Jersey: Regulation Of Administrators

This guide outlines the legal and regulatory issues related to the carrying on of administration business in or from within Jersey. This is intended as a general guide, however, specific reference to fund structures is included.

There are two key issues to consider in relation to a person carrying on administration business in or from within Jersey (“Administrator”), the first being the substance of the services which will be provided, and the second being the regulation (if any) to which the person to whom the services will be provided is subject. This analysis gives rise to a distinction between an Administrator who will be regulated for “trust company” and/or “fund services business”, in each case as defined below.

Trust Company Business

The Financial Services (Jersey) Law 1998 (“FSJL”), regulates the carrying on of financial services business by any person in or from within Jersey. The FSJL also covers the carrying on of financial services business by a company incorporated in Jersey, in any part of the world.

Article 2 of the FSJL provides that a person carries on financial service business if by way of business the person carries on investment business, trust company business, general insurance mediation business, money service business or fund services business.

Article 2 of the FSJL further provides that:

An Administrator who carries on business which falls within the ambit of trust company business under the FSJL will require registration under the FSJL for this purpose unless an applicable exemption applies. Further, the Administrator would be required to comply in full with the “Codes of Practice for Trust Company Business” (the “Trust Code”) issued by the Jersey Financial Services Commission (“JFSC”) and any related requirements.

It may appear from the definition of trust company business that every Administrator who carries on trust company business, on the basis described above, would fall to be regulated for trust company business under the FSJL. However, not every Administrator providing services which fall within this definition will be carrying on trust company business. This is due to specific exemptions which either exclude the activity from being regulated or deal with the regulation in an alternative manner. This is dealt with below.

Important Exemptions relevant to Trust Company Business

The following is a summary of certain exemptions (in whole or in part) to the carrying on of trust company business.

Part 2 of Schedule 2 to the FSJL

• Special purpose vehicle

• Company that is general partner of unregulated fund

• Certain managers of managed entity

Financial Services (Trust Company Business (Exemptions)) (Jersey) Order 2000

• Employee pension scheme trustees

• Employee share or debenture scheme trustees

• Executors and administrators

• Private trust company business

• Private trust company business in relation to foundations

• Manager

• Global custodians

• Incidental providers of services

• Address providers

• Jersey Post Office

• Managers of managed banks

• Connected company

• Introducer

• Director

• Liquidators and trustees in bankruptcy of registered persons

• Certain persons engaged in banking, insurance and other investment businesses

• Certain persons in relation to collective investment funds

• Persons registered to carry on fund services business under the Law

• Director – registered person

• Liquidators and trustees in bankruptcy of persons other than registered persons

• Tuteurs, curators, administrateurs, general and special attornies and fideicommisaires

• Recruitment agents

• Guardians of a foundation

Financial Services (Trust Company Business (Exemptions No.2)) (Jersey) Order 2000

• Overseas persons

• Private Appointer Company

• Unit holding nominee company

• Electronic communications service providers

• Experienced personal adviser

Financial Services (Trust Company Business (Exemptions No.3)) (Jersey) Order 2000

• Private protector company

• Private appointer company

• General partner

• Agent for the sale of trading companies and partnerships

• Investment company subsidiary

• Agent for the sale of trading companies and partnerships locally trading

Financial Services (Trust Company Business (Exemptions No.4)) (Jersey) Order 2000

• Connected persons

Financial Services (Trust Company Business (Exemptions No.5)) (Jersey) Order 2000

• Professional investor regulated scheme

• Restricted funds

Financial Services (Trust Company Business (Exemptions No.6)) (Jersey) Order 2000

• Person providing service in relation to functionary of professional investor regulated scheme

Financial Services (Trust Company Business (Exemptions No.7)) (Jersey) Order 2000

• Testamentary trustee

• Trustee of shares in property holding company

Some of the exemptions are limited exemptions and others are unlimited exemptions. A couple of the more important exemptions are detailed below.

Fund Services Business

Apart from Recognised Funds (highly regulated retail funds), fund type structures in Jersey may be broadly classified as follows:

Paragraph 14B of the Financial Services (Trust Company Business (Exemptions)) (Jersey) Order 2000 excludes from the ambit of trust company business a person who is registered under the FSJL, when providing a service specified in Article 2(4) of the FSJL (see above) as part of the fund services business in respect of which the person is registered.

An Administrator who acts as an administrator in relation to a fund which falls into paragraphs (a) or (b) above (ie. Services provided to a CIF Fund or Unregulated Fund), would be carrying on fund services business under the FSJL and, accordingly, the Administrator would require registration under the FSJL for this purpose. If so, the Administrator would also be required to comply in full with the JFSC's “Codes of Practice for Fund Services Business” (the “FSB Code”) and any related requirements. This excludes regulation for trust company business for the provision of those services.

An Administrator who acts as an administrator in relation to a fund which falls into paragraph (c) above would not be carrying on fund services business under the FSJL. Instead, the services provided would have to be evaluated with reference to the definition of trust company business under the FSJL. This is because the definition of trust company business only applies in the case of services provided to CIF Funds or Unregulated Funds (as per paragraphs (a) and (b) above).

Although Unregulated Funds may only be constituted under the Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008, CIF Funds may be located worldwide and reference should therefore be had to the Collective Investment Funds (Jersey) Law 1988, for further information of the definition of CIF Fund should this be required.

Professional Investor Regulated Scheme

The Financial Services (Trust Company Business (Exemptions No.5)) (Jersey) Order 2000 contains an important exemption in relation to the provision of administration services in relation to a professional investor regulated scheme. An Administrator will be exempted from the FSJL when it is providing services as described in Article 2(4) of the FSJL (see above) to a professional investor regulated scheme as defined in the Article 3 of the Financial Service (Investment Business (Restricted Investment Business – Exemption)) (Jersey) Order 2001.

An investment scheme is a professional investor regulated scheme if: (1) relevant consent has been granted pursuant to the Control of Borrowing (Jersey) Order 1958 (this means that the Exemption Order may not be relied on in the case of CIF Funds); and (2) each investor in the scheme either has made a minimum subscription of £250,000, or is a professional investor as defined in the Exemption Order, and has signed an investment warning.

There are a number of categories of professional investor, which includes any person whose ordinary activities involve the person in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of the person's business or who it is reasonable to expect will acquire, hold, arrange or dispose of investments (as principal or agent) for the purposes of that business.

Manager of a Managed Entity

Barring a substantive presence in Jersey, an Administrator would usually discharge the majority of its functions, and comply with the requirements of the FSJL and Trust Code or FSB Code, through a person appropriately regulated for the services locally (the “Manager”). In this sense, the Administrator would comprise a Managed Entity and the Manager would comprise a Manager of a Managed Entity in accordance with the requirements of the JFSC. In all cases, the Administrator would remain ultimately responsible for the discharge of the regulatory requirements applicable to it. In the case of a Manager providing services to an Administrator carrying on fund services business, the provision of services would be subject to the requirements as set out in the JFSC's “Guidance Note for a Manager of a Managed Entity and Certain Managed Entities” (the “Mome Guide”).

In the case of a Manager providing services to an Administrator carrying on trust company business, the provision of services would be subject to the requirements as set out in the JFSC's “Policy Statement: Licensing Policy in respect of those activities that require registration under the FSJL” (the “Licensing Policy”).

Accounts

The Financial Services (Trust Company and Investment Business (Accounts, Audits and Reports)) (Jersey) Order 2007, applies among others to a person registered for trust company business and prescribes certain requirements in relation to the appointment of an auditor, as well as the maintaining of reports and audited accounts for a period of at least ten years.

A person who is not regulated for trust company business but instead fund services business will not be covered by the above Order, but instead will be covered by the FSB Code and related provisions.

Summary

The carrying on of administration business by an Administrator requires examination of the nature of the services which will be provided, as well as the classification of the person to which services will be provided. Both are key in assessing the regulation to which the Administrator will be subject and, furthermore, whether a relevant exemption will apply.

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.