The introduction of Jersey's unregulated funds regime has widely be recognised as a success. Client interest has been very positive and the number of unregulated funds established reached 35 in the first year.
The regime, introduced on 19 February 2008, allows eligible funds to merely notify the Jersey Financial Services Commission of their establishment, rather than going through a full authorisation process. The speed and simplicity of the system will provide Jersey with a significant advantage in competing with other European and offshore jurisdictions and becoming a funds jurisdiction of choice, particularly for alternative/hedge funds and sophisticated investors.
Two forms of unregulated fund have been introduced; an Unregulated Eligible Investor Fund and an Unregulated Exchange Traded Fund.
Unregulated Eligible Investor Fund
An Unregulated Eligible Investor Fund is available to investors injecting a minimum of US $1 million each into the fund, or a sophisticated investor. The investors will be required to acknowledge in writing their acceptance of the risks involved in a prescribed form. In addition, the fund must take steps to ensure that its investors meet the legal requirements to invest in the fund.
The fund may be open-ended or closed-ended and may take the form of a company (or cell company), unit trust or partnership.
There will be no requirement for an Unregulated Eligible Investor Fund to have a Jersey-based administrator or custodian, nor for it to have any Jersey resident directors. There is also no need for Jersey-based auditors to be appointed to the fund.
The fund may only list on a stock exchange which permits restrictions upon transfers of interests within the fund. This is in order to ensure that only eligible investors are allowed to invest in the fund.
Unregulated Exchange Traded Fund
An Unregulated Exchange Traded Fund is a form of unregulated listed fund which need not be regulated by the Jersey Financial Services Commission on the basis that it is already regulated by a stock exchange. There will be a prescribed list of stock exchanges for which funds listed on them may classify as Unregulated Exchange Traded Funds.
An Unregulated Exchange Traded Fund may only take the form of a closed-ended fund, but may be established as a company (or cell company), unit trust or partnership.
There are no criteria for minimum investment by investors, unlike or an Unregulated Eligible Investor Fund.
As with an Unregulated Eligible Investor Fund, there is no need for Jersey-based auditors to be appointed to the fund.
The new regime allows Jersey to compete with other jurisdictions already offering lightly-regulated fund products. In particular, Jersey will continue to make strong advances in the alternative/hedge funds market. As such, unregulated fund regime is an exciting and innovative development for Jersey and will provide both investors and Jersey fund advisers with attractive new fund structures.
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.