finance update - issue 3

Finance UpdateFor international investors and their advisors

Issue No.3

Jersey remains top offshore jurisdiction in global rankingsIn the latest competitive rankings published

by the City of London, Jersey is now the only

offshore jurisdiction in the top twenty

Plus Jersey continues to attract foreign businesses

Jersey Finance Finance Update: For international investors and their advisors Contents

Contents

Jersey remains top offshore jurisdiction in global rankings ...........................1

Research rebuts recent Christian Aid allegations ...............................................2

Jersey continues to attract foreign businesses ...................................................3

India - A wealth of opportunity ...............................................................................5

Jersey for Islamic Finance ................................................................................... 7

Food for thought in London ................................................................................ 8

Building on Chinese success so far ................................................................... 9

Managed Trust Companies in Jersey ............................................................... 11

Fund regulations could still present opportunities

for an adaptable Jersey ...................................................................................... 12

Relocating to Jersey: An attractive option for fund managers .................. 13

Why not Jersey for insurance and reinsurance? ........................................... 15

Jersey's IT industry is competing on the world stage ................................. 16

Taking financial security to the next level ..................................................... 17

If you would like to contribute to the next issue of Finance Update please email: [email protected] page 1

Jersey remains the highest rated offshore international finance centre in the latest competitive rankings published by the City of London and is now the only offshore jurisdiction in the top twenty. Jersey is placed 18th in the latest Global Financial Centres Index (GFC 7) overall, ahead of Guernsey, who have fallen out of the top twenty to 22nd, the Isle of Man (24th) and Cayman (28th).

The report, published in March 2010, is produced every six months by the Z/Yen Group on behalf of the City of London and examines the major financial centres globally in terms of competitiveness, using a set of ratings and rankings for each jurisdiction based on responses to a global survey. Although Jersey is four places down in the overall ranking, it has still recorded an improvement on its actual rating, and the change in order is in fact due to major city finance centres such as Beijing, Washington and Boston, achieving significantly

higher ratings during the last six months and moving up as a consequence. London remains number one in the rankings but it has dropped 15 ranking points and is now tied with New York, with Hong Kong now third.

Considering the impact of the financial crisis and the scrutiny that has been directed at offshore finance centres, the latest ranking is extremely encouraging for Jersey. So too are the latest quarterly statistics on Jersey’s finance industry, produced by the Jersey Financial Services Commission, which show growth in all of the key sectors. Banking deposits increased by £12.4bn (7.5%) during the first quarter of 2010 from £165.2bn to £177.6bn. The Net Asset Value of funds under administration increased by £14.4bn (8.6%) from £166.2bn to £180.5bn and the value of funds under investment management increased by £1.3bn (6.8%) from £19.7bn to £21bn. ■

Jersey Finance Finance Update: For international investors and their advisors News

“Jersey is placed 18th overall, ahead of Guernsey, who have fallen out of the top twenty to 22nd, the Isle of Man (24th) and Cayman (28th)”

By Geoff Cook Chief Executive, Jersey Finance

Jersey remains top offshore jurisdiction in global rankings

1 Scores have been rounded to the nearest whole number. Where centres have tied, this is given as an equal ranking and they are listed in order according to their underlying scores.

Global Financial Centres Index (GFC 7)1

GFC 7 Rank GFC 7 Rating GFCI 6 Rank GFCI 6 Rating Change in Rank Change in Rating

LondonNew YorkHong KongSingaporeTokyoChicagoZurichGenevaShenzhenSydneyShanghaiTorontoFrankfurtBostonBeijingSan FranciscoWashington D.C.JerseyLuxemborgParis

=1=1345678

=9=911121314

=15=1517

=18=1820

775775739733692678677671670670668667660652651651647643643642

123478695

1110131217231820141619

790774729719674661676660695651655647649634613634630640637630

010022

-11

-42

-11

-13833

-4-2-1

-151

101418171

11-25191320111838171736

12

Jersey =18 643 14 640 -4 3

Please click here to view the full GFC 7 report.

http://www.zyen.com/PDF/GFC%207.pdf

mailto:[email protected]


Jersey Finance has published a research report which concludes that, far from killing 1,000 babies a day as recent Christian Aid reports alleged, global trade actually saves the lives of up to 5,000 children every day.

The report - ‘Transfer mispricing and child mortality’ - by Richard Teather, Senior Lecturer in Taxation in the Bournemouth University Business School, reviews two reports published by Christian Aid and concludes that the data contained in the two studies is fatally flawed. His research completely undermines the validity of Christian Aid’s claims that “illegal, trade-related tax evasion alone” is responsible for the deaths of 1,000 young children every day, and instead concludes that global free trade has in fact had a hugely beneficial impact on poor countries.

Commenting on the publication of the report and on the previous findings of Christian Aid’s reports on the issue, Richard Teather said:

“Much of the debate on the subject of international trade and tax ‘mispricing’ is based upon well meaning but fundamentally

flawed studies which should not be used as the basis for the development of policy. The methodology and assumptions used to analyse the trade data are biased, and artificially inflate the scale of any mispricing.”

He continued: “Far from being a major source of child death, the sort of multi-national transactions criticised in these reports are potentially a major factor in reducing child mortality, lifting half a billion families out of poverty.”

Jersey Finance commissioned the research in order to increase understanding of the issues involved in transfer mispricing, to promote an open debate based upon a rigorous and dispassionate analysis of the facts on what is an increasingly important subject and to examine allegations that financial centres such as Jersey are somehow implicated in child mortality.

This debate has been given added significance by the interest of global policy makers in this area following the global financial crisis. The purpose of the report is not to attack Christian Aid, it simply analyses the robustness of the data used to calculate alleged losses resulting from transfer mispricing. ■

Research rebuts recent Christian Aid allegations

Jersey Finance Finance Update: For international investors and their advisors News

“Far from killing 1,000 babies a day as recent Christian Aid reports alleged, global trade actually saves the lives of up to 5,000 children every day”

By Richard Teather Senior Lecturer, Bournemouth University Business School

“Much of the debate on the subject of international

trade and tax ‘mispricing’ is based upon well meaning

but fundamentally flawed studies”



Jersey Finance Finance Update: For international investors and their advisors New Entrants

“Jersey is well known as an international finance centre

and this provides a substantial draw to new businesses”

“Newcomers don't always establish their presence in Jersey with new 'green-field' offices, but often do so by acquisition of, or merger with, existing businesses”

An increasing number of foreign businesses are choosing to re-locate or expand their businesses into Jersey, and with good reason, as Jersey offers real advantages for newcomers, as well as being a welcoming place to do business.

Jersey offers a business-friendly environment with good infrastructure, access to new commercial opportunities and a friendly and pleasant lifestyle, which is proving attractive to a range of different types of businesses. Naturally, this includes those that, like much of the existing finance industry, have an international perspective such as fund managers and trust companies, but also those with a domestic retail focus, such as Handelsbanken, which is seeking to establish a Jersey branch.

Of course newcomers don't always establish their presence in Jersey with new 'green-field' offices, but often do so by acquisition of, or merger with, existing businesses. Thus we have seen Jersey attracting international law firms to merge with local firms and State Street's recent acquisition of Mourant's administration business.

A number of organisations also set up offices initially by appointing a local manager to run and provide all the resources for their business, generally with a view to operating independently once the Jersey office has reached certain targets.

So what is it about Jersey that continues to attract foreign businesses?

International finance centre

Jersey is well known as an international finance centre and this provides a substantial draw to new businesses. It has been consistently ranked in the Top 20 Finance Centres in the City of London's Global Financial Centres Index and was the top offshore finance centre in the latest survey results (March 2010). The recent IMF Report and Jersey's place on the OECD's 'White List' also both demonstrate Jersey’s commitment to international regulatory principles and its 'good neighbour' policy in relation to foreign tax.

New financial services businesses are therefore required to meet Jersey's licensing policy in relation to the relevant business sector and should expect their businesses to be scrutinised and subject to international standards of regulation. For example, Jersey has a long-standing policy to only licence banks that are in the world's top 500 banks, by reference to tier 1 regulatory capital, and are of systemic importance in their home jurisdiction. This policy appears to have stood Jersey in good stead for decades and, no doubt, will not be lightly waived, even if it means rejecting an application for a licence.

By Simon Gould Partner, Mourant du Feu & Jeune

Jersey continues to attract foreign businesses



Jersey Finance Finance Update: For international investors and their advisors New Entrants

“Business depends on people and Jersey has a busy population

of experienced professionals, although it is also possible to

bring people over with your business from elsewhere”

are subject to income tax at 10%, although there is a deemed dividend tax applied to local resident individuals who own businesses established in Jersey. The general rate of income tax for Jersey resident individuals is 20%.

Jersey has also introduced a Goods and Services Tax in relation to domestic consumption, but financial service businesses are generally eligible for treatment as an 'international services entity' on payment of the relevant charge. There are no capital gains or inheritance taxes in Jersey.

Geographical location

Location is always an important factor to consider, even in these days of instant electronic communication. Jersey is conveniently located for doing business with the UK and Europe, with excellent air-travel links via London and increasingly, Paris and Geneva.

Lifestyle

Jersey people can talk indefinitely about the benefits of living in Jersey, but it should suffice to say that it is a lovely place to live, offering a relaxed yet sophisticated and beautiful environment. ■

Open and welcoming authorities

Recent experience in advising newcomers to Jersey has also re-emphasised the welcoming and helpful response from Jersey’s authorities. Local businessmen might be excused if they sometimes take this for granted, but for newcomers, this is very different to their normal experience elsewhere, although, of course, a warm welcome should not be confused with a lax approach to business or regulation.

People, premises, infrastructure

Business depends on people and Jersey has a busy population of experienced professionals, although it is also possible to bring people over with your business from elsewhere, subject to obtaining appropriate housing licences. Likewise, office premises and infrastructure to support the finance industry are all readily available.

Tax

The corporate income tax rates in Jersey have changed in recent years, but overall tax in relation to local businesses remains benign and relatively straightforward. The general corporate tax rate is 0%, whilst financial services businesses



Jersey Finance Finance Update: For international investors and their advisors India

“Over the last five years the CAGR of assets under

management in India has increased by 38%”

“In recent years more than £5bn of inbound infrastructure fund investment into India has been undertaken using Jersey feeder funds”

With a total country population of 1.15bn, the median age of which is 25 years old, India’s working age population, numbering some 760m people (US Census Bureau), is the youngest amongst the large economies of the world. Combined with recent economic developments, such as the move of India’s economy from being agro-based to service sector dominated, rising infrastructural and industrial spending, increasing international trade and investment, as well as a continuing pursuit of better governance and the liberalisation of financial markets, there is a huge potential for sustainable growth, if this remarkable demographic can be converted into a virtuous circle of productive jobs leading to higher savings and investment.

Currently India has the fifth largest economy in the world in terms of GDP and is the 13th fastest growing nation in terms of GDP growth rate. It is therefore not hard to see why India is considered to be one of the fastest emerging global economies. Indeed, economists are forecasting that the combination of India’s favourable demographics with these other factors give it the potential to become the world’s second largest economy by 2050.

Jersey, in the top tier of international regulatory compliance and co-operation, is well placed to provide the vehicles to conduit international capital into India for the infrastructure

projects it needs within the country, as well as to provide the vehicles to enable Indian businesses to expand internationally and access capital on foreign exchanges, and to service the needs of the growing HNWI population.

Jersey’s flexible fund regime provides for the use of feeder funds into India. These are recognised by, and marketable to, EU and Middle East investors in a way double tax jurisdictions such as Mauritius are not. In recent years more than £5bn of inbound infrastructure fund investment into India has been undertaken using such Jersey feeder funds. Although there is no DTA between Jersey and India, income earned by Jersey feeder funds is not subject to Jersey income tax (and there is no capital gains tax or stamp duty in Jersey), nor is there withholding tax in Jersey on the repatriation of funds to (non-Jersey) investors. Typically the feeder fund structure will include a Mauritian holding company and dividend income received by it from Indian holding companies is tax exempt, with no Mauritian withholding tax on dividend payments to the Jersey feeder fund. Nor is there capital gains tax in Mauritius on the sale of shares of Indian holding companies.

Jersey has an excellent reputation as a jurisdiction for businesses wishing to raise capital on UK, European and US Stock Exchanges and has a dominant position amongst offshore centres in the very high value listings on the London Exchange.

By Srinivasan Krishnamurthy Assurance Manager, Ernst & Young

India - A wealth of opportunity



“The benefits of using Jersey vehicles for Indian businesses wishing

to expand internationally, by accessing capital on foreign exchanges,

flow from the familiarity and flexibility of Jersey’s company law,

the reassurance its international regulatory reputation provides

and its tax neutrality”

Jersey Finance Finance Update: For international investors and their advisors India

which to base their wealth preservation and international investment diversification strategies (in recent times taking advantage of weakened asset values in the West) using India’s Liberalised Remittance Regime. The amount permitted to be remitted out of India under the scheme is currently US$200,000 per person. A wealthy family can consolidate their annual remittances into an overseas investment holding vehicle and leverage such structures using the target investible assets (such as UK immovable property, shares and debt instruments) as security. Appropriate structuring using Jersey vehicles by an Indian resident can also provide effective UK tax planning for UK situs assets.

As India continues its rapid economic development into a global powerhouse, Jersey has the expertise and reputation as an international finance centre and has the vehicles and services needed to facilitate the effective flows of capital needed for global expansion. It is a stable and secure location for the wealth generated by its population seeking international diversification. A wealth of opportunity indeed. ■

The benefits of using Jersey vehicles for Indian businesses wishing to expand internationally, by accessing capital on foreign exchanges, flow from the familiarity and flexibility of Jersey’s company law (which is based on English company law, as is India’s), the reassurance its international regulatory reputation provides and its tax neutrality (including no VAT on legal fees and other services or stamp duty on share transactions). To demonstrate how innovative Jersey’s finance industry is, an amendment will soon be introduced to Jersey’s Companies Law which will enable the merger of a Jersey company into an Indian company. This has tax minimisation advantages for a corporate restructuring.

The economic growth forecasts for India will boost its HNWI population and associated wealth. Over the last five years the CAGR of assets under management in India has increased by 38%. The HNWI population in India is expected to grow to more than 250,000 in 2018, triple its size in 2008. A number of Jersey’s wealth managers have been advising resident Indians wanting a well regulated, stable and secure jurisdiction in



People and organisations requiring Shari'a compliant investments and returns have become a significant source of capital in recent years. Furthermore, the requirement for organisations to raise capital in a Shari'a compliant manner has increased greatly with the development of the Middle Eastern market.

As the market has grown, the Islamic Finance sector has developed sophisticated structures and products, delivering Shari'a compliant, competitive returns for investors. The appeal of these structures and products has proved far greater than just for those required to make Shari'a compliant investments.

Jersey has proven itself as a prime jurisdiction for establishing Shari'a compliant financing structures. With its political stability, its strong relationship with the United Kingdom, its respected regulatory regime and its flexible statutory regime, Jersey has gained the approval of both the IMF and the OECD and won the endorsement of arrangers, investors and originators in the Islamic sector. It benefits from high quality legal advisers and corporate administrators who are familiar with the Islamic market. Furthermore, the Jersey Financial Services Commission, which regulates Jersey’s finance industry, is familiar with all varieties of Islamic financing structures. Jersey is also conveniently located in the GMT time zone, benefiting from excellent direct air links with London and other European cities.

Islamic Finance transactions

Jersey based special purpose vehicles issuing Sukuk, ranging from short-term to long-term certificates, or redeemable share capital, have been used in connection with a wide variety of Shari'a compliant capital markets transactions. Such structures

include those established for making investments off-balance sheet, securitising assets and re-packaging financial instruments.

A variety of other legal entities are used in Islamic Finance transactions in Jersey particularly in connection with Shari'a compliant fund structures. These vehicles include limited partnerships issuing partnership interests, trusts issuing units, trust interests or certificates and protected cell companies, which have the added benefit of allowing different cells to be created to offer exposure to distinct opportunities.

Recent transactions have included:

Milestone Capital PCC, a Jersey protected cell company, establishing a Sukuk certificate issuance programme of up to US$1bn, the proceeds of which were to be invested in equities, funds, murabaha, mudaraba, musharaka or ijara contracts.

Morgan Stanley Islamic Finance Limited issuing up to US$10bn of trust certificates in series and listed on the Channel Islands Stock Exchange, the proceeds of which have been used to purchase Shari'a compliant wakala and salam assets (including equities) using a wakil.

Looking ahead

Jersey will continue to offer a sophisticated, experienced and flexible environment for arrangers, investors and originators of Sharia’a compliant financing structures – and it intends to continue expanding its share of the Islamic Finance market. ■

Jersey Finance Finance Update: For international investors and their advisors Islamic Finance

“Jersey will continue to offer a sophisticated, experienced and flexible environment for arrangers, investors and originators of Sharia’s compliant financing structures”

By Simon Marks Senior Associate, Carey Olsen

“Jersey has proven itself as a prime jurisdiction for

establishing Shari'a compliant financing structures”

Jersey forIslamic Finance



To complement the well attended annual conferences on Funds and Trusts hosted by Jersey Finance in London each year, an ongoing programme of dinners designed to bring Jersey professionals and their London counterparts together on an informal basis is underway. These Round Table Dinners, each with a particular theme, are hosted by me, Clive Boothman, Jersey Finance’s London Representative.

The first two of these events took place late last year, on the themes of Hedge Funds and Private Equity Funds. Held in Tower 42 in the City (where the Jersey Finance London office is based) and at The Royal Aeronautical Society in the West End, they were attended by practising fund managers, lawyers, accountants, administrators and advisors from Jersey, London and elsewhere in the UK.

The dinners provided an opportunity to discuss topics such as the Alternative Investment Fund Managers Directive (AIFM) and, more generally, offshore centres as a base for funds—and ‘Why Jersey?’ as opposed to others. There was a healthy debate on each occasion and an opportunity to ask (and answer) thought provoking questions, as well as to influence the future direction of Jersey’s offering.

Feedback was encouraging, although Jersey, like anywhere else, needs to continuously adapt and improve. The attendees

enjoyed these informal meetings, with good food, wine and company and the chance to gain an insight from Jersey practitioners into what Jersey has to offer from a technical perspective – fund structures, tax, regulation etc – to lifestyle, including housing, schools and transport links. With 50% tax rates looming in the UK (or more, if you include NI), it is no great surprise that the 20% rate of income tax and absence of wealth, capital gains or inheritance tax in Jersey came in for some scrutiny. Attendees were interested to hear that Jersey has both the capacity and capability to welcome new business and businesses, especially given that a number of jurisdictions currently seem to be putting up metaphorical ‘closed for business’ signs. News of the favourable independent reviews of Jersey (IMF Report, Foot Review etc), which confirm Jersey as a respected ‘top tier’ jurisdiction, was also well received.

A new programme of dinners for 2010 has now commenced, with a second one on Hedge Funds, given the continued debate over AIFM and changes to UK taxes. Further dinners during the year are likely to include the themes of Property Funds, Private Equity Funds and Private Wealth Management.

If you are interested in attending one of these Round Table Dinners, or have a theme to suggest, please contact [email protected]. ■

Food for thought in London

Jersey Finance Finance Update: For international investors and their advisors United Kingdom

“An ongoing programme of dinners designed to bring Jersey professionals and their London counterparts together on an informal basis is underway”

By Clive Boothman London Representative, Jersey Finance

E-mail: [email protected]: +44 (0)7884 313376Office: +44 (0)207 877 2317

Clive BoothmanLondon Representative

Jersey Finance LimitedSuite 604, 6th FloorTower 4225 Old Broad StreetLondon EC2N 1HN





Building on Chinese success so far

Jersey Finance Finance Update: For international investors and their advisors Greater China

Jersey’s recent recognition as the highest rated offshore international finance centre in the latest Global Financial Centres Index is vitally important in the drive by Jersey’s finance industry to diversify its client base around the world.

This is particularly the case in the Asian region as China develops and is likely to become the world’s biggest economy in only a matter of years.

Equally important is recognition by foreign financial regulators and governments. The recent approval of Jersey as an ‘approved jurisdiction’ for the purposes of listing on the Hong Kong Stock Exchange, and the listing there of the first Jersey incorporated company, United Company RUSAL Plc¹, certainly created considerable awareness, publicity and many column inches in the Chinese press!

The time and effort invested by Jersey’s finance industry in building relationships between Jersey, Hong Kong and China has certainly been beneficial so far, but it is not the end of the work required. Jersey has more to do in developing relationships with the Chinese.

Opportunities

As far as Jersey companies are concerned, the robust but reasonably flexible Jersey regulatory regime, together with laws and corporate governance principles internationally acceptable to business, are very attractive to issuers and investors alike when raising money. For similar reasons, there should be no reason why Jersey companies and other entities should not be attractive in the investment funds sector in the region. Perhaps most importantly of all, the stature and reputation of Jersey’s trusts laws, coupled with the vast experience of the professionals working in the area and the widely recognised and effective judicial system to uphold and protect rights, makes private client work the most attractive target. Indeed, China is a country with one of the fastest growing number of millionaires in the world.

But that’s only half of the picture - there are many Jersey businesses which have good relationships with Chinese clients and taking into account the size of Chinese economy, that business represents a very small proportion of the total that is potentially available.

“The signing of a double tax treaty with mainland China is vital and this is now in progress”

By Marc Yates Partner, Ogier

“Physical presence is very important as those who deal with Chinese

and Asian clients will know, the personal trust and relationship which

needs to be built is one which is developed over a period of time”

1Marc Yates acted for UC Rusal in its dual Hong Kong and Paris listings in January 2010



“The stature and reputation of Jersey’s trusts laws, coupled

with the vast experience of the professionals working in the

area and the widely recognised and effective judicial system

to uphold and protect rights, makes private client work the

most attractive target”

Jersey Finance Finance Update: For international investors and their advisors Greater China

Jersey as a jurisdiction will increase its exposure there and more business will be generated back in Jersey, where the infrastructure of the jurisdiction in the form of regulation, registries and expertise exist.

The future

There are two important facts to note. The first is that the signing of a double tax treaty with mainland China is vital and this is now in progress. The second is that some of the Chinese mainland stock exchanges have grown even quicker and bigger than Hong Kong and, when they open up to non-Chinese companies being able to list there, that will create all sorts of new opportunities. Whilst business growth can only be achieved by the private sector undertaking that business, the negotiation of information exchange agreements and double tax treaties at the government and regulator level will, in the long term, produce more benefits and, generally, will be essential in ensuring that as many opportunities as possible are open to Jersey. ■

Jersey has some huge benefits to offer; it has an impressive track record and the ability to provide some real advantages to clients in comparison to other international financial centres. However, there is a growing need to have professionals, particularly law firms, on the ground, able to serve their clients’ needs personally and in the clients’ time zone. That physical presence is very important as those who deal with Chinese and Asian clients will know, the personal trust and relationship which needs to be built is one which is developed over a period of time and many contacts.

Jersey lawyers in Hong Kong

Up until now, there have not been any Jersey lawyers in Asia, but this is set to change with the transfer of Jersey based lawyers to Ogier’s Hong Kong office this year. There are other global offshore law firms with both Jersey and Hong Kong offices, but no Jersey presence as yet in the latter. Those firms, as well as other Jersey financial services businesses, are now looking at building more physical presence in Asia to take advantage of the opportunities there. In doing so,



Jersey Finance Finance Update: For international investors and their advisors Wealth Management

The Jersey Financial Services Commission website is a helpful guide for businesses considering setting up in this way and includes details of minimum capital requirement.

The Managed Trust Company option offers clients a seamless service, enabling customer relationships and branding to be maintained. Managed Trust Companies are, in essence, trust companies within trust companies – they have their own licences to trade, but are administered within existing trust companies. There are currently over 30 in operation in Jersey.

Managed Trust Companies are particularly attractive to new businesses putting a toe in the water. The existing trust company service provider effectively ‘incubates’ the new business, babysitting it until it reaches sufficient maturity to stand on its own. In those early days, the expertise of the local, well-established business is on hand to ensure that operationally the new company has all it needs to comply with the local regulations, and to cope with the challenges of growth.

The existing business i.e. the Manager of the Managed Trust Company, allocates staff with the correct level of qualifications and experience to provide directors, client administrators, accountants and book-keepers, usually charging the Managed Company on a time spent basis. Particular expertise is needed to cover regulatory issues, which are complex and detailed, with significant reporting requirements, including quarterly calculations on the capital adequacy of the business.

The Managed Company must resource its own business development directly, as its products may compete with those of the Manager. However, Managed Companies are sometimes active in geographical locations not normally covered by the Manager. This means that the likelihood of competition is reduced and the possibility of synergies between the businesses are opened up.

In addition to efficiently covering staffing issues, Managed Companies pay only for work stations used within the Manager’s offices, rather than renting and equipping their own. The only direct costs are for licensing, professional fees, audits and insurance. Comprehensive professional indemnity insurance is required, which must comply with the Financial Services (Jersey) Law. It may be possible for the owner of the business to extend its existing PI insurance to cover the Jersey entity, but if this is a completely new venture, separate insurance will have to be taken out.

All of these issues are usually covered within a comprehensive Management Agreement, which clearly sets out the duties and responsibilities of both the Manager and the Managed Trust Company. There is likely to be a long notice period, as the provision of the services will require the Manager to invest time and resources. If the relationship works well, the Managed Company may remain with its Manager in the long term, enjoying the benefits of the full variety of skills and expertise required for their clients, without having to directly employ anyone. By doing so, they can take advantage of the many opportunities Jersey offers as an international finance centre, whilst keeping costs under control and thereby mitigating some of the risks associated with start up ventures. ■

By Julie Coward Chief Executive Officer, Basel Trust

Managed Trust Companies in Jersey

“Managed Trust Companies are, in essence, trust companies within trust companies – they have their own licences to trade, but are administered within existing trust companies”

www.jerseyfsc.org



Jersey Finance Finance Update: For international investors and their advisors Funds

Fund regulations could still present opportunities for an adaptable Jersey

There has been lengthy commentary on the potential negative impact of the EU’s Alternative Investment Fund Manager Directive, but jurisdictions such as Jersey are also conscious, that where change takes place, nimble world class fund centres such as Jersey will always have a role to play.

In assessing and understanding the impact of the Directive, we need to take this balanced approach in terms of both the jurisdiction and our clients. Of course, Jersey recognises that changes to the regulation of alternative asset class funds are inevitable and indeed in some areas necessary, but it is also appropriate that Jersey engages with Europe on the development of the Directive to ensure that all parties are fully appreciative of the role centres such as Jersey play in providing:

■ A tax neutral environment for the pooling of investment capital from both in and out of the EU, including substantial amounts of US capital;

■ A highly regulated system, regulating both the funds and the functionaries to the fund.

Very often it is overlooked that Jersey acts as a substantial conduit for inbound capital to Europe and further afield, and helps investment in many countries and areas of the economy which would otherwise be directed elsewhere, outside the EU. Jersey believes that the final outcome of the directive will enable high quality third country centres such as Jersey

to continue to participate in the European market and that where equivalence exists, we will be able to demonstrate to appropriate bodies our robust and appropriate regulation, supervision and enforcement.

It is interesting to note though that away from the European scene, the priorities of investors in other markets, such as in the Far East and the Gulf, should also be taken into account. Non-EU investors will not take kindly to the increasing costs of doing business within the EU, an inevitable consequence of the introduction of yet more regulations within Europe. Non-EU investors and their advisors will assess the whole market and they will no doubt wish to explore the jurisdictions that remain independent of overall EU regulation, but have high standards of regulation and governance.

Jersey, highly regarded in regulatory terms and endorsed by third parties such as the IMF, and with a stable, tax neutral economic environment, continues to have increasing appeal in the Far East and elsewhere in emerging markets. Fund professionals have also demonstrated an ability to innovate and re-invent their service offering to meet the needs of the global marketplace. So, whatever the ultimate outcome of the Directive - and it is by no means clear yet what will finally be agreed upon - Jersey as a jurisdiction will remain broadly independent, with its hard earned reputation for probity, and will be able to adapt to the market conditions, helping to address the needs of EU and non-EU investors. ■

“Jersey recognises that changes to the regulation of alternative asset class funds are inevitable and indeed in some areas necessary.”

By Ian Moore Chief Executive Officer, Moore Management

“Very often it is overlooked that Jersey acts as a substantial

conduit for inbound capital to Europe and further afield.”




“Jersey is an extremely attractive proposition from a business

and a lifestyle perspective. It is increasingly featuring in the

considerations of fund managers looking to relocate”

“Jersey is a place where you can achieve a work-life balance whilst benefitting from a low tax regime and retain many of the cultural aspects of being in the UK”

Jersey is an extremely attractive proposition from a business and a lifestyle perspective for senior finance professionals and their families. It is increasingly featuring in the considerations of fund managers looking to relocate.

There are two important questions to answer when considering a place to relocate to:

■ Can you ‘do business’ effectively there?

■ Will the family settle and be happy there?

Jersey ticks both boxes.

Culture and business environment

Jersey is English speaking and benefits from a British culture that is familiar to many fund managers. It has a mature and fully funded public infrastructure. With a well regulated and mature financial services industry, Jersey has an excellent reputation internationally. Most recent recognition has come from the IMF, OECD and the UK Foot Review.

Tax

Incoming high net worth individuals are taxed at special rates and tax liabilities can be effectively capped at £100k. The general rate of income tax for other individuals is 20%. There is no capital gains tax, wealth tax, gift tax or inheritance

tax. Corporate tax rates are 0% or 10% for financial services businesses, with fund management generally taxed at the 0% rate.

Travel

There are very regular flights to nearby London and a number of other UK regional airports.

Jersey is a 35 minute flight from Gatwick making it possible to be in central London by 9:15am and be home again by 8:30pm. Other daily destinations include Geneva, Paris and Zurich. Private charter flights are readily available and there are excellent facilities for servicing private jets.

Property

Jersey enjoys a relatively stable property market, with an extensive housing stock.

"There is a wonderful range of property in Jersey to choose from, from large granite family homes to bespoke apartments and classic Georgian town houses. The dream of buying a waterfront property is a reality here, whether next to the marina or adjoining beautiful beaches and scenic bays." Michael Dean, Savills

By Garry Bell Tax Director, PricewaterhouseCoopers

Relocating to Jersey An attractive option for fund managers



The ultimate work life balance

Jersey is a place where you can achieve a work-life balance whilst benefitting from a low tax regime and retain many of the cultural aspects of being in the UK.

"There is little contest between congested motorways and weekly commuting for some hedge fund managers, when they can combine family life with business interests in a place like Jersey. People in Jersey take pride in doing things well and this extends to welcoming newcomers of all ages into this naturally friendly, vibrant and multicultural community" Michael Dean, Savills

"Every time a client relocates it is great to be reminded why Jersey is so unique and special."Katie Griffiths, Ace Relocation

When city dwellers end their working day and face choosing the best route for their evening commute, Jersey residents need only choose how to spend their evening leisure and family time.

With beaches just minutes away, outdoor markets and music, art and food festivals, Jersey offers what so many of us seek around the world without success – that elusive work life balance. ■


“When city dwellers end their working day and face choosing the

best route for their evening commute, Jersey residents need only

choose how to spend their evening leisure and family time”

Education

Jersey schools have excellent academic results, they follow the UK national curriculum and there are places available at all ages.

"When families are relocating, education is a top priority and clients are always impressed by our well equipped schools and high academic standards and results. A large number of families obviously relocate to Jersey for the lifestyle, they want to avoid long commutes and spend more time with the family. They want their children to be safe and in an environment where they can thrive – and Jersey certainly delivers." Katie Griffiths, Ace Relocation

Leisure

For passions from food and music to watersports, there are hundreds of stunning locations for you to do your thing - jump on your yacht after work and dine at sea in the rays of the evening sun!

Jersey Marinas, highly commended by the Yacht Harbour Association, offers permanent marina and moorings facilities. Keen golfers can take their pick from a selection of golf courses across Jersey, many with spectacular views. There is also a rich array of excellent restaurants and hotels.



Why not Jersey for insurance and reinsurance?

Jersey Finance Finance Update: For international investors and their advisors Insurance

Jersey offers many if not all of the same benefits, advantages and services as other offshore insurance jurisdictions and may well have a more substantial infrastructure and flexible approach to immigration.

Jersey is business-friendly, with a world-class reputation for financial services. It was recently rated the top offshore financial services centre and got its best ever report from the IMF. The development of the insurance industry is an important area for Jersey in 2010. There is a well-resourced professional services community, including brokers and insurance managers, lawyers and accountants/auditors, with acknowledged expertise. The up-to-date laws in place present no bar to entry and cater for traditional and alternative structures alike.

The Jersey Financial Services Commission is a well-respected member of the IAIS and the effectiveness of its supervision is widely recognised and extends to insurance. As the Commission confirms, applicants will find the Commission open and flexible, whilst each application is judged on its own merits. Lloyd’s enjoys an existing specific exemption as regards Jersey under Article 5 (5) (a) (i) of the Insurance Business (Jersey) Law 1996.

Jersey is on the OECD ‘White List’ and its 0/10 corporate tax regime compares very favourably. Insurance and reinsurance would currently attract a zero rate. Personal tax is at a maximum rate of 20% currently, a clear attraction for those coming to live and work in Jersey.

The importance of all this in terms of legitimate corporate tax planning should not be underestimated. An insurance group established in an EU member state could readily establish and license a Jersey reinsurance subsidiary, initially dedicated solely to internal group reinsurance. Discussions would be necessary with the regulator and revenue authorities in the host state regarding the level of reinsurance and any collateralisation, to provide due comfort.

Thereafter, as in the captive arena, the subsidiary could branch out into third party reinsurance. Jersey does not have a reinsurance passport into EU states. Nevertheless, this should not be seen as a disadvantage since reinsurance may be purchased from non-EU or non-EEA reinsurers. In addition, the Jersey subsidiary could if desired establish a licensed presence in a selected EU state, in order to access EU passporting rights. However, care over tax matters would be required. ■

“The up-to-date laws in place present no bar to entry and cater for traditional and alternative structures alike”

By Andrew Deighton English Solicitor, Viberts Jersey Lawyers

“The Jersey Financial Services Commission is a well-respected

member of the IAIS and the effectiveness of its supervision is

widely recognised and extends to insurance”



“There has certainly been more demand in

recent years for IT services delivered from Jersey”

“It is Jersey’s neutral legislation and the independence of the court that helps reinforce the sovereignty of data and adds a further layer of protection that has proved attractive”

Jersey is proving to be an attractive location for international businesses wishing to host or store commercially sensitive corporate data, thanks to factors including appropriate legislation, its reputation as a banking centre and a well developed telecoms and IT services sector.

Jersey’s reputation as a banking centre is undisputed. Less well known however is the fact that its credentials for banking data are growing. On the face of it, money and data might seem to be worlds apart, but they share many common features, both in their intrinsic nature and the way that they are managed. The existing banking infrastructure and associated expertise therefore means that Jersey is in an excellent position to consolidate as a global data banking centre.

The commoditisation of IT services, particularly in relation to storage and communications, has set data free. Corporate information, no longer shackled to servers within business premises, is increasingly being stored and/or processed remotely in third party datacentres. As well as significantly reducing complexity and cost, another major benefit of this trend has been to increase the availability of data, allowing businesses to expand into multiple countries without having to invest in an internal IT infrastructure to support a multinational corporation. This new flexibility comes, as

might be expected, with some additional risks in security, governance and compliance.

Information, like capital, is a precious resource. Ready availability of information is vital and a modern business starved of it is as vulnerable as one starved of cash. Security concerns around the inadvertent disclosure of sensitive information are addressed by encryption techniques and physical security controls at the datacentre. It is Jersey’s neutral legislation and the independence of the court that helps reinforce the sovereignty of data and adds a further layer of protection that has proved attractive. This can be particularly important where a service is provided to an offshore structure that requires privacy at all levels including IT, as data domiciled in the ‘wrong’ jurisdiction can, in some cases, be accessed with relative ease.

It remains to be seen if banking data in Jersey will become as popular as banking money. There has certainly been more demand in recent years for IT services delivered from Jersey to be provided to customers in other major international finance centres such as Hong Kong. As a location, it is clear that Jersey is becoming increasingly attractive to multinational businesses seeking tailored solutions for the storing and the hosting of data. ■

Jersey’s IT industry is competing on the world stage

Jersey Finance Finance Update: For international investors and their advisors Technology

By Chris Evans Managing Director, Foreshore Limited



Jersey Finance Finance Update: For international investors and their advisors Legal

By Matthew Swan Partner, Ogier

The recent turbulent times have led to a greater focus on the validity of security and the process of enforcement. Financial institutions have looked to protect their position against competing creditors and insolvency officials, and to recover as much value as possible from distressed debtors.

Currently, under Jersey law, security is taken over intangible movables (such as bank accounts, contractual rights and shares and other investments) pursuant to the Security Interests (Jersey) Law 1983 (the “1983 Law”). The 1983 Law has served well over the years, but there are a number of shortcomings that have been compensated for through drafting and good practice. The increased sophistication of Jersey’s financial services industry has led to continued pressure to reform its provisions.

Over the past 18 months, there has been a period of active consultation between government, the banking industry and law firms. As a result, the Security Interests (Jersey) Law 201- (the “new Law”) has been drafted so that, once in force, it will establish a new, more flexible regime for creating security

over intangible movables under Jersey law. The main changes proposed in the Law are outlined below.

Given the large number of Jersey security agreements in place and the fact that there is currently no register of securities, the transitional provisions are key. It is therefore good news that the new Law provides that existing security under the 1983 Law will stay in place as continuing security, without the need for further action to be taken. If there is then an amendment to, amongst other things, the secured obligations or the collateral, the security will be taken to be a security under the new Law and will have to comply with its provisions. Parties may also opt for the security to be subject to the new Law, so that a secured party can take advantage of its greater flexibility.

A great deal of hard work, and thought, has gone into the drafting of the new Law and it is expected that its clarity and flexibility will enhance Jersey’s position in the top tier of offshore finance centres and assist in attracting business to its shores. ■

“The recent turbulent times have led to a greater focus on the validity of security and the process of enforcement”

Taking financial security to the next level

The main changes proposed in the new Law are:-

■ Greater flexibility in how security is created. This can be by either:-

(a) Possession and/or control, where the collateral consists of bank accounts, investment securities or securities accounts held at intermediaries.

(b) The security agreement containing a description of the collateral sufficient to allow it to be identified, together with registration at a centralised register of securities.

■ The creation of security over present and future collateral.

■ The automatic creation of security in favour of an intermediary (such as a custodian) over investment securities

acquired by such intermediary on behalf of the client, where the client has not yet provided the purchase price.

■ Greater flexibility on enforcement, through either appropriation or sale.

■ The 14 day statutory grace period on enforcement, currently applicable where an event of default is capable of remedy, is removed.

■ The concept of registration. Jersey is relatively unusual in not having a register of securities. Under the new Law, registration will be relevant where security is not taken by way of possession and/or control. There will be a fee payable for the registration, as yet undetermined but believed not to be onerous.


Head Office

Jersey Finance Limited4th Floor, Sir Walter Raleigh House48-50 EsplanadeSt HelierJersey JE2 3QBChannel Islands

T: +44 (0)1534 836000F: +44 (0)1534 836001E: [email protected]

London Office

Clive BoothmanJersey Finance LimitedSuite 604, Tower 4225 Old Broad StreetLondon EC2N 1HNUnited Kingdom

T: +44 (0)20 7877 2317F: +44 (0)20 7877 2316E: [email protected]

Hong Kong Office

Zhaoan LiJersey Finance LimitedSuite 46, 21st FloorICBC Tower, Citibank Plaza3 Garden Road, Central Hong Kong

T: +852 22735519 F: +852 22735999E: [email protected]




finance update - issue 3

Documents

adaptable jersey

offshore finance centres

offshore jurisdiction

major city finance centres

islamic finance

city of london

latest competitive rankings

issue of finance update