In January 2012 the JFSC launched a new private placement funds regime, making it quicker and easier to establish close-ended funds, including property funds and private equity funds, for offer to not more than 50 persons, all of which are professional investors or sophisticated investors.
This pragmatic new regime allowing regulatory consent to be obtained within 3 days has been warmly welcomed by Jersey's funds industry as a new addition to the broad range of fund products already offered by Jersey.
Funds which qualify under the private placement funds guide issued by the Jersey Financial Services Commission (JFSC), may now be formed in Jersey using a streamlined formation process which excludes the promoter policy test usually applied to private funds. The fast-track formation process is facilitated by a self-certification procedure, including sign-off by an administrator in Jersey, permitting formation in as little as 3 days.
A Private Placement Fund must:
- be a company (standalone, protected cell or incorporated cell company), partnership (limited partnership, special limited partnership or incorporated limited partnership) or unit trust;
- be established in Jersey or managed in Jersey;
- have at least two Jersey resident directors if a company, or a Jersey corporate trustee or general partner with at least two Jersey resident directors;
- be closed-ended;
- not be offered to more than fifty investors, all of which must be Professional Investors or Sophisticated Investors;
- be administered by a Jersey administrator.
Only Professional Investors or Sophisticated Investors as defined by the Guide may invest in a Private Placement Fund.
There are eleven categories of Professional Investor. These include: (a) a person whose ordinary activities involve the person acquiring, holding, managing or disposing of investments for the purposes of the person's business; (b) certain persons (not including an individual) who have property with a market value of not less than US$10 million (or currency equivalent); (c) certain service providers to the Private Placement Fund, including an investment manager, and senior employees, directors, partners, members of shareholders of the service provider.
A Sophisticated Investor includes any investor who makes a minimum initial investment of £250,000 (or currency equivalent).
The promoter of a private placement fund must be of good standing and, among other things, be established in an OECD member state or any other state or jurisdiction (of which there are many) with which the JFSC has entered into a Memorandum of Understanding (or equivalent) on investment business and investment funds and either (a) be regulated in that state; or (b) possess amongst its principal persons relevant experience in relation to promoting, managing or advising on institutional, professional or sophisticated investors' investments using similar strategies to those to be adopted by the fund.
The pragmatic private placement funds regime has been warmly welcomed by the Jersey funds industry as a new addition to the broad range of fund products already offered by Jersey, each of which lends to Jersey's reputation as a leading jurisdiction for the establishment and servicing of investment funds.
The promoter or investment manager of a Private Placement Fund must be of good standing and meet the requirements of the Guide. In particular, the promoter must be established in an OECD member state or any other state or jurisdiction with which the JFSC has entered into a Memorandum of Understanding (or equivalent); and either:
- be regulated in that state or jurisdiction; or
- possess amongst its Principal Persons (as defined) relevant experience in relation to promoting, managing or advising on institutional, professional or sophisticated investors' investments using similar strategies to those to be adopted by the Private Placement Fund.
The accounts of a Private Placement Fund must be audited and both a money laundering reporting officer and money laundering compliance officer must be appointed.
Consent to the issue of securities in a Private Placement Fund will be issued by the JFSC relying upon the receipt of certain written self-certifications, a copy of the Private Placement Fund's proposed Private Placement Memorandum and details of the Principal Persons of the promoter. The Guide provides that the JFSC will use its best endeavours to issue the requisite regulatory consent within 3 days of the correctly completed application.
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.