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24 March 2020
Jersey is long established as a primary centre for the establishment of offshore funds and has been at the forefront of international developments, which have attracted international sponsors, promoters, fund managers, advisers and investors. One of the key features of Jersey's fund industry is the flexibility and range of structures and corresponding regulatory and commercial approaches that can be used for funds.
This article examines public funds. For a discussion on private funds, please see "Jersey private investment funds – regulatory options".
Unregulated funds are exempt from regulation as collective investment funds by virtue of an exemption order that specifies schemes or arrangements that have been established as either:
Either type of unregulated fund may take any form recognised under the laws of Jersey – namely:
Subject to the structure complying with the order, there is no regulatory review or oversight of the terms or conduct of such an unregulated fund.
The offer or listing document of an unregulated fund must contain a prominent statement that the fund is unregulated, together with a prescribed form of investment warning. In order to claim exemption as an unregulated fund, a completed notice must be filed with the Jersey registrar of companies.
Following consultation with the Jersey funds industry, it was decided to phase out the unregulated exchange-traded fund. Accordingly, as of 1 April 2018, no new notifications of unregulated exchange-traded funds are accepted by the registrar.
Existing unregulated exchange-traded funds (notified to the registrar before 1 April 2018) can continue in operation until the end of their natural life but may need to convert into a regulated fund if they continue to be marketed to potential investors in the European Union.
Further to the implementation of the EU Alternative Investment Fund Managers Directive (AIFMD) (2011/61/EU) in Jersey, it is no longer possible to market unregulated funds in the European Union or the European Economic Area without further regulation to ensure compliance with the AIFMD (as set out in further detail below).
The JFSC Listed Fund Guide provides a fast-track process for the establishment of corporate closed-ended funds that are listed on recognised stock exchanges or markets and regulated pursuant to the CIF Law.
Necessary features of listed funds include the following:
Listed funds are capable of being marketed to investors in the European Union and European Economic Area subject to compliance with certain additional requirements (as set out in the "AIFMD" section below).
Eligible investor funds are regulated pursuant to the CIF Law and are restricted to 'eligible investors' (which include, among other tests, any person committing at least $1 million (or the equivalent in another currency) to the fund). Eligible investor funds are subject to a streamlined approval process and a relatively light degree of regulation in accordance with the JFSC Eligible Investor Fund Guide.
Other necessary features of eligible investor funds include the following:
To the extent that a fund is to be offered to more than 50 investors or listed and is unable to fall under the expedited regulatory approach offered under the Expert Fund Guide, the Listed Fund Guide or the Eligible Investor Fund Guide, a collective investment fund may be regulated as an unclassified fund pursuant to the CIF Law. In this situation, the JFSC will regulate the fund in accordance with its policy, which includes compliance by the promoter of the fund with the JFSC's promoter policy. This will include an evaluation of the promoter's track record, experience and reputation, as well as its financial resources and spread of ownership. The JFSC will review the prospectus, constitutional documents and material agreements relating to the fund. The fund operation and investment and borrowing restrictions will need to comply with certain established standards against which the JFSC evaluates funds of this type.
Other relevant features of unclassified funds include the following:
Recognised funds are regulated as collective investment funds pursuant to the CIF Law and must, in addition, comply with a separate prescriptive order. Funds of this type may be marketed directly to retail investors in the United Kingdom under the UK Financial Services and Markets Act 2000, taking advantage of Jersey's designated territory status for the purpose of this legislation. Recognised funds are more highly regulated and provide investors with access to a statutory compensation scheme. Recognised funds may also be marketed to the public in numerous other territories, including Australia, Belgium, Hong Kong, the Netherlands and South Africa. Functionaries of recognised funds are also regulated under the CIF Law.
Service providers to unclassified or unregulated funds in Jersey are licensed and regulated under the Financial Services (Jersey) Law 1998 (FSJL), as amended, as providers of fund services business. Once an entity is registered for a class of funds service business, it no longer needs to apply for authorisation in relation to each new fund for which it provides that class of services.
Service providers to JPFs are not required to be licensed under the FSJL as they generally benefit from exemptions to such licensing on the basis that the fund meets the criteria of a professional investor regulated scheme.
Separate briefings on the regulation of service providers to different types of fund are available upon request.
Since July 2013, Jersey AIF managers marketing Jersey or other non-EU or EEA AIFs to investors in the European Economic Area have been required to comply with additional disclosure, transparency and reporting requirements pursuant to the AIFMD.
Expert, listed, eligible investor, unclassified or recognised funds are already regulated under the CIF Law and their service providers are regulated under the FSJL. Thus, where these funds are to be marketed to investors in the European Union or European Economic Area, the only additional requirement pertaining to such funds and service providers pursuant to the AIFs (Jersey) Regulations is to comply with the applicable sections of the Code of Practice for AIFs and AIF Services Businesses (ie, in relation to disclosure, reporting and asset stripping, together with notification to the JFSC in advance of marketing into the European Union or European Economic Area.
These funds must be converted to another form of fund (eg, an eligible investor, listed or expert fund) before they may be marketed to investors in the European Union or the European Economic Area).
Jersey offers a location for investment funds which does not impose its own tax burden on an investment fund or its investors.
Jersey-domiciled investment funds may be structured as companies (including protected cell companies and incorporated cell companies), limited partnerships (including incorporated limited partnerships and separate limited partnerships) or unit trusts. They may be open or closed ended.
For further information on this topic please contact Niamh Lalor, Emily Haithwaite, Tatiana Collins or Alexandra O'Grady at Ogier by telephone (+44 1534 514 000) or email (firstname.lastname@example.org, email@example.com, firstname.lastname@example.org or email@example.com). The Ogier website can be accessed at www.ogier.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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