The Codes of Practice for Certified Funds (the "Codes") were introduced on 2nd April 2012. The Codes have been issued by the Jersey Financial Services Commission ("JFSC"), under powers given to it under the Collective Investment Funds (Jersey) Law 1988 (the "Law"), for the purpose of establishing sound principles and providing practical guidance in respect of unclassified collective investment funds holding a certificate issued by the JFSC pursuant to the Law ("Certificate Holders"). The Codes should also satisfy certain IOSCO objectives and principles.
The following funds are not subject to the Codes:
- Very private funds;
- COBO only funds;
- Private placement funds;
- Unregulated funds;
- Non-Jersey domiciled funds; and
- Recognized funds
The Codes are similar to the Codes of Practice for fund services businesses which were introduced in 2007 and apply to registered persons carrying on the business of the provision of fund services to funds ("FSB Codes").
The Codes are arranged under eight fundamental principles:
- a fund must conduct its business with integrity;
- a fund must act in the best interests of the unitholders;
- a fund must organise and control its affairs effectively for the proper performance of its business activities and be able to demonstrate the existence of adequate risk management systems;
- a fund must be transparent in its business arrangements with unitholders;
- a fund must maintain, and be able to demonstrate the existence of, both adequate financial resources and adequate insurance;
- a fund must deal with the JFSC and other authorities in Jersey in an open and cooperative manner;
- a fund must not make statements that are misleading, false or deceptive; and
- a fund must at all times comply and be operated in accordance with any applicable Guide (as defined in the Codes).
It is the responsibility of the governing body (ie. the board of directors of a company, the general partner of a limited partnership and the trustees of a unit trust) to comply with the Codes and to implement such additional practices as it deems necessary to ensure the proper management and control of the business of the fund. The Certificate Holder may appoint one or more persons to carry out the actions necessary for the Certificate Holder to comply with the Codes.
The Certificate Holder should continue to ensure there is adherence with the conditions of the certificate issued to it but there will now be fewer conditions attached.
Failure by a fund to follow the Codes represents grounds for the JFSC to take enforcement action. In such circumstances, the JFSC may use its regulatory powers which, in serious cases, could result in the revocation of the certificate and winding-up of the fund.
The Codes came on 2nd April into immediate effect and the Commission have provided that where a Certificate Holder is not able to demonstrate full compliance, it will look favourably on circumstances showing compliance with the relevant fundamental principle of the Codes and active measures being taken to ensure compliance. In exceptional circumstances, where strict adherence to the Codes would produce an anomalous result, a fund may apply to the JFSC for variance from the Codes.
To the extent the Codes overlap with the FSB Codes, the JFSC have indicated that where one set of policies and procedures is fully compliant with the requirements of both the Codes and the FSB Codes, that set can be used to satisfy such requirements and avoid duplication.
As a consequence of the introduction of the Codes, Certificate Holders should review their policies and procedures for funds and either prepare new policy and procedure manuals or amend existing FSB Codes manuals to incorporate the requirements of the Codes.
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.