In order to clarify the requirements under the AIFMD, the EU also implemented supplemental regulations to the AIFMD (the "Level 2 Regulation"). The Level 2 Regulation came into force on 22 July 2013.
The methods for marketing funds to professional investors in the EU (including those additional countries within the EEA)1 under the AIFMD are:
- Marketing passport regime: Marketing passports are used by EU AIFMs to market EU AIFs across the EU through a regulator-to-regulator prior notification procedure. Currently only EU Member States benefit from the marketing passport. At this stage it seems unlikely that the marketing passport will ever be extended to include third countries, such as Guernsey (and, following Brexit, the United Kingdom).
- National Private Placement Regimes ("NPPR"): NPPR is a mechanism which allows non-EU AIFMs to market AIFs into EU Member States.
Marketing under NPPR
AIFMD permits the marketing of interests in non-EU AIFs into EU Member States on the basis of NPPRs. Guernsey satisfies the requirements for the purposes of marketing under the NPPRs broadly through:
- providing for an AIFMD equivalent regime2, requiring compliance by all Guernsey AIFMs (ie Guernsey domiciled managers who have opted-in to comply with such regime to become non-EU AIFMs) with all relevant requirements of AIFMD and the Level 2 Regulation.
- co-operation arrangements between the Guernsey Financial Services Commission (the "GFSC") and the regulators of all EU Member State securities regulators as well as authorities from Croatia, Iceland, Liechtenstein and Norway, coordinated by the European Securities and Markets Authority ("ESMA"), which arrangements enable supervisory co-operation between the GFSC and the relevant regulators, including via the sharing of information with respect to risks and compliance with AIFMD requirements and onsite visits; and
- complying with international anti-money laundering and counter-terrorism financing standards.
While NPPR is simple in the UK and many EU Member States, EU Member States have the power to introduce rules stricter than those reflected in AIFMD and the Level 2 Regulation. This means that NPPR requirements may differ among EU Member States. It is worth seeking advice from local counsel in these circumstances.
In addition, it is important that Guernsey AIFMs keep themselves updated in respect of any changes that may be made to the NPPR under which they market, or intend to market, Guernsey AIFs as under AIFMD EU Member States have the power to introduce rules stricter than those reflected in AIFMD and the Level 2 Regulation.
Marketing of Guernsey AIFs under NPPR in the UK
The UK ceased to be an EU Member State from 31 January 2020 meaning that the marketing passport regime under AIFMD ceased to be available to UK AIFMs at such time. In its place, the UK has implemented a regime regulating fund managers and the marketing of AIFs in the UK, which generally mirrors the requirements under AIFMD (and the requirements which were applicable in the UK pre-Brexit).
Following Brexit, the UK (like Guernsey) is a "third country" for the purposes of AIFMD and, as such, the marketing passport regime under AIFMD is no longer available to UK AIFMs.
Marketing of a Guernsey AIF by a Guernsey AIFM under NPPR in the UK is now made under the Alternative Investment Fund Managers Regulations 2013 (see regulations 58 and 59 in respect of small third country AIFMs and above threshold third country AIFMs respectively). For completeness, regulation 59 corresponds to marketing under Article 42 of the AIFMD.
The notification process is straightforward and requires a notification to be made to the United Kingdom Financial Conduct Authority (the "FCA") via the FCA's online "Connect" system. The same process applies where a Guernsey AIFM markets a UK AIF or AIF from another third country in the UK.
In addition, Guernsey AIFMs and self-managed Guernsey AIFs (in each case, unless sub-threshold) are required to submit a notification to the GFSC within 14 days of commencing any marketing of that AIF in the UK. Guernsey AIFMs are required to continue to comply with the conditions of the NPPR in the relevant jurisdiction in which the Guernsey AIF is marketed (and any other provisions of the AIFMD that may apply).
Marketing of Guernsey AIFs under NPPR in the EU
Guernsey AIFMs and AIFs are treated as third country AIFMs/AIFs for the purposes of AIFMD. As such, marketing of Guernsey AIFs must be carried out in accordance with NPPR in the relevant EU Member State. Marketing is carried out in accordance with Article 42 of the AIFMD.
NPPR requirements vary across EU Member States from notification regimes similar to the UK, to more fulsome authorisation processes. EU Member States offering the most straightforward NPPRs include (but are not limited to) Luxembourg, Ireland and the Netherlands.
As for marketing into the EU, Guernsey AIFMs and self-managed Guernsey AIFs (in each case, unless sub- threshold) are required to submit a notification to the GFSC within 14 days of commencing any marketing of that AIF in the EU and must comply with the conditions of the NPPR in the relevant EU jurisdiction in which the Guernsey AIF is marketed (and any other provisions of the AIFMD that may apply).
AIFMD II
More than 10 years after the AIFMD was adopted, the EU Parliament and the Council of the EU have agreed on specific amendments to the text of the AIFMD ("AIFMD II").
While AIFMD II entered into force on 15 April 2024, EU Member States have until 16 April 2026 to implement its rules, subject to certain measures that Member States must implement from 16 April 2027.
Changes impacting third countries (including Guernsey) include the introduction of the "NPPR framework conditions". These conditions will mean that access to NPPR regimes will only be granted for non-EU AIFMs or the non-EU AIFs established in third countries which have not been identified as "high-risk third countries" pursuant to the EU's fourth Anti-Money Laundering Directive. Guernsey meets all relevant requirements to take advantage of NPPR regimes.
These above conditions expand on existing rules and, ahead of the changes coming into force on 16 April 2026, in-scope AIFMs (including Guernsey AIFMs marketing funds to EU investors) should familiarise themselves with the new ESMA reporting templates (once available).
1 We refer in this note to "EU" for consistency with terminology used in the AIFMD. AIFMD was also adopted in 2016 under the agreement constituting the European Economic Area. Therefore, references throughout to EU should be read to include the additional counties who are members of the EEA.
2Pursuant to the AIFMD Rules and Guidance, 2021 and the AIFMD (Marketing) Rules, 2021, each published by the GFSC pursuant to the powers conferred on it under the Protection of Investors (Bailiwick of Guernsey) Law, 2020.
The information contained in this guide is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter.
