On 26 January 2012, the Jersey Financial Services Commission (JFSC) introduced the Jersey Private Placement Fund Guide. A Private Placement Fund which satisfies the eligibility conditions set out in the guide may be established using a streamlined three day authorisation process providing certainty regarding regulatory conditions and treatment following establishment.
What is a Private Placement Fund?
A Private Placement Fund is a closed-ended investment fund established in Jersey or, if established outside Jersey, managed in Jersey, participation in which is offered to not more than 50 potential investors. Offerees must be either Professional Investors or Sophisticated Investors (see below).
Who may invest in a Private Placement Fund?
Only Professional Investors, Sophisticated Investors and investment managers if acquiring an interest in the Private Placement Fund directly or indirectly for or on behalf of non-professional or non-sophisticated investors, each of whom has received an investment warning substantially in the form required by the guide.
What is a Professional Investor/Sophisticated Investor?
A Sophisticated Investor is an investor who makes a minimum initial investment or initial investment commitment of £250,000 or currency equivalent. The Private Placement Fund Guide includes an extensive definition of Professional Investor, which will include market professionals, eligible employees (i.e. carried interest executives) of service providers to the Private Placement Fund and family trusts or family investment vehicles of such persons.
What form may the Private Placement Fund take?
A Private Placement fund may be a Jersey company (including a protected cell company, incorporated cell company or any cell of such), one or more Jersey limited partnerships (including limited partnerships, limited liability partnerships, separate limited partnerships or incorporated limited partnerships) or a Jersey unit trust, or an equivalent form incorporated or established under the laws of any other country or territory.
What local service requirements are there?
A Jersey regulated administrator must provide at least registered office services to the fund company or limited partnership (where it is a Jersey company or limited partnership), to the trustee or manager where it is a Jersey unit trust and to the relevant Jersey based service provider (e.g. general partner or manager) where the fund vehicle itself is not established in Jersey. The same administrator must also provide support to the Private Placement Fund in relation to its anti-money laundering obligations.
Two Jersey resident directors with appropriate experience, must sit on the board of the fund company if a Jersey company or the fund company or its manager if not a Jersey company. If the Private Placement Fund comprises one or more limited partnerships, whether established in Jersey or outside, it must have at least one general partner which is either (a) a company incorporated in Jersey with two Jersey resident directors with appropriate experience or (b) itself a limited partnership that has at least one general partner, which is a company incorporated in Jersey with two Jersey resident directors with appropriate experience. If the Private Placement Fund is a unit trust (under Jersey law or otherwise) each of the trustee and manager (if any) must be a company incorporated in Jersey with at least two Jersey resident directors with appropriate experience.
What ongoing obligations are there?
The Jersey service provider will be responsible for submitting statistics in relation to the Private Placement Fund in accordance with the JFSC requirements from time to time. Annual accounts and an auditor's report to investors is required. If audited accounts are not circulated or if the auditor's report is qualified, notification to the JFSC is required. Any material changes to the information provided to the JFSC in connection with the Private Placement Fund must be notified to the JFSC within 28 days. Where a change would not meet the criteria set out in the guide, prior written consent of an officer of the JFSC is required.
What are the benefits of being a Private Placement Fund?
A Private Placement Fund can take advantage of a streamlined authorisation process based upon selfcertification of the characteristics of the Private Placement Fund and its promoter. Authorisation should take no more than three working days.
To achieve this, the promoter will have to confirm in writing that it is in good standing and suitably regulated and a Jersey service provider must certify its satisfaction with the statement of the promoter and that the private placement memorandum of the Private Placement Fund complies with the content requirements of the guide. An English language version of the private placement memorandum must be lodged with the JFSC together with details of the directors and owners of 10% or more of the promoter of the Private Placement Fund.
The introduction of the Private Placement Fund Guide comes at a very opportune time and fills a gap in the range of fund offerings in Jersey. As a lightly regulated private fund regime, it will sit beside the streamlined public fund offerings encapsulated by the Jersey Expert Fund Guide and Jersey Listed Fund Guide. The speed and certainty of authorisation is a very important factor in these challenging times. The new guide is expected to cement Jersey's position as a leading jurisdiction for the servicing of alternative investment funds.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.