Jersey can achieve equivalent status in matching proposed EU regulations on alternative investments “immediately” and thereby avoid being harmed by such rules, the chief executive of Jersey Finance recently told a conference in London.

The EU’s Commission draft Directive on Alternative Investment Fund Managers has been hotly contested, with some countries, such as the UK, warning that overly harsh regulations on hedge funds and other investment vehicles will push them outside the EU into countries such as Switzerland, costing jobs and revenues. Under the proposal only AIFMs established in the EU will be able to provide their services and sell their funds to investors in the bloc. As a result, jurisdictions such as Jersey want to be accorded "equivalent" status to avoid their funds being barred from the EU.

“We are very well placed to meet equivalent standards [of regulation] immediately,” Geoff Cook told the Jersey Finance conference.

Hedge funds have, to the anger of the alternatives industry, been blamed by some policymakers for helping to cause the financial crisis of two years ago, or from profiting from it. The sector has also been hit by the Bernard Madoff scandal, in which investors lost billions of dollars to a $65 billion Ponzi scheme masquerading as a legitimate investment programme. Defenders of hedge funds say they were as much the victims as perpetrators of a crisis that had its roots in cheap credit and house price bubbles.

Jurisdictions such as Jersey and Guernsey say their regulatory regime matches that of the EU, so that funds domiciled in these islands should not be discriminated against in soliciting investors from within the EU.

However, some funds which do not wish to be put under any EU regulatory umbrella – possibly for cost reasons – may choose to set up in Jersey, Cook said.

Cook warned that the directive should not be allowed to become a protectionist measure by EU states against other parts of the world.

“It is essential to avoid discrimination and to ensure a level playing field for non-EU funds,” Cook said. He pointed out that more than 4,000 people work in Jersey’s funds industry and that the island has been placed on the “white list” of the Organisation for Economic Co-operation and Development in terms of compliance on tax information exchange.

Speaking at the same conference, Charlie McCreevy, a former EU Commissioner and prominent Irish politician, said that he was not convinced of the need for “intrusive legislation” in dealing with hedge funds and private equity funds. He scorned the idea, for example, that hedge funds posed a significant problem for financial markets or had played a major part in the credit crunch.

“It was the most lightly regulated of all the financial sectors that caused this crisis – namely, the banks,” McCreevy said.

Brendan McMahon, partner, global asset management private equity leader at PricewaterhouseCoopers, said that Jersey “ticks all the boxes” as an “equivalent” jurisdiction in terms of meeting the terms of the AIFM directive.

Last month, lawmakers in the upper chamber of the UK parliament warned that equivalence with legislation in third countries, particularly the US, was essential as the EU could lose its competitive edge with other parts of the world.