERSEY

BY JOSEPHINE HOWE

Whilst benevolent giving is generally done from the heart, it is of increasing importance to donors that it is also done with their head. Modern donors want to achieve real value and impact from their giving and often want to play an active role in the structure in order to ensure this. Due to its personal nature, philanthropy continues to be an area which many donors prefer to keep confidential and consequently private philanthropic structures continue to be attractive.

In addition, whilst donors have a giving goal, they often require professional support and advice. First, to achieve that goal through the establishment of an appropriate structure with flexibility for the donor to be involved during his lifetime in deciding the strategy and selection of good causes, and second, to ensure the good governance and administration of the structure so that it can provide benefit for years to come, even after the donor’s death.

Jersey is well established in the establishment and administration of private structures for charitable or wider philanthropic purposes (meaning wider aims that may not fall within the strict definitions of ‘charitable’) in particular charitable trusts, noncharitable purpose trusts and foundations. Due to the flexibility of Jersey law, such private structures can be created for a wide variety of philanthropic purposes and Jersey is particularly attractive to

donors due to its the stability as a jurisdiction (both economically and politically) and its robust legislation, judicial and regulatory regime, not to mention its wealth of experienced professional advisors.

Such private philanthropic structures often complement larger structures which have been established for wealth preservation and succession planning or investment purposes and are often viewed

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as a way of involving and bringing together the different branches of high net worth families in a joined purpose outside the family’s principal business or investment activities. Philanthropy and the involvement in structures created for philanthropic and charitable giving are therefore an increasingly important tool in preparing the next generation for the responsibility and opportunities of wealth and as a way to pass on family values.

FOUNDATIONS Jersey foundations can be created for one or more objects which can be charitable, non-charitable or a mixture of both and since their introduction in 2009 they have shown themselves to be popular for philanthropic uses. A foundation is an asset holding vehicle which is incorporated and therefore has separate legal personality, unlike a trust, allowing it to contract on its own behalf. A foundation is an ‘ownerless’ entity as there is no beneficial owner.

A foundation’s powers are exercised by its council in accordance with the powers and functions set out in the charter and regulations of the foundation. At least one council member, known as the ‘qualified member’, must be registered under the Financial Services (Jersey) Law to carry on foundation services business and the foundation must have a ‘guardian’ whose main role is to ensure that the council carries out its functions in order to achieve the objects of the foundation. It is possible for the founder to be both a council member and the guardian, thereby enabling the founder to retain some control and to monitor the council by virtue of being a council member or guardian.

In addition to the founder, the council may be populated with a combination of handpicked advisors, family members or persons with specialist knowledge in the philanthropic objects of the foundation.

CHARITABLE TRUSTS AND NON-CHARITABLE PURPOSE TRUSTS In addition to charitable trusts for charitable purposes which satisfy the charity test, Jersey law permits the creation and enforcement of non-charitable purpose trusts (also known as ‘purpose trusts’). The trustee of a purpose trust holds the trust fund upon trust to carry out specific purposes which do not qualify as exclusively charitable and are not for the benefit of beneficiaries.

Therefore, purpose trusts are often used for

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or purposes that are purely ancillary or incidental to any of its charitable purposes and (2) in giving effect to those purposes it provides a public benefit (in Jersey or elsewhere) to a reasonable degree. Once a Charity Commissioner has been appointed, implementation of the remaining parts of the Charities Law can be completed.

philanthropic purposes or for a mixture of charitable and philanthropic purposes or asset holding purposes.

Under Jersey law a purpose trust must provide for an ‘enforcer’ whose duty it is to enforce the trust in relation to its non-charitable purposes. The enforcer must be a person different from the trustee. It is therefore an ideal role for a donor who having settled the trust for philanthropic purposes wants oversight in relation to the administration of the trust and the benefits distributed from it. It is also possible for the enforcer to be a committee of family members or a corporate enforcer whose board is populated by family members and advisors.

CHARITY The Charities (Jersey) Law 2014, once fully implemented, will provide Jersey with a modern legal framework to support all types of international philanthropic and charitable enterprise in Jersey, including the establishment of a register of charities with a restricted section available for structures that do not solicit donations from the public (i.e. privately funded structures), a Charity Commissioner, a statutory charity test, a modern definition of ‘charitable purposes’ and charitable tax reliefs.

Registration as a charity will be voluntary but will be relevant in determining entitlement to certain charitable tax reliefs and to the use of the term ‘charity’.

For those not wishing to register as a charity, tax neutrality is to be preserved for structures with no beneficiaries in Jersey and no income deriving from land and buildings in the Island.

An entity will satisfy the test and be regarded as a charity if (1) all of its purposes are charitable purposes

VENTURE PHILANTHROPY Another area developing in Jersey is venture philanthropy, which for many high net worth investors is a natural extension of their business activities. Jersey Finance is a member of the European Venture Philanthropy Association and, in addition, to the aforementioned structures, Jersey has within its tool box various fund, corporate and limited partnership vehicles through which to make such investments.

Josephine Howe Josephine Howe is an Advocate in Ogier’s Private Client & Trust Team in Jersey.

She acts for professional trustees, settlors, beneficiaries and family offices on all issues concerning trusts and foundations as well as private wealth, philanthropy and regulatory matters, in particular advising on the establishment, administration or restructuring of complex trust structures and rectifying or mitigating breaches of trust.

Josephine is a STEP member and a member of the working party on philanthropy in Jersey. www.ogier.com josephine.howe@ogier.com

ISLAMIC FINANCE

ISLAMIC FINANCE IN JERSEY

BY TREVOR NORMAN

TheCityUK, an institution that represents the UK-based financial and related professional services industry, has made the bold statement that the UK is the leading Western centre for Islamic finance. The strong links between the financial services sector in Jersey and those in the City of London, as well as elsewhere in the UK, are well documented and Islamic finance has been an important part of these links, and whilst client confidentiality and other factors make it difficult to obtain exact figures, all the indications are that activity in this area continues to grow.

As will be seen from this article, Jersey has been providing services to Muslim clients – and in particular those resident in the GCC – for many years. Unlike some other western countries, Jersey has not had to make any changes to its Laws to permit Islamic financial transactions or investment, thereby ensuring that conventional and Islamic financial products are governed, regulated and administered on the same basis.

For over a decade, Jersey Finance Limited (the promotional body for Jersey’s finance industry) has led delegations of representatives from member firms, often

accompanied by local politicians and ministers on visits to the GCC. They have established an Islamic Finance Community of Interest group, which draws on the knowledge and experience of practitioners based in Jersey and the GCC to promote these services and to share knowledge and expertise to ensure that Jersey maintains its position as the pre-eminent offshore centre for Islamic finance. The group are actively supported by the Jersey Finance representative office established in the UAE since March 2011 and the technical team at the offices of Jersey Finance in St. Helier but a key feature that sets Jersey apart from some of our competitor jurisdictions is the willingness of

practitioners to share their intellectual property and knowledge in order to benefit the group as a whole.

‘Islamic finance’ is greatly misused as a catch-all definition for financial products and services designed for use by Muslims; a more accurate term would be ‘Shari’a-compliant financial products’. There are many similarities with the concept of ethical investment, such that the ethical constraints are those derived from Shari’a law. However, Shari’a is not a single, coherent jurisprudence: there are a number of different schools having their own interpretations of what is and is not compliant, such that a financial product that is certified

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as being Shari’a-compliant in Malaysia may not be deemed to be compliant by scholars from the Kingdom of Saudi Arabia. So whilst many practitioners from Jersey are well versed in the basic concepts of what is and what is not Shari’a-compliant from a financial perspective, they will often have to work with a Shari’a scholar to ensure more complex financial structures and arrangements comply with Shari’a law, such that the scholar can approve a fatwa (ruling) for the financial service being provided.

The two primary areas of Shari’a-compliant service in Jersey are those offered to: a) Individuals, through private wealth management services such as the establishment and administration of trusts, foundations and private companies, and b) Institutions, by way of establishment and administration of collective investment funds, and other vehicles for raising finance or the investment of capital.

PRIVATE WEALTH MANAGEMENT VEHICLES Jersey’s position as an international financial centre is founded on the provision of private wealth management services such as the establishment of trusts, private companies and more recently foundations, and many such structures have been established for GCC residents. There are many reasons why an individual may wish to establish such an entity ranging from the simple creation of a company to own, for example, a holiday residence in London, to the more complex structures required by a family office or the ownership of a family business to ensure that this is not broken up on the death of the patriarch and founder.

The concept of a trust is very similar to the Islamic waqf; indeed some academics have suggested that the concept of a trust was brought back from the Middle East by the Crusaders. Regardless of its origins, the trust concept has been developed over the centuries, such that it has become one of the most effective tax and estate planning techniques available today. One potential barrier in the establishment

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acceptable to Islamic financial institutions so this can restrict the market for the structure.

As previously mentioned, the Jersey Financial Services Commission (JFSC) as regulator of financial services in Jersey does not impose any additional or different regulatory criteria on a vehicle established to issue securities be they either ‘conventional’ or Shari’acompliant; nor does it impose any requirements over the establishment of the Shari’a Supervisory Board that will issue the fatwa and monitor the Shari’a compliance of the vehicle and its investments. The JFSC have established close links with regulators throughout the GCC and have Memorandums of Understanding with many of these; the one with Bahrain having been signed in 2002 and more recently one signed with the Emirates Securities and Commodities Authority.

of a trust is the requirement that ownership of the assets must be transferred to the trustee, a concept that many wealthy people unfamiliar with trusts have difficulty in accepting. Jersey has enacted a Foundations Law, which, in providing for a Council to oversee the management of the underlying assets, should alleviate such concerns.

In spite of this, many Jersey trust structures have been established for GCC residents. Where families had concerns about losing control over their assets when gifted to the trustees, in recent years a common solution to this has been the establishment of a Private Trust Company (PTC) to act as trustee of the family trust, or trusts. The directors of the PTC will include members of the family and/or their close advisors, together with professional trustees and the PTC will often be advised by a family council or similar body.

The factors affecting whether a potential Muslim client resident in the GCC or MENA regions will choose to use either a trust or foundation for their wealth management vehicle are many and varied and each case should be considered separately. In many cases it will depend on the service providers’ ability to explain the differences to the client and to ensure that as many variables as possible are catered for within the structure.

Whilst the structure and establishment of a trust and waqf are very similar, a trust is not registered and does not have legal personality, it is the trustee that enters into contracts in the name of the trust.

The main difference between a trust and a foundation is that a foundation has separate legal personality, it is able to contract with third parties, sue and be sued in its own name and holds its own assets, which can be traded. Similarly, Shari’a law provides that a waqf is an independent legal entity (‘thimmah’) that may engage in trading with third parties but a waqf may be restricted from trading in the original settled assets.

Finally, many civil law jurisdictions do not recognise the concept of a trust but are happy with foundations which may enable ownership of the underlying assets to be transferred into a foundation established for the long-term benefit of a Muslim family.

CORPORATE VEHICLES AND FUNDS Islamic (or Shari’a-compliant) Collective Investment

Funds were ‘the’ Islamic financial product of the late 1990s and it is difficult to think of any major financial institution, either conventional or Islamic, that did not participate in the promotion of an Islamic investment fund, with several funds investing in assets ranging from equities to real estate being established in Jersey during this period. Historically, the primary asset class for such vehicles has been commercial real estate, with examples spread across the full spectrum of real estate investment from development to commercial letting, with student accommodation a popular sub-sector in recent years.

The early 2000s saw the emergence of the Islamic securitisation market, often referred to as the Sukuk market and several vehicles issuing Sukuk were established in Jersey, notably Caravan I Limited which won an award as the Innovative Product of the Year in 2004, this transaction generally being regarded as the first true-sale corporate Sukuk. In more recent years Sukuk structures using Jersey corporate entities have been established to provide financing of a wide range of assets, including aircraft, shipping and commercial property and whilst the overall Sukuk market has faced many challenges, the expectations are that they will reemerge as a popular asset class in the coming year.

A recent development has been in the use of cell company structures for quasi-private equity investment into companies participating in projects and trading activities in Shari’a-compliant business sectors. A common problem with target companies is that they themselves may not be structured in a Shari’a-compliant manner (e.g. their share classes may include preference shares which are not permissible under Shari’a, or their debt-to-equity financing ratios may exceed the recognised Shari’a limit of 33%). In such cases the promoter of the cell company may present his offering without the usual Shari’a approval by scholars in the form of a fatwa. In such cases the offering circular contains a clear statement that the underlying investment policy regarding the activities of the target companies is that their activities are Shari’acompliant, however the structure of the investment is conventional and may not be fully Shari’a-compliant.

Such products may be accepted by individual sophisticated investors but will generally not be

It follows that Islamic funds and Sukuk issuance vehicles established in Jersey will have to conform to Jersey’s laws and will be subject to the same standards of corporate governance as ‘conventional’ funds and securitisation vehicles. Whilst this implies a similarity between Shari’a-compliant vehicles and conventional funds and securitisation structures, there is much more to establishing a Shari’a-compliant transaction than a simple rewording of conventional transaction documentation.

CONCLUSION The advantages of Muslims using Jersey for either private wealth structures or the issuance of securities are very similar to those for any other group but Jersey’s long-standing connections to the Middle East bring an additional benefit of experience and expertise in establishing these structures in a Shari’a-compliant context.

Trevor Norman Trevor Norman is Chairman of the Islamic Finance Community of Interest Group of Jersey Finance.

He joined Volaw in 1988 and is now Director of Islamic Finance and Funds Group at Volaw Trust & Corporate Services Limited in Jersey. He has worked on a wide variety of Shari’a-compliant transactions, including several real estate funds, various specialist Shari’a screened equity funds and the award-winning Caravan I securitisation Sukuk. The author of several definitive articles on Islamic finance, Trevor is a regular speaker on the subject at international conferences.

He is a Fellow of The Institute of Chartered Accountants in England and Wales and a member of the Society of Trust and Estate Practitioners (STEP), the Institute of Islamic Banking and Insurance, the International Tax Planning Association and the Institute of Directors.

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CAPITAL MARKETS

JERSEY COMPANIES LISTING ON THE WORLD’S EXCHANGES

BY GUY COLTMAN

Jersey is well known as an international finance centre and Jersey companies are regularly used as listing vehicles for IPOs on the world’s stock exchanges. The Island itself is home to a range of finance experts who advise groups seeking to list via a Jersey company on exchanges worldwide, including the main market and the alternative investment market (AIM) of the London Stock Exchange (LSE), the New York Stock Exchange (NYSE) and the Hong Kong Stock Exchange (HKEx).

Jersey is also home to offices of the Channel Islands Securities Exchange (CISE), a globally recognised and growing exchange based in the Channel Islands.

WHY JERSEY? There are a several reasons why Jersey has historically been and continues to be chosen as the jurisdiction of

incorporation for holding companies of international groups that are seeking to list securities on the world’s markets. Jersey’s reputation as an established offshore jurisdiction providing world-class financial services in a well regulated, stable and reliable environment, is one of the principal reasons for its continued popularity in these markets.

The Organisation for Economic Cooperation and Development (OECD) has placed Jersey on its ‘white list’ along with jurisdictions such as the UK and the US and the International Monetary Fund (IMF) ranks Jersey among the leading international finance centres.

Endorsements from the OECD and IMF are powerful

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statements and ensure international confidence in Jersey as a jurisdiction.

Companies looking to list benefit from a deep pool of legal, accountancy, banking and other financial expertise available in Jersey and transactions are often easier and more cost-effective as a consequence. Jersey’s courts are well developed and capable of handling the most complex and difficult corporate cases.

Jersey provides a stable, tax-neutral environment in which to establish and maintain corporate structures.

Jersey companies (apart from locally regulated financial services companies and utility companies) are, typically, zero rated for income tax and are not subject to capital gains tax within the jurisdiction. Jersey does not levy any withholding tax on dividends and there is no Jersey stamp duty on share transfers. Companies can incorporate in Jersey and be tax resident in another jurisdiction if certain criteria are met. This is an increasingly common approach for many listing vehicles.

Modelled on English company law, Jersey company law is familiar to investors around the world, making it easier to understand the implications of using a Jersey company. The law provides greater flexibility than English law, such as a more flexible regime for dividends

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and distributions, share issues and financial assistance (there is no prohibition on financial assistance in Jersey for either public or private companies). In addition, the share buyback, share redemption and capital reduction regimes are increasingly flexible and straightforward.

These aspects of Jersey company law are particularly attractive to companies and investors who are used to company law regimes that are different to England (e.g.

Delaware) but who want the assurance of a wellstructured company law regime backed by extensive case law.

If necessary, investors can typically replicate investor protection and other market standards through a Jersey company’s memorandum and articles of association in order to reflect any particular market requirements.

LONDON MARKETS Jersey has attracted many companies seeking a listing on the LSE, on both the main market and AIM. This is partly because Jersey company shares settle in the same way as UK shares on the London market (either through the paperless CREST system or through stock transfer forms). This removes the need for a depository receipt programme or branch register and associated costs. In addition, the UK Takeover Code applies to a Jersey company listed on AIM and the main market of the LSE in the same way that it applies to an English

CAPITAL MARKETS

companies include the replacement of mandatory court approval of capital reduction with a procedure requiring shareholder approval, provided a solvency test is met (although the previous procedure remains available).

CHANNEL ISLANDS SECURITIES EXCHANGE (CISE) Whilst Jersey companies are regularly listed in exchanges in other jurisdictions, the CISE offers an alternative listing venue for Jersey and overseas companies alike, with a market capitalisation of £357 billion, representing 2,173 securities listed at the end of 2015. Like Jersey more generally, the CISE offers equivalent levels of expertise and regulatory standards to onshore jurisdictions, with faster document turnaround, competitive pricing and a more pragmatic approach to disclosure requirements (not being bound by the European Union Listing Directive).

The CISE has grown significantly in recent years, with 423 new securities listing in 2015, which is an 8% increase when compared with the same figure for 2014, corresponding to a 21% increase in market capitalisation. The CISE is also expanding the nature of securities that it lists and in November 2015 it introduced new rules to allow special purpose acquisition vehicles (SPACs) to list with equivalent capitalisation and free-float requirements to the LSE.

company. This is attractive to investors as the Takeover Code is highly regarded in investor circles.

Polymetal International plc, a leading precious metals mining company, is an example of a Jersey company that is listed on the main market of the LSE. Other examples of Jersey incorporated group holding companies which are also listed on the main board include Cape plc, as well as Sanne Group, Hastings Insurance Group, Henderson Group plc and Wolseley plc. Recent examples of Jersey companies listing on AIM are XLMedia plc, WANdisco plc and Safestyle UK plc.

NEW YORK MARKET There are several Jersey companies currently listed on the NYSE and Nasdaq. Jersey company law is flexible enough to largely reflect the market standards that US investors would expect to see in a company listed on the NYSE. In addition, recent changes to company law in Jersey provide that Jersey shares can now settle in the same way as US shares on the NYSE. An example of a Jersey company that is listed on the NYSE is Delphi Automotive plc, with Quotient Biodiagnostics being listed on Nasdaq.

HONG KONG MARKET Following the decision of the HKEx to approve Jersey as

a jurisdiction of incorporation for admission, there has been increased investor interest in Jersey. The first Chinese business listed through a Jersey holding vehicle, West China Cement, was admitted to the HKEx in August 2010.

While Jersey and Hong Kong company law are both based on English law, where there are differences between the two the HKEx expects any issues to be bridged by amending the Jersey company’s articles of association. The company’s internal management and the protections afforded to the shareholders will therefore largely reflect the ‘norms’ under Hong Kong law and will be in line with local market expectations.

RECENT LAW REFORM Jersey’s regulators and legislators regularly update Jersey’s company and other laws to ensure that the Island remains an attractive jurisdiction for doing business. Recent innovations include exempting distributions which do not reduce the net assets of a company from the statutory distribution regime, specific provisions dealing with the redemption and buy-back of depositary receipts and removal of both the prohibition on the issue of shares at a discount and restrictions on commissions.

Guy Coltman Guy Coltman is a Corporate Partner at Carey Olsen, Jersey.

Guy has worked on a number of high profile transactions in respect of UK and cross-border M&A and private equity transactions.

He focuses on corporate finance, particularly AIM and main market listings of Jersey companies, mergers and acquisitions, corporate restructuring, structured investments, joint venture vehicles and general corporate advice.

His IPO work has included the first listing of PRC assets held by a Jersey company on the Hong Kong Stock Exchange (West China Cement).

Guy is an advocate in the Royal Court of Jersey.

He has also qualified in England & Wales and prior to joining Carey Olsen in 2006, practised corporate law with an emphasis on private and public company mergers and acquisitions at the London office of the international law firm Skadden, Arps, Slate, Meagher & Flom.

Other developments that may assist publicly traded

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THE NATURAL PARTNER FOR MULTINATIONAL CORPORATIONS

BY STEVE ROBINSON

The benefits of doing business with Jersey are well known – but why does this Island in the middle of the English Channel appeal to multinational corporations as a jurisdiction of incorporation for their parent companies?

Jersey is a leading jurisdiction of choice for multinational corporations requiring a parent/holding company. Given its strong corporate governance and regulation, it is a highly reputable jurisdiction that is regularly acknowledged by independent assessments, including the Global Financial Services Index (GFSI).

Jersey’s political and economic stability is well respected and supported by the calibre of professionals working in the Island, strengthening the first class service already provided by its financial service providers.

Additionally, Jersey’s physical proximity to the United Kingdom and Europe bridges the time zone gap with the USA and Asia, which can be essential for working with and fostering close relations with cross-border groups and corporations.

The Island’s government, trade and industry representatives have worked hard to ensure Jersey’s reputation is maintained and promoted. Influential bodies such as the Organisation for Economic Cooperation and Development (OECD) and

International Monetary Fund (IMF), regard Jersey as a compliant and cooperative jurisdiction for information exchange and transparency.

Jersey’s tax neutrality is a major draw for multinational companies and many joint ventures, when it comes to structuring. Jersey offers a relatively straightforward income tax regime where the general corporate income tax rate is 0% (although higher rates of 10% and 20% apply in certain circumstances) and there are no taxes imposed on capital gains. Furthermore, there are no

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Photo: Chris George

withholding taxes applied to dividends or interest on loans and no stamp duty or transfer taxes in Jersey on the issue or transfer of shares in a Jersey company. This creates a relatively low cost of compliance and allows multinational corporations to structure their global businesses in a tax neutral manner by using a well regarded jurisdiction.

Yet why specifically does this offshore finance centre appeal to those seeking to incorporate a parent company? Jersey’s financial service providers and external legal and tax advisers ensure proper corporate governance, management and control is maintained in the Island. This is required by those blue chip multinational corporations and institutional investors, who wish to maintain best practice and will be a consideration when deciding on a jurisdiction for structuring and operating across borders.

Jersey has a well established and robust legal framework which is in line with the UK’s Companies Act 2006 and protects many of these cross border companies from

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Paternoster Square in London - the location of the London Stock Exchange.

unpredictable local laws where the activity is carried out. This makes the Island particularly appealing to institutional investors and blue chip companies by providing a law that they are familiar with but with the added flexibility to adopt and enhance regulatory standards. Jersey’s highly regulated and skilled workforce may come at a higher price than those in some other offshore finance centres but a price that the majority of clients are happy to pay, for the peace of mind it affords. They expect the best quality work and have confidence that Jersey’s workforce will deliver.

Jersey companies have a well established presence throughout recognised stock exchanges across the globe – from New York and London to Hong Kong. Jersey’s credit rating of AA/A-1+ by Standard & Poor’s, is another draw for many blue chip companies when considering the structuring of business and achieving the highest possible valuation.

The Companies (Amendment No.11) (Jersey) Law 2014, which came into force on 1st August 2014, also provides significant benefits. The amendment increases flexibility within Jersey’s company law regime. In summary, the key changes are as follows: Reduction of capital - Companies may now reduce capital without court approval. A special resolution must be passed and filed with the Registrar, together with a director’s solvency statement. This process is in addition to the retained court approval process.

Distributions - It is now clear that a distribution that does not reduce the net assets of a company is not subject to the statutory distribution regime. Whether a reduction occurs will be dependent on the company’s accounting principles and relevant to many group transactions; ordinarily an ‘upstream’ guarantee by a subsidiary will not be a distribution because of its contingent nature.

Fiduciary Duties - Any breach of duty by a director may now be authorised or ratified by resolution of the shareholders, subject to a cash-flow solvency test.

Ratification of Distributions - On application to the court, unlawful distributions may be ratified where certain solvency conditions are satisfied and the court deems such ratification not to be contrary to justice.

Share Commissions and Discounts - A company may now pay commissions in connection with share subscriptions and may issue shares at a discount.

Share Redemptions and Buy-Backs - It is now clear that a company may redeem or buyback its shares in cash or in kind, or a combination of the two.

Transfers between accounts - Credit amounts may be transferred to a stated capital account (for no par value companies) or a share premium account (for par value companies and otherwise than from its nominal or capital redemption account).

Written Resolutions - Written resolutions of members need not be signed by all shareholders but only the required majority of those entitled to vote. All shareholders must receive a copy of such resolutions.

Special Resolutions - A company may now set different thresholds for passing different special resolutions, subject to the continued two-thirds minimum requirement.

Private Company AGMs - Unless provided for in its articles, there is no requirement for a private company to hold an AGM.

Private/Public Company Determination - In determining whether a company has more than 30 members (and is thus regarded as a public company), the number of persons to be discounted has been extended to include directors or employees of group companies.

The aforementioned points are not a finite list of the changes made by this amendment. Additional matters included within the amendment and indeed subordinate legislation could, of course, be of great importance depending on the specific circumstances of a structure.

Jersey’s well earned reputation as a leading and cooperative international finance centre has helped to consolidate its reputation and standing as the jurisdiction of choice for the incorporation of multinationals’ parent companies.

Steve Robinson Steve Robinson is Director, Corporate, Hawksford.

Steve heads up Hawksford’s corporate team and under his direction a team of Hawksford administrators assist corporate clients with establishing offshore structuring vehicles, asset separation and protection, structured finance, and employee benefit trusts and employee share ownership plans for private and public companies.

Steve is recognised for providing robust structuring solutions for his clients and has advised in areas including media and digital technology, employee solutions and institutional investment and finance.

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CORPORATE SERVICES

A QUALITATIVE APPROACH TO CORPORATE SERVICES

BY ROBERT LUCAS

In recent times, the pressures on the corporate services sector have become even more pronounced with the focus shifting from ever increasing regulation towards tax considerations.

International Finance Centres (IFCs) remain under scrutiny despite the numerous studies which attempt to explain how IFCs are adding value by supporting global financial flows, and that ‘offshore’ does not equal illicit.

Indeed, in jurisdictions such as Jersey, with an acknowledged robust and transparent regulatory and compliance framework, where the regulator has on record the names of ultimate beneficial owners of companies and which boasts a comprehensive network of information exchange platforms, it is difficult to understand the range of criticisms being levelled. The case for using Jersey as a jurisdiction is compelling with the Island’s reliable track record in financial services, political and economic stability, a strong regulatory

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framework, tax neutrality, and its sophisticated and comprehensive legal system.

However, for the corporate services sector, specifically in the case of non-EU holding companies and SPVs, it is vital that clients understand what they need to do to ensure that their structure remains effective in everchanging global circumstances. In other words, regular monitoring of a structure to ensure that the original advice is still valid and takes account of any changes in

tax laws or the application thereof, is essential. A good corporate service provider will be able to ensure that all regulatory requirements are met.

Perhaps one of the greatest challenges for practitioners themselves is the impact of FATCA and other recently introduced international regulations such as Common Reporting Standards (CRS), not only administratively but also from the impact on costs and pricing. The ability of the administrator to be on top of the

Photo: Chris George

CORPORATE SERVICES

requirements, or even ahead of the curve, for providing full compliance with any new regulations should not be underestimated.

The requirements arising from regulatory and tax considerations for the corporate services sector are abundantly obvious. However, the solutions are surprisingly uncomplicated. Companies must demonstrate an economic purpose other than tax mitigation alone and must authenticate clear beneficial ownership of any proceeds realised from their assets.

Corporate services demand an emphasis on governance, regulatory and legal dimensions but this is not necessarily a question of the provision of office space, employees or telephone lines but more so a clear qualitative understanding of the role to be played by a company and the value that it can add, for example in terms of risk control and management services. These roles must be achieved structurally (fully professionally advised) and functionally (qualified directors, service providers) without any artificiality. There is certainly no room for brass plate operations without substance and control in the jurisdiction of incorporation without running the risk of the commercial and tax rationale of the structure being attacked.

the functionaries to a structure. An independent administrator will also have the ability to leverage off its relationships in order to provide a ‘beauty parade’ of options to ensure that a client receives the best quality and most cost effective solution for any required service.

selection from the outset is to ask the proposed administrator to organise a face-to-face ‘workshop’ to meet with the key operational contacts in their corporate administration team.

In general, a good company administrator will take a proactive role in addressing the numerous ongoing regulatory and tax considerations of the structure and will be able to do so in each relevant jurisdiction in a joined up manner. A further consideration will be to ensure that you select a provider that will be able to rationalise your outsourcing to a single point of contact as far as possible so that they can organise the required services in all the relevant jurisdictions, thus aligning systems and reporting, which in turn should lead to operational synergies and therefore a reduction in costs.

This is where a qualitative approach to corporate services will make all the difference with clients. Jersey has a wide range of quality corporate service providers who understand these requirements. It is all about good management, supplied in the relevant jurisdiction, to ensure appropriate levels of control.

With regard to technology, a robust company secretarial system that can automate shareholder reports and consolidate reporting across a group structure, together with a platform to automate FATCA, CRS reporting and consolidated accounting should be at the forefront of considerations.

Selecting the right corporate services provider to engage with over the life of a corporate structure can be challenging, especially if outsourcing to a third party is not a mainstream part of your business model.

In recent times, it has become significantly more onerous to open a bank account anywhere in the world, so the strength of a corporate service provider’s banking relationships might be a consideration in your selection process. Furthermore, the benefits from the alignment of banking arrangements across a global structure, the bank’s ability to provide short term borrowing, and to place money without negative interest rates being applied, as well as the ability of a corporate services provider to help facilitate all of this, should not be underestimated.

Whilst technology, jurisdiction coverage, existing client base, experience, banking relationships, staff retention and pricing will all be important considerations, the key differentiator for selection invariably lies in relationships. If your structures are active, it is conceivable that you will be communicating with your administrative contacts as often as your close relatives.

Therefore developing a positive working relationship, built on trust to avoid the need for micro-managing, is essential. After all, you will be dependent on them for the execution of highly complex transactions. A practical method of ensuring that one makes the right

In addition, service providers’ working relationships with legal practices, non-executive directors, auditors and any other required functionaries should be considered. An integral service for a good corporate services provider will be the ability to coordinate all of

In conclusion, we must expect more complexity in relation to regulatory and tax considerations, so finding a robust and proactive corporate service provider is vital in helping to ensure that the rationale and validity of a structure remain current. As a final observation, it is notable that the increasing burden of regulatory and tax considerations has caused a significant contraction within the industry and this is a trend which is likely to continue, so when outsourcing any company administration function, care should be taken to ensure the right global partner is selected for a long lasting, fruitful relationship.

Robert Lucas Robert Lucas is Director - Head of Funds and Corporate, Vistra. Rob is a fellow of the Chartered Institute of Accountants in England and Wales (ICAEW) with more than 12 years’ offshore fund and trust experience in both Jersey and the Cayman Islands.

Prior to joining Vistra he was at Northern Trust Jersey for six years as a Director and headed up their Real Estate and Infrastructure Fund Administration Business. In addition, Rob has also served as a Private Equity Fund accountant for Trident Trust in the Cayman Islands and spent two years working in private wealth for Volaw in Jersey.

He joined Vistra in July 2012 and heads up the Funds and Corporate Services operation. Rob is involved in all operational, client relationship and business development aspects of the business. He also acts as a director on a number of fund and corporate entities

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WE ARE

L E A DE R S

Making the right decision isn’t always easy. When we work with you we adopt your concerns as our own, guide you through the tough times and focus on helping you make the choices that will get you where you need to be. We measure our success from your perspective so when you succeed, we do too. That’s why we believe it’s what we achieve together that makes us great leaders.

To find out how a leading law firm can help your business visit collascrill.com Cayman // Guernsey // Jersey // London // Singapore

LEGAL, ACCOUNTING & TAX SERVICES

All Photos: Chris George

JERSEY’S LEGAL INFRASTRUCTURE: FIT FOR PURPOSE – FIT FOR THE FUTURE

BY JONATHAN SPECK

Jersey’s position as one of the world’s leading international finance centres has not been achieved without considerable effort and resolve. It is a status that has taken many years to foster yet requires constant focus and effort to nurture and protect, as well as to develop and adapt in line with changing market circumstances and international demands.

There is much to be said for Jersey’s history of financial stability and security but for it to maintain its standing internationally and to retain a competitive edge in a dynamic and ever-changing world, it needs to have a sound political environment, an effective regulatory structure and a robust yet flexible legal infrastructure that, collectively, gives confidence to investors, residents and the international community, is conducive to business and operates in line with constantly increasing international standards and expectations.

While it is clear that Jersey enjoys a political, regulatory and legal landscape that places it

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Jersey may have more lawyers per head of population than in the UK but this is reflective of the diverse and specialist nature of Jersey’s operating environment and business.

It is an Island that is truly open for business and – certainly from a legal perspective – has the right people, with the right expertise, to keep Jersey where it belongs, at the top of the premier division of international finance centres.

The legal profession in Jersey is immensely proud of its contribution to the Island; for its services to the personal and business community in representing their interests and in upholding the role of law, in its provision of the safety net of Legal Aid to those who are truly in need and, significantly, the economic benefit it brings, not only through the business it generates for Jersey but by the taxes it pays.

Arguably, though, its most significant contribution is its role in sustaining existing business streams while securing new business opportunities, underpinned by legislation that members of the profession have been instrumental in creating or amending, safeguarding the confidence of investors, while ensuring that international standards are met at all times.

As a jurisdiction, Jersey is increasingly on the front foot, anticipating the potential impact of threats to its market position, proactively evolving its offering to remain competitive yet compliant, so as to retain the trust, integrity and reputation for which Jersey is renowned.

It is, though, a jurisdiction that understands what the market needs, it has the right skills base, the right operating environment, the right legal framework and, critically, a regulatory regime that not only is fit for purpose, but is also fit for the future.

appropriately in the premier division of international finance centres, it is important to recognise the role that key stakeholders have in achieving and maintaining this positioning.

Arguably one of the major contributors in this respect is the part played by Jersey’s legal profession. While it is a profession that is steeped in tradition and heritage, it has adapted to Jersey’s needs and aspirations, acting and reacting to market trends and opportunities and has been instrumental in helping Jersey to attract business both locally and internationally, providing effective and flexible support for new streams of business activity and revenue for the Island.

With legal expertise spanning the entire spectrum of banking, corporate finance, trust, fund, property, personal and offshore law, lawyers in Jersey play a critical role in establishing and maintaining Jersey’s position as a jurisdiction of trust and integrity that is fit for the business world of the 21st Century.

There are now over 330 advocates and solicitors in private practice in Jersey, across 45 law firms, ranging from long established sole practitioners focusing on the local personal market, several recent small, specialist practices to the large, multi-disciplinary (and multi-

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Jonathan Speck Advocate Jonathan Speck is President of The Law Society of Jersey, the statutory regulatory body for Advocates and Solicitors of the Royal Court of Jersey.

jurisdictional) firms which are engaged by local businesses, FTSE companies and international conglomerates, while also taking instructions from the so called ‘Magic Circle’ firms within the City of London on matters of Jersey law.

The collective strength of Jersey’s legal profession – its skills, its responsiveness, its tenacity, its expertise and its experience – cannot be underestimated. The whole is, without doubt, greater than the sum of its parts, although according to the Legal 500, many of the ‘parts’ of the profession in Jersey are quite exceptional.

The Law Society of Jersey represents the interests of the legal profession in Jersey, helping to shape and improve the legal framework, supporting its members in the practice of law, while upholding the highest standards of professional conduct.

Advocate Speck specialises in commercial litigation, principally involving contentious and non-contentious trust cases, about which he has written and lectured around the world. He is currently Managing Partner of Mourant Ozannes in Jersey.

LEGAL, ACCOUNTING & TAX SERVICES

JERSEY’S LOW TAX ENVIRONMENT AND THE IMPACT OF INTERNATIONAL DEVELOPMENTS

BY JUSTIN WOODHOUSE

AIFMD, BEPS, CRS, DPT, EU State Aid, FATCA, GAAR… for anyone trying to track the ongoing developments in the international tax landscape, it is easy to get lost in the alphabet soup of new rules and regulations. Although it is clear that times are changing in the world of tax, it can be difficult to discern what the impact of these changes might be on Jersey’s tax system, how businesses that have activities in Jersey might be affected and, most importantly, what can be done to mitigate these risks.

TAX NEUTRALITY IN THE NEW ENVIRONMENT Although Jersey has been successful at distancing itself from a ‘tax haven’ label, jurisdictions with low tax rates continue to be scrutinised closely by the OECD, EU and other large countries with higher tax rates. Also, with the recent media and political focus on certain large multinational corporations that utilise lower tax jurisdictions, it is not likely that this scrutiny will end any time soon.

Tax treaty networks can be a major advantage when being considered as a location for an international business. Jersey’s network has been growing in recent years and it would be hoped will expand further in the

future. However, the recent update to the OECD guidance on tax treaties makes it clear that jurisdictions should be wary of signing treaties with those that have a 0% tax rate. This could make it difficult to agree treaties with major economic powers, though there is still potential for strong relationships to be built in Africa, Asia and the Middle East.

The Anti-Tax Avoidance Package released by the EU in January reaffirmed the Code of Conduct on Business Taxation, under which Jersey’s current 0/10 regime was reviewed and sanctioned, and good progress continues to be made on Jersey’s removal from national black lists.

Despite the pressures in the current environment, Jersey remains well placed to maintain its status as an important international finance centre. Jersey is generally a well-accepted jurisdiction in Europe and the UK has acknowledged the contribution Jersey makes to the UK economy. As Jersey continues to stay at the forefront of implementing new global transparency standards and further promotes the benefits of tax neutrality to other jurisdictions, it is going a long way toward relieving the pressure.

CONSIDERATIONS FOR JERSEY BUSINESSES Although Jersey may be well placed to weather changes in the tax environment without significant changes,

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businesses with operations in Jersey will still need to look closely at current structures and transactions outside Jersey to assess the potential impact of international tax changes. In particular, businesses should consider: • How is cash repatriated to or from entities in Jersey?

The OECD and EU have both proposed changes to tax treaties that may restrict or prevent access to treaty benefits, such as the reduction or elimination of withholding tax on dividends, interest and royalty payments. This may impact on a group’s ability to establish group finance companies and/or repatriate cash or reserves to its parent company in Jersey and may also have an impact on structures that utilise other jurisdictions as an intermediary between investments and a Jersey fund.

• Are interest payments or hybrid instruments included in financial flows? New rules could restrict the deductibility of interest to at most 30% of EBITDA, at least based on rules proposed or being considered by the OECD, EU and many countries, including the UK. In addition, hybrid instruments that have different tax treatment in different countries and are commonly used in fund structures, could be disregarded under proposed rules.

• Do your staff regularly travel abroad or are many of your sales booked abroad? Any business conducted onshore, either via travelling employees or associated enterprises, increases the risk of creating a taxable presence in those countries. Current and proposed rules will further increase scrutiny by tax authorities and it is important to identify arrangements that could give rise to heightened permanent establishment risk.

• Does the ‘substance’ of the business align with where profits end up? Although no government or body has truly defined substance, it is a clear theme in the recent OECD work on BEPS. Tax authorities will increasingly be focused on key value-adding activities, potentially expecting more than the making of strategic decisions at board meetings that is already needed to maintain residency positions.

Businesses that recognise significant profit in Jersey accompanied by the right level of substance should

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•

find their tax position strengthened by these proposed changes.

How will tax reporting information be interpreted by tax authorities and other stakeholders? Between FATCA/CRS reporting on account holders and corporate country-by-country reporting being implemented in the EU and in many other countries, not to mention AIFMD and other existing regulatory reporting requirements, the amount of information on businesses’ tax strategies and positions will be unprecedented. Although current rules generally only have the information being provided to tax authorities, there are some calling for making the information public. As such, it is important to consider how your business model could be viewed from the outside by all stakeholders.

RISK MITIGATION STRATEGIES The new world of tax is here to stay but that does not necessarily mean drastic changes are needed within every business to mitigate tax risks. Before making any changes, it is important to first conduct a thorough review to assess the level of risk and where the key pressure points are for a particular business. There are tools available to help navigate the array of different tax rules to consider but it will also be key to have a clear picture of the value chain of your business.

Once the risk areas are identified, some changes to the business may be needed. In some cases, this could require a major structural change but in many instances it will be more important that employees and entities within the business operate in a way that does not create tax risk. This is where a strong set of internal operating guidelines comes in. A robust set of operating guidelines can help mitigate residency, permanent establishment and transfer pricing risks by ensuring that the business is operating commercially as intended, without creating undue risk.

In addition to these types of internal documents, robust documentation of tax risk policies and how tax strategies are implemented is needed. This will be the first line of defence if ever a tax authority starts an

enquiry but will also help ensure the business is aligned with the tax position. Finally, close monitoring of ongoing implementation of tax policies is important to ensure accurate reporting and execution of transfer pricing policies, so it is necessary to have adequate governance and control frameworks in place.

In this new, ever-changing world of tax rules and regulations, there are still plenty of reasons why Jersey and its businesses will continue to thrive. Jersey is an island of substance, with many businesses having a strong presence on the Island but businesses must closely monitor ongoing developments and adapt structures/transactions as needed to manage evolving tax risks.

Justin Woodhouse Justin Woodhouse is Tax Partner, PwC Channel Islands. Justin Woodhouse graduated from Cambridge University in Law in 1978. He qualified as a Chartered Accountant in 1981 and became a Partner at PwC in 1990. Justin has worked in New York and spent five years in PwC’s financial services practice in Japan. In July 2015, Justin transferred from London to the Channel Islands as Head of Tax for the Channel Islands.

Justin leads PwC’s European Banking and Capital Markets Tax team. He has vast experience advising clients on tax optimising their structures and activities, whilst managing tax risk and maintaining strong relationships with fiscal authorities. Clients include global and international banks, insurance companies and asset managers.

LEGAL, ACCOUNTING & TAX SERVICES

ACCOUNTING FOR CHANGE

BY CHRIS STUART

As a leading global international finance centre, it is crucial that the Jersey finance industry has access to the very best professionals, including lawyers, investment management professionals, bankers and of course accountants. Each of the five largest international accountancy firms have a significant presence in Jersey and the Island is also well served with a number of mid tier firms as well as local accountancy practices.

The Jersey Society of Chartered and Certified Accountants (JSCCA), established in 1974, represents the accountancy professionals on the Island and currently has over 750 members. Given the number of accountants in Jersey, the accountancy profession has a significant role and is well established within all aspects of the finance industry in Jersey.

The profession continues to evolve with both the

Jersey economy and international economies facing increased regulatory focus. The accountancy profession is having an ever increasing role in shaping the Island’s future, although the original objectives of the JSCCA are just as valid today, being: • To encourage cooperation between members and to stimulate the interest and participation of members in matters concerning the accounting profession

•

• •

To provide a forum for discussion on matters of mutual interest and to provide a medium for expression of professional opinion on matters of public interest To communicate with the Jersey authorities and other professional bodies To promote high standards of professional conduct.

The Sub Committees of the JSCCA’s Executive

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Photo: Chris George

Committee cover Taxation, Technical, Legislation, Accounting Regulation and Training, with each Sub Committee devoting time to focus on important matters that arise throughout each year.

One of the key areas that the Training Sub Committee takes responsibility for is organising the annual two day CPD conference for members. The JSCCA welcomed around 300 members to the two-day conference which was held in October.

One of the main aims of the conference is to provide continuous professional development to attendees covering a wide variety of subjects of interest to local accountants. This year, the sessions included topics such as accounting standard updates, local and international taxation, and regulatory developments.

Many sessions were fully booked suggesting that the conference was successful in covering the issues that matter most to the profession.

The JSCCA’s annual dinner took place at the end of Photo: Chris George

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Being a relatively small Island with a population of around 100,000, although being a very successful international finance centre, there are significant challenges with regard to attracting and retaining a sufficient number of high quality accounting professionals. Given this, one of the key roles for the JSCCA is not only to represent the existing accountancy professionals on the Island but also to promote a career in accountancy at schools and universities.

As part of the JSCCA’s aim of promoting the accounting profession in Jersey we offer a very successful bursary scheme. The scheme was established in 2010 to provide a bursary of up to £5,000 per year for a Jersey school leaver studying a relevant degree outside of Jersey but who is looking to pursue a career in the accountancy profession. This has been a great success since its launch.

We are however in a transitional period with respect to attracting candidates into the profession. With the cost of university being an ever increasing burden on students, many are looking at other ways of pursuing their chosen career. We are seeing more students looking at joining the profession directly from school and, as such, we are having to adapt as training firms but also as a profession.

CHALLENGES AND OPPORTUNITIES AHEAD: Technological changes Looking back over my (long) time working in the accountancy profession, technology has already had a significant impact on changing working practices and how the accounting profession operates and interacts with its clients. The last two decades have seen the explosion of the internet, PCs which were once a new phenomenon, becoming the preferred way of working and now themselves being overtaken by use of tablets and cloud computing. When looking back, this pace of change seems to have been huge but I can only see the pace increasing exponentially into the future.

Technology will increasingly be woven into the fabric of the accounting profession in the next decade. The profession will be reshaped as accounting firms use cloud computing platforms and applications, combined with advanced analytical tools, large data sets, and social and mobile computing.

The focus of accounting will shift from computation to consulting as clients increasingly rely on their accounting professionals to analyse information, support management decisions and provide strategic advice. Greater automation, coupled with a growing interest on the part of businesses to outsource part, or even all, of their bookkeeping and financial operations, will create new opportunities for accounting firms to support their clients by taking over these functions.

influence and shape the global financial services market. In the new financial world that has followed the credit crisis, financial services companies have continued to assess their internal processes and procedures to ensure that they remain fit for the increased regulatory environment. New regulations and tax scrutiny have triggered these reviews but intense political pressure has added the significant threat of reputational risk.

Photo: Chris George

the two-day conference and was attended by a number of distinguished guests. Intended to celebrate a successful year for the members, the sold-out event was supported by Jersey’s largest accountancy firms including KPMG, EY, Deloitte and BDO, along with many of the major financial services firms on the Island.

Given this, global organisations are looking at their international finance centres of choice to ensure that they too are enablers for business in the ‘new world’ rather than causing them increased risk.

Organisations want real time financial reporting and accountants that have the ability to quickly analyse huge amounts of data, identify trends and thus help make business decisions, will become increasingly invaluable.

These advances in technology also mean that accountants and finance professionals need new skills and competencies, from change management to knowledge of data extraction tools to aid business intelligence.

New UK Accounting Standards (New UK GAAP) With the introduction of ‘New UK GAAP’, effective for entities with accounting periods beginning on or after 1 January 2015, the profession has been grappling with the impact of the biggest change in accounting standards in the UK for over 20 years.

The Accounting Standards Board started its project on the ‘Future of UK GAAP’ a number of years ago, basing its proposals on IFRS for SMEs. However, this proposal document needed amendment if it was to be applied in the UK, as parts of it were incompatible with EU law. Accordingly, first of all came proposals for a FRSME (Financial Reporting Standard for Small and Medium-Sized Entities) and then proposals for ‘The FRS’, now FRS 102, the Financial Reporting Standard applicable in the UK and Ireland.

Jersey has continued to adapt quickly to the changing international regulatory and fiscal environment – seeking to balance the concerns of inter-governmental associations with the needs of the financial services industry and its wide range of stakeholders.

Constantly in the vanguard of transparency and cooperation, Jersey remains a highly regarded offshore finance centre which is the jurisdiction of choice for many global international finance organisations.

The JSCCA has been proactively involved in providing input on how Jersey should best interpret and introduce these new requirements, particularly where there is an impact on accounting and financial and regulatory reporting. With new regulation comes new reporting requirements and, as such, the profession has been looking to develop methodologies in order to provide the relevant stakeholders assurance over the reporting being generated. Linking very closely with the changes we are seeing in technology within the profession, it is both an exciting and challenging time for the Island and its professional community.

Chris Stuart Together with FRS 102, we also have FRS 100, FRS 101 and – more recently – FRS 103, FRS 104 and FRS 105, increasing the set of New UK Accounting Standards.

Although a number of changes have been made to FRS 102 as a result of consultation, there remain some key differences when compared with previous UK GAAP. For example: • Deferred tax is recognised on valuations and fair value adjustments in a business combination • Revaluation movements on investment properties are recognised in profit and loss account • Derivatives are recognised on the balance sheet at fair value through profit or loss As always, the devil is in the detail. Overall the changes are extensive and the particular accounting treatment to adopt for individual transactions may well vary according to either their form or substance.

Continuing impact of global regulation Global regulatory changes and the desire for increasing tax transparency continue to significantly

Chris Stuart FCCA, is President of the Jersey Society of Chartered and Certified Accountants.

Chris joined BDO as an Audit and Advisory Director in 2015 and has been working in the financial services industry for 20 years, having qualified as a certified accountant in 1998. He has worked in Scotland, Guernsey and Jersey and spent two months on secondment in Boston.

Chris’ primary focus is on the delivery of audit and advisory services to entities operating within the financial services sector. Chris has spent most of his career within the professional services sector undertaking audit and advisory work but he has also spent time working directly in the funds industry. Established in 1974, the JSCCA supports the accountancy profession in Jersey and has over 750 members from across different accountancy bodies. www.jscca.org secretary@jscca.org

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Partnerships, relationships, affiliations.

Whatever you call them, all companies need good connections. ^ƵƌĞ /ŶƚĞƌŶĂƟŽŶĂů ŝƐ ƉĂƌƚ ŽĨ ƚŚĞ ĂƚĞůĐŽ 'ƌŽƵƉ͕ Ă ĐŽŵŵƵŶŝĐĂƟŽŶƐ ĐŽŵƉĂŶLJ ǁŝƚŚ Ă ŐůŽďĂů ĨŽŽƚƉƌŝŶƚ ĂŶĚ ǀĂƐƚ ĞdžƉĞƌƟƐĞ͕ ĚĞůŝǀĞƌŝŶŐ ĐŽƌƉŽƌĂƚĞ ƚĞůĞĐŽŵŵƵŶŝĐĂƟŽŶ ƐĞƌǀŝĐĞƐ ƌĂŶŐŝŶŐ ĨƌŽŵ ǀŽŝĐĞ͕ ŵŽďŝůĞ ĂŶĚ ďƌŽĂĚďĂŶĚ ƚŽ ŶĞƚǁŽƌŬƐ͕ ŽŶͲŝƐůĂŶĚ ĚĂƚĂ ĐĞŶƚƌĞ ŚŽƐƟŶŐ͕ ŐůŽďĂů ĐŽŶŶĞĐƟǀŝƚLJ ĂŶĚ ŵĂŶĂŐĞĚ ƐĞƌǀŝĐĞƐ ƐŽůƵƟŽŶƐ͘ KƵƌ ŐƌŽƵƉ ƐƚƌƵĐƚƵƌĞ ĐŽƵƉůĞĚ ǁŝƚŚ ůŽĐĂů ĞdžƉĞƌŝĞŶĐĞ ĂŶĚ ŬŶŽǁͲŚŽǁ͕ ŵĂŬĞ ƵƐ Ă ƉĞƌĨĞĐƚ ĐŽŶŶĞĐƟŽŶ ĨŽƌ LJŽƵƌ ĐŽŵƉĂŶLJ͘ Contact Jon McCulloch, Head of Sales on 01534 888291 or email business@sure.com

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DIGITAL

THE YEAR OF JERSEY FINTECH

BY TONY MORETTA

Last year Jersey’s FinTech momentum stepped up a gear, providing the impetus for 2016 to become the year that Jersey FinTech really makes its mark. Our Island’s trusted brand and capabilities in specific financial services sectors give us a foundation to build new businesses and jobs with a strong, targeted FinTech focus. Yet it is not just about diversifying our economy, as given its adjacency to our financial services industry, FinTech is a natural way for us to preserve and strengthen our existing position in financial services.

Our work culminated last October in the Island’s first major international FinTech conference, alongside the issuance of Jersey’s cryptocurrency consultation paper, which significantly clarified Jersey’s regulatory position surrounding virtual currencies. All these developments mean that from KYC to blockchain, Jersey is moving forwards in the FinTech space.

While FinTech has become somewhat of a buzzword, the level of interest has been backed up by concrete action. Jersey now has a strategic working group to identify key opportunities for industry in the FinTech sector and we are seeing a growing receptivity from Jersey’s established financial services to the opportunities that FinTech presents.

Jersey has worked hard to establish its reputation as one of the best-regulated jurisdictions in the world for financial services. This process has understandably brought a degree of conservatism with it, which has at times spilled into risk aversion. Nevertheless, as identified in a recent survey by KPMG, FinTech does not need to represent a disruption to our Island’s reputation for robustness in financial services.

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Photo: Chris George

FinTech can and should be used to build on our reputation, for example through the use of the most cutting edge digital solutions in KYC and due diligence, to make client on-boarding both more efficient and more thorough. By the same token however, FinTech does present the threat of disruption to other areas of financial services, particularly in the form of automation and machine intelligence. Financial services need to address this reality head on; we cannot hold back the tide, disruption is happening – and we have no choice but to ‘ride the wave’.

Once we understand the scale of the opportunities and challenges, Jersey businesses can really focus on specific areas of opportunity. Our finance industry operates in strong niche areas, namely private client trusts, funds and banking, so our FinTech offering should correspond to this. We are not aiming to be a rival to the major FinTech hubs but we should focus on holding our own alongside them.

Our main area of focus now is to ensure the opportunities are there for innovation to flourish. Large established financial institutions need to find ways to replicate the agility of startups, which benefit from their size and their youth to quickly and effectively implement digital innovation throughout their organisation. This is why a collaborative approach between our financial and digital industry is essential – and it is promising to see developments in this vein, with members of our digital industry actively supporting and investing in FinTech solutions for established financial institutions.

Government, alongside Digital Jersey and Jersey Finance, can also support innovative projects, by bringing ‘Fin’ and ‘Tech’ members together to fund collaboration on trials. The digital sector is making substantial ground in demonstrating how we can bring together innovation and existing expertise to ensure the continued competitiveness of our Island’s core industry, alongside enabling the much needed diversification of our economy to ensure steady growth in our GVA. Research undertaken by KPMG at the end of last year has underscored areas where Jersey can really capitalise on FinTech innovation. These areas fit in with the idea

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that we must build on our current expertise and enhance it using technology and they include: bespoke business processes enhancement software to reduce the amount of paperwork in the day-to-day running of trust sector and fund administration businesses; automation of time-intensive activities such as KYC; advanced risk management systems to assist in decision making, alongside automating time intensive risk management functions; wealth management platforms; and Regulation Technology (RegTech).

RegTech in particular is a major priority for Jersey in 2016. Since the financial crisis, regulators are requiring more detailed data from financial institutions. Keeping up with regulatory requirements requires clear and systematic methods to ensure transparency, which digital solutions are ideally suited to assist with. Closely related to FinTech, RegTech has the added bonus that it builds on what is arguably Jersey’s central point of attraction for new businesses. The Jersey Financial Services Commission (JFSC) and the Registrar are keen to explore how we can use RegTech to improve our Island’s competitiveness.

What is crucial now is pace: our competitor jurisdictions are aware of the opportunities of FinTech, so we must act, as an Island, to build on Jersey’s unique value proposition so we can attract new business and grow existing ones. This means putting in place the requirements for accelerators – particularly access to funding – and facilitating further collaboration between relevant industry and governmental areas.

The foundations are very much in place for FinTech to play a profitable role in Jersey’s long-term diversification strategy. Our financial sector is among the best in the world and we need to keep it that way through focusing on what we do well and exploring how this can be enhanced through digital innovation. Crucially, responsible risk management should not stop us from trying new things.

Throughout this year, I look forward to seeing further collaboration between our financial and digital industries and exploring how we can attract talent to the

Island to ensure our digital skills are able to meet the demands of FinTech. While the obvious challenges are there, the opportunities are greater; Jersey must seize them. Digital Jersey will work closely with Jersey Finance to combine Jersey’s established strengths with the most innovative ideas, ensuring our vision for an Island with diverse, robust industries can become a reality.

Tony Moretta Tony Moretta is the CEO of Digital Jersey.

Tony is responsible for delivering Digital Jersey’s goal to develop Jersey as a recognised digital jurisdiction. Tony has over 20 years of senior management experience across a wide range of digital industries, including mobile, online, broadcast, payments, advertising and data analytics, using the latest technological innovations to develop new revenue streams.

Tony began his career at NatWest on the graduate training programme, rising to Senior Manager of Commercial Development in their cards business.

He went on to work for Visa Europe as Vice President of New Products. He took this interest in innovation to ITV Digital where he was Director of Interactivity, followed by senior positions at the National Grid Wireless and Digital Radio UK. Before joining Digital Jersey, he was delivering a number of projects in the digital space for both the UK Government and major private sector companies, and was one of the founders of Weve, a joint venture between EE, O2 & Vodafone in mobile marketing, payments and data analytics.

DIGITAL

JERSEY: EMBRACING THE DIGITAL ERA

BY GRAHAM HUGHES

As Jersey’s economic recovery continues and the financial services industry, which has been the mainstay of the Island’s economy for over half a century, once again grows in strength, Jersey is well positioned to make a concerted effort to embrace the opportunities of the digital era and effectively diversify its economy, making it less susceptible to future disruption and simultaneously creating new opportunities for the finance sector.

Whether Jersey embraces growth in financial technology innovation, healthcare or digital industries such as data storage and eGaming, the Island’s finance industry is set to benefit as funds are raised to get businesses off the ground and investments are attracted to the Island from around the world.

financial expertise and combines it with the Island’s technological know-how. Whether a company needs specialists in corporate structuring, tax advice, accounting or law, Jersey has a ready supply of professionals working within an environment that enjoys world-class connectivity.

eGaming is an excellent example of an industry that plays to Jersey’s strengths. It uses the best of Jersey’s

TREATING YOUR DATA WITH CARE Importantly, this connectivity is backed up by highly

secure tier three data centres run by companies that have enormous experience in processing live transactions and securely storing data.

In the eGaming sector Sure International’s capabilities in the Channel Islands were reinforced by the 2014 acquisition of data centre and hosted services company, Foreshore. Based in St Helier, Foreshore had long been at the vanguard of data security in Jersey. It built a client

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base that reaches across the Atlantic and helped it become one of the leading providers of disaster recovery and business continuity services to dozens of major financial services companies in the Caribbean, as well as many much closer to home.

The firm’s global capabilities were put to the test in 2004 when Hurricane Ivan struck Grand Cayman, causing devastation to buildings across the island and compelling companies to enact their business continuity plans. Foreshore’s technology kept clients trading during that difficult period, giving companies time to recover from the disaster.

Today, the business has been fully integrated into Sure’s tri-island data centre network which reaches from Jersey to Guernsey and the Isle of Man, offering a wide range of hosting, cloud and managed services in addition to its role as a disaster recovery facility.

Sure’s Data Centre business has become the first in the Channel Islands to be accredited with the international standard for Information Security Management: ISO/IEC27001:2013. This means that our customers can be assured that we operate to the highest levels of information security. We are also accredited as a top-tier data security supplier for users of the payment card industry as a PCI-DSS Level One Service Provider, giving eGaming and eCommerce clients the reassurance they need that their transactions are being handled securely.

GLOBAL NETWORKS FOR ISLAND BUSINESSES As well as its data centre network, Sure’s core communications network reaches across the three islands, delivering the full range of high quality communications services to business and islanders.

Although Sure’s focus is on the Channel Islands and the Isle of Man, its capabilities extend far beyond the British Isles and it is our global reach which makes us stand out from the crowd. Sure forms a key part of the Bahrainbased, Batelco Group, whose international network

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stretches across four continents – with particularly strong links in the Middle East – helping bring international quality and expertise to Jersey.

cloud for their IT systems, services and storage, 4G is the technology that is finally turning dreams of a fully mobile business, into a reality.

The strength of our relationships and the high standard of our global network gives us the ability to work with Jersey Finance, helping companies across the world learn more about the Island’s international capabilities and helping them understand that Jersey can play an important part in their global operations.

There is no doubt in my mind, that Jersey is a prime location from which to do business. Not only does the Island offer access to the highest levels of expertise across a range of professional services but every Island business knows that it can operate from here at a truly global level.

We also use this unique combination of global expertise and local knowledge to provide global solutions to businesses whose locations cut across time zones and which need consistent global connectivity of the highest standard.

To this end, we have built a Network Team that is dedicated to ensuring that Island businesses have the means to operate at the local, regional and global levels.

This highly skilled and qualified team is able to design the networks that businesses need, whether they have to send information efficiently, securely and effectively across continents or just across Jersey’s parish boundaries.

As I have mentioned, part of Jersey’s all round attraction as a location for doing business is the easy availability of the very latest communication technologies. It is by staying at the forefront of technological developments that a small Island like Jersey is able to keep businesses running 24/7 and able to process ever greater amounts of information.

Jersey’s superb communications infrastructure includes all-Island 4G mobile networks and the ongoing roll-out of fibre to every home. Island businesses are already embracing the benefits of 4G and its ability to make full mobile cloud access possible wherever you are in the Channel Islands. With firms increasingly turning to the

Graham Hughes Graham Hughes is Chief Executive of Sure Jersey.

Graham was born in Jersey and following a career in Aeronautical Engineering with the Royal Navy, returned to the Island working as Senior Company Officer for Reuters in Jersey, Guernsey and the Isle of Man. He joined Sure in 2004 for the launch of Sure’s Jersey operations and leads the firm’s commercial, operational, sales and revenue strategy in the Island.

DIGITAL

FINTECH: PAST, PRESENT, FUTURE

BY CHRIS MATTHEWS AND SAM FULLER

FinTech has been described as a ‘paradigm shift’, a ‘revolution’ and a ‘boom’ in financial reports and headlines in the past 12 months and FinTech is indeed thriving with $12.2 billion of investment globally in 2014; triple the figure of 2013.

These media portrayals of FinTech suggest that, potentially, the ‘banks are right to be afraid’. It is currently unclear whether FinTech can fully destabilise conventional banking but what is clear is that Jersey possesses huge potential to capitalise on this growth and should maximise this opportunity.

FinTech may be broadly defined as ‘innovation in financial services’ which includes developments such as peer-to-peer (P2P) lending, crowdfunding, mobile payments, advisor platforms, digital currencies and

more. However, FinTech – if we take the aforementioned definition – is not a totally new construct and can be clearly evidenced as far back as 1946 with the introduction of the world’s first bank card. In addition to this, 1967 witnessed the world’s first ATM, 1983 saw the introduction of online banking services in the UK and PayPal was established as long ago as 1998.

In practice, FinTech is comprised of intelligent individuals or teams with the entrepreneurial drive and

ideas to provide solutions in order to solve problems in both developed and developing countries, specifically by applying technology to financial services.

JERSEY PERFECTLY SUITED TO FINTECH Jersey is perfectly suited to take advantage for a number of reasons, which include not only the advanced infrastructure and technical knowledge available onIsland but also the accessible and responsive authorities, who are able to react promptly to the new opportunities that FinTech presents.

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London’s FinTech companies witnessed an investment of £314 million in 2014 alone and this provokes the question: why the sudden increase in investment and excitement?

structured an investment trust which is administered in Guernsey and listed on the LSE with the assistance of Guernsey law firms. Jersey must endeavour to be firstchoice provider of these services.

An EY report commissioned by UK Trade and Investment identified three key areas which have led FinTech to thrive. The first factor recognised is the cumulative effect of digital connectivity; with smartphones and internet penetration having revolutionised connectivity, consumers and businesses have been able to connect in ways previously unimagined.

FinTech has offered – and will continue to offer – new opportunities for entrepreneurs such as those the professional services firms in Jersey have always nurtured. Indeed, it might well be said that we, among others, have been building and following a model of networked entrepreneurial working for some years. It is just recently that an element of that thinking has been given a name.

Second, customer satisfaction with banks plummeted globally in the period post-financial crisis and has continued to remain low; a fact further emphasised by findings from the Millennial Disruption Index showing that over 70% of 18 to 34 year olds would be more excited about a new offering in financial services from Google, Amazon or Square, a mobile-payments company, than from their own bank.

Philip Ozouf has communicated his goal to “put Jersey on the FinTech map”.

It is clear that significant efforts are being made and that Jersey should continue to be fleet of foot, innovate and adapt to technological advancements to ensure that the industry remains relevant and is responsive to FinTech opportunities. Given the Island’s reliance on financial services, FinTech is not an area to be neglected.

The Island does not need to recreate itself but must instead continue to develop the core competencies already present.

Finally, the report identified the lack of innovation and investment by incumbent providers as the third major factor in the rise of FinTech.

A further question arises as to whether the market’s expectations are substantiated. Opinions are divided on this front and there is no definitive answer. Some, such as former JPMorgan executive and current CEO of Digital Asset Holdings Blythe Masters, are recognising the potential of FinTech for providing a viable alternative in the financial services space. Ms Masters argues that blockchain technology should be taken as seriously as was internet development in the early 1990s, giving a clear indication of the esteem in which FinTech is held by some commentators.

Chris Matthews

This contrasts with the more conservative views of those such as Sam Hodges, co-founder of Funding Circle, who asserts that “banks have such incumbency advantages that it is hard to see a start-up beat them head on”.

The Jersey government and Jersey Financial Services Commission (JFSC) have also taken a positive approach.

Philip Ozouf identified FinTech as the “natural evolution of an innovative Jersey” and has communicated his goal to “put Jersey on the FinTech map”.

FINTECH COMPLEMENTS JERSEY’S EXISTING EXPERTISE Jersey’s finance industry employs almost 5,000 people, holds 33 banking licences, is home to over 90 regulated trust company businesses and has regulated funds under administration with a cumulative NAV peaking at over £200bn. Jersey is already one of the world’s leading international finance centres and FinTech is offering considerable opportunities to further promote an already desirable reputation.

The Jersey Innovation Fund was launched in 2013 and has released approximately £2.5m of funds, over half of which went to digital ventures including FinTech products and services. The JFSC recently introduced virtual currency regulation, with the intended consequence of encouraging confidence and innovation in this sector.

Certainly, Jersey has taken steps towards maximising the benefit from this opportunity. Jersey’s first FinTech conference was held in October 2015 and a second is set to take place in 2016. Digital Jersey has just launched a new strategy and plan identifying FinTech as an ‘obvious candidate for investment’ and has also been holding regular events hoping to promote technology and innovation. In addition, specific Jersey companies are embracing FinTech; Elian is implementing an app to facilitate elements of the KYC information-capture process and C5 Alliance is launching Jersey’s first FinTech Lab to work in partnership with entrepreneurs and businesses.

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JERSEY BENEFITS FROM STRONG UK LINKS Jersey’s direct and close links to the UK should not be neglected; the link to London in particular is important considering the city’s aim to be recognised as the FinTech capital of the world and its capacity for catalysing change.

Financial institutions in Jersey and the professional services that serve them need to be able to utilise these links in order to apply the capabilities and expertise inherent with such close ties.

Jersey must recognise the considerable potential in supporting the more established companies with the provision of services; such as structuring trusts and investments or helping to raise finance in the form of a listing or otherwise – skills this tax-neutral Island is wellknown for. To illustrate, Funding Circle, a P2P lender,

Chris Matthews is a Partner at EY. Chris has over 20 years’ experience working in the Channel Islands, London and Sydney. Chris serves as the head of both EY’s Channel Islands Financial Accounting Advisory Services (FAAS) as well as its International Financial Reporting Standards (IFRS) services.

A Fellow of the Institute of Chartered Accountants in England and Wales, he is head of private equity and cleantech for EY in Jersey and has a focus on wealth and asset management, especially alternative funds.

Sam Fuller Sam Fuller is an Executive, Assurance Services, EY. Sam has worked for the firm since 2013. He has experience in leading audit teams across diverse entities within the financial services industry. Sam has a strong technical understanding of accounting standards and audit regulations and a good knowledge of the robust regulatory environments of Jersey and Guernsey.

He has a particular interest in all things digital and how the finance industry is addressing the opportunities and challenges FinTech presents.

MARINE SERVICES

JERSEY’S GROWING MARITIME BUSINESS SECTOR

BY DAVID CAPPS

As the largest of the Channel Islands, situated just south of the busy shipping lanes leading through the Channel to northern Europe, Jersey has an ancient maritime heritage.

All Photos: Chris George

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As part of the momentum towards the growth of Jersey as an international maritime hub, I gathered together a number of Jersey maritime interests to form Jersey Maritime International (JMI) in 2011. Maritime related Jersey businesses in the fields of insurance, yacht management, legal services, trust and company administration, accounting, crew management, survey and maritime consultancy, became the founder members of JMI, whose aim is to encourage the development of Jersey’s maritime cluster in promoting the advantages of registry and the utilisation of locally based but internationally orientated service providers, thereby linking Jersey’s success as a major finance centre to its growing maritime sector.

Just prior to the formation of JMI, the States of Jersey adopted the Jersey Red Ensign which may now be flown

by Jersey registered vessels. This ‘defacing’ of the Red Ensign – as it is called – by the addition of the Royal Arms of the House of Plantagenet, has created one of the most distinctive flags within the already coveted Red Ensign Group and one which I believe will be much sought after by discerning yacht owners.

Registration in Jersey – the largest Category 2 register within the British Red Ensign Group – provides a number of benefits:• • •

During the reign of Elizabeth I, for example, the Island was a centre for privateers operating under letters of marque from the sovereign permitting them to attack enemy vessels (which at that time included Spanish galleons taking provisions and gold to the Spanish low countries) and bring them before admiralty courts for adjudication and sale. The site of one such court remains in use to this day – as a popular restaurant.

Cruising for prizes with a letter of marque was considered an honourable calling combining patriotism and profit; an ethos that is alive and well in the Island today. Jersey established close trading relationships with Portugal, from where special wool was imported for the world famous ‘Jersey’ which was knitted mainly by fishermen during their winter down time. In the 1800s Jersey developed as a busy ship building centre, especially for wooden cod fishing vessels (up to around 300 tons) which fished the cod banks of Newfoundland.

The first recorded vessel on Jersey’s register was a ship called ‘The Nelson’, which was registered in 1803. Since then the Jersey register has grown to well over 1,700 vessels, including a number over 24 metres and small commercial vessels such as workboats, windfarm support vessels and charter yachts – an interesting potential niche market for Jersey – with the Island’s position as a premier international finance centre ensuring the necessary legal, banking, company and trust administration, insurance and other practical services required by potential owners of Jersey vessels.

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The Island is part of the Sterling area Jersey is in the same time zone as Britain Close to continental Europe but outside the VAT regime

Yachts flagged in Jersey can therefore – subject to meeting certain criteria – obtain Temporary Importation relief from VAT when sailing in EU waters, as well as GST-free Temporary Importation into Jersey, Social Security insurance exemptions available to nonresident crews and no corporation or tonnage tax for company-owned vessels.

Jersey also has close links with the City of London, which remains one of the world’s leading maritime business centres. Being part of the Red Ensign Group, Jersey’s registration system is monitored by the UK Maritime and Coastguard Agency; and legal matters, ship registration and compliance are carried out within the regulatory section of the Economic Development Department of the States of Jersey which ensures high standards of administration and safety while proactively pursuing growth for the industry as a whole and demonstrating that Jersey welcomes new maritime related business.

Until recently, the Jersey Registry comprised mainly pleasure vessels up to 400 tons. However, in April 2014 commercial vessels up to 400 tons were permitted to be registered by agreement with the UK Maritime and Coastguard Agency, which – it is hoped – is a first step towards an increase in Jersey’s participation in the international maritime industry. Already this has resulted in the registration of a number of smaller commercial vessels on the Jersey register in structures which have conveniently dovetailed into Jersey’s first class reputation as an international finance centre. It has also led to contracts for new building in overseas shipyards so that the vessels can be built to Jersey standards from the start.

A strong Jersey delegation – led by Jersey’s Chief Minister Senator Ian Gorst, assistant Chief-Minister Senator Philip Ozouf and Treasury Minister Senator Alan Maclean – attended a variety of key events throughout London Shipping Week in September 2015, which brought together leading figures from the international maritime industry. These industry figures were left in no doubt as to the intention of the Jersey authorities to expand the Island’s shipping register, building on its already established expertise in large yacht management and commercial ship administration, all of which underpins Jersey’s intention to play a greater role in world maritime and related business – enhancing the already extensive benefits of Jersey as a Port of British Registration – in what the States of Jersey hopes will develop to become a suitable adjunct to the Island’s already established profile as a leading international finance centre.

David Capps David Capps is the founding Chairman of Jersey Maritime International (JMI) and has chaired the Mission to Seafarers Jersey Branch for many years.

He trained as a shipping solicitor in the City of London from 1972 to 1974 and came to Jersey to set up his own law firm, from which Capco Trust Jersey Ltd emerged, which now deals with private and corporate clients and a wide range of commercial interests. Capco is also well known as a maritime specialist, dealing predominantly in the administration of structures for commercial ship owners and financiers, from banking groups to private equity.

AVIATION SERVICES

PLANE SENSE – AIRCRAFT REGISTRATION IN JERSEY

BY BRIAN JOHNSON

A 10-year demand forecast for business jets – predicting sales of 9,100 aircraft worldwide worth $259 billion – was released recently by Embraer Executive Jets. It shows that the North American market currently leads demand with 4,850 aircraft worth $130 billion, followed by Europe and Africa with 2,100 aircraft worth $64 billion; and the Middle East and Asia-Pacific with 1,500 aircraft worth $54 billion. Large jets will lead the market both in terms of number of aircraft and valuation at 3,400 aircraft worth $175 billion.

There are currently over 12,500 business jets in the USA and 2,500 in Europe. They are all efficient business tools, confidential, secure, time-saving machines for successful international companies who can fly their executives and staff directly to the nearest regional airport to their clients, arriving well ahead of their scheduled travelling competitors.

Historically, aircraft were registered in the country where the owner/operator was based and where the

pilots were normally licensed. However, national registers were usually bureaucratic government departments, with no understanding of the urgent service needs of a business jet operation.

Over the last decade there has been a large movement to register business aircraft ‘offshore’ with the growth of dedicated business aircraft registries which are more customer focused to the needs of their business aviation clients.

Recognising this trend, Jersey decided to establish a high quality aircraft register for private and corporate aircraft, placing its emphasis on safety and professional expertise. The Jersey Aircraft Registry (JAR) became operational on the 5th November 2015 and with an assurance of exceptional client service, the JAR provides a new business opportunity for the Island’s highly respected financial, legal and fiduciary services. To emphasise its objectives, JAR’s mission statement is ‘Service

Photo: Chris George

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Photo: Chris George

Photo: Chris George

Assured’ which is emphasised on its new user-friendly website: www.jar.je I had personally helped contribute to the new trend of offshore registers by establishing the Isle of Man Aircraft Registry in 2007 and in 2011 I joined Appleby, the global law and fiduciary firm, to help grow their aviation business. Through Appleby’s Jersey office I was very pleased to be asked by Chris Kelleher, Jersey Government’s Business Development Manager, who was responsible for driving the registry project, to help him establish the new register. Our objective is to be a safe and efficient global option for the registration of high-value private and corporate aircraft and helicopters.

We looked at all the ways we could improve on the other offshore registers and a 24/7 computerised registration website service which is shortly nearing completion became an early priority; this will allow our global clients to submit applications and request approvals quickly and efficiently at any time, in any time zone.

Another unique JAR offering is a commercial aircraft engine mortgage register which allows the owners of aircraft engines leased to commercial airlines to register and thereby prove their ownership should an airline collapse and recovery of the engines be required.

JAR has contracted with AVISA Aviation Safety Systems Ltd to provide the technical support required, using their experienced Surveyors and Flight Operations Inspectors conveniently positioned geographically to provide aircraft airworthiness surveys, inspections and assistance to JAR clients, without excessive and expensive time-wasting travel. AVISA have been a UK and global market leader in aviation consultancy,

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confidentially secure in their Jersey registered aircraft.

A few days after the JAR commenced operations it completed the registration of its first aircraft, a new Cessna Citation CJ4 Jet, with the owner’s chosen registration marks ZJ-THC. Other aircraft are already in the pipeline and Jersey’s new aircraft register will be perfectly positioned to take advantage of the future growth forecast.

The first Jersey registered aircraft Cessna Citation ZJ-THC. Photograph courtesy of Graham Hocquard.

training and airworthiness management since 2004.

Bob Commander has been recruited to be the JAR Registrar and with his many years industry experience will manage and regulate the client’s registration process.

The first one or two characters of an aircraft registration mark denote its nationality of registration.

In the early days of the aviation industry, at the beginning of the last century, large countries chose the nationality marks for their registered aircraft. For example, G was chosen by Great Britain, F by France, D

by Germany (Deutschland) and I by Italy. By 2015 the choice was more limited and as Jersey could never be a Contracting State to the International Civil Aviation Organisation (ICAO), we had to choose from the marks already held by the UK, which is our ICAO Contracting State member. Our Nationality prefix soon became the appropriate ‘Zulu Juliet’ ‘ZJ’ followed by three characters of the owner’s choice. This neutral registration mark carries no international political bias and therefore allows JAR owners to travel the world

Brian Johnson Brian E. Johnson is the Technical Director at Appleby Aviation.

Brian has led the firm’s focus on the aviation sector since taking up his role in August 2011, offering clients a combination of aircraft registration services.

Before joining Appleby, Brian was the first Director of Civil Aviation for the Isle of Man, responsible for establishing its aircraft register for high-quality private and corporate aircraft. He is a Liveryman of The Honourable Company of Air Pilots.

Brian was the winner of the Special Achievement Award for establishing the Isle of Man Aircraft Registry at the Corporate Jet Investor awards in February 2012.

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Jersey | British Virgin Islands | Cayman | Hong Kong | New Zealand | Singapore | Switzerland | United Arab Emirates Hawksford Group, 15 Esplanade, St Helier, Jersey JE1 1RB Channel Islands | T +44 (0) 1534 740 000 Hawksford Trust Company Jersey Limited and Hawksford Fund Services Jersey Limited are registered at 15 Esplanade, St Helier, Jersey, JE1 1RB. They are regulated by the Jersey Financial Services Commission.

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