Jersey Evolves its Offering to Keep it in the Top League as a Wealth Management Centre

By Geoff Cook, chief executive, Jersey Finance Limited

Through extensive consultation with the lawmakers and regulators, Jersey has been able to announce a number of enhancements to its legislative and regulatory regime which have been welcomed by the global investment marketplace.

More attractive

Most recent has been the introduction of a series of legal and regulatory changes to make the Island a more attractive jurisdiction for incorporating companies.

These changes bring further flexibility and a far wider range of options for legal and finance professionals setting up companies in the Island. The measures will be particularly advantageous for those establishing special purpose companies, group holding companies or joint venture vehicles.  Some of the changes took effect in January and included the introduction of treasury shares, the abolition of the financial assistance provision, increased flexibility to the format of cell companies incorporated in Jersey and a change in the law so that regulated financial services businesses can now act as a corporate director of another Jersey company.

During the summer, further law changes will come into force which will simplify procedures when certain types of companies wish to reduce capital or make distributions to shareholders.  There will also be a relaxation of the rules on share buy backs.

In the trust sector, professionals have already benefited from the legislative changes that were implemented in 2006 following a period of consultation with the regulator and with finance and legal professionals in London and elsewhere. At the time it was recognised that there was scope for further enhancements and so consultation continues and a new raft of amendments are anticipated before the end of the year.

A law that will permit the formation of Foundations in Jersey is in the pipeline. Incorporated Limited Partnerships and changes to the Limited Partnership law are also on the legislative agenda for 2008.

Confidentiality

One of the issues for the offshore jurisdictions is finding the balance between international co-operation in the fight against money laundering and fiscal crime and the importance of the privacy of an individual’s financial affairs.

Jersey, whose reputation for probity has been partly based on its ability to provide the appropriate level of regulation and supervision of its financial services industry, has been willing to participate in the process to achieve that delicate balance and it believes that through Tax Information Exchange Agreements (TIEAs), it is possible to reaffirm a commitment to confidentiality whilst meeting international obligations to co-operate when investigations are underway. Whilst Jersey has never had banking secrecy laws, the Island adheres to very strong principles of client confidentiality and the privacy of each person’s financial affairs and this remains paramount in our thinking. The TIEA agreement is used only in very specific circumstances when an investigation is underway and there will be no opportunity for ‘fishing expeditions’ by tax authorities.

In addition to our long held commitment to confidentiality, Jersey has its own data protection rules which are enshrined in law, so the authorities in the Island are obliged to assess any request thoroughly, in some cases seeking the authority of the courts, before agreeing to supply information. Normal protections also continue to apply with rights of appeal to local courts to prevent such exchange where appropriate.

To show its willingness to commit to the process, Jersey has negotiated a very small number of TIEAs, with the United States, Netherlands and shortly with Germany. The Industry is cautious about finalising further agreements until evidence of similar commitments are demonstrated by some of the larger financial centres.

A series of tax agreements between nations will only work successfully if the concept is embraced wholeheartedly by all the competitor jurisdictions, not only those located offshore but the major financial centres such as Switzerland, Hong Kong and Singapore.  The Jersey authorities are trying to put pressure on other jurisdictions to meet their obligations through the Island’s membership of the OECD ‘harmful tax competition’ initiative.  Without such a commitment the process is likely to stall long term.

Emerging markets

One area of business growth has been from the emerging markets. Increasing numbers of legal and finance professionals from these regions are turning to Jersey in support of their investment planning and asset structuring. In China, for example, there are many instances where institutional investors have been able to tap into the investment opportunities available in the European markets through the formation of Jersey companies which are then listed on European exchanges.

Jersey is already winning listing business from Asian clients seeking to list on Exchanges in Europe for investment purposes, but the Island would be an even more attractive option if investors were able to dual list on the Asian Exchange also and discussions on this measure will be on the agenda next time the Island visits the region.

India

Another market where wealth management services are in demand is the trillion dollar economy of India.  It is clear from a recent visit to India by a delegation from Jersey that the Island is an attractive location for Indian holding companies looking to diversify business interests into the UK and Europe. Since Indian nationals are able now to invest up to $US 200,000 per annum outside of India, this has opened up the opportunity for a range of private wealth management work.

Thriving business model

Jersey has been at the forefront of the Industry for more than 40 years and it has learnt the importance of adapting its product during that time. When you combine that appreciation, with the experienced providers that we have based in the Island – Jersey has the largest proportion of STEP qualified professionals anywhere outside of the City of London -  the convenience of our time zone for doing business with the major centres of London, New York and Hong Kong, and the strong relationships that have built up with the investment professionals in London in particular, it is easy to understand why the Island still has a compelling product offering for the wealth management industry.

This recognition continues to come from other respected sources also. This year Jersey has been listed as one of the top three global finance centres by leading advisers and wealth managers in research conducted by a London based wealth management publishing group, whilst the jurisdiction was also highly graded in the City of London’s GCFI 3 publication which assesses the capabilities and competitiveness of all the finance centres. Jersey was positioned ahead of all its close competitors in the offshore environment and it’s a ranking the Island is keen to preserve.