A new exemption from the requirements of Jersey's Financial
Services (Jersey) Law 1998 ("FS(J)L") has been introduced
which will enable Jersey-regulated fund managers to service
qualifying segregated managed accounts ("QSMAs") without
the need for further regulation in Jersey while continuing to
benefit from Jersey's 0% corporate income tax rate.
It is anticipated that the exemption, implemented by the Financial
Services (Investment Business (Qualifying Segregated Managed
Accounts – Exemption)) (Jersey) Order 2014 (the
"Order") will prove popular with many managers who are
already seeing a boost in managed account business due to a
combination of investor demand and the potential ability to provide
investment management services to EU/EEA-resident clients without
the need for AIFMD compliance.
Overview of how the exemption works
Previously, managers of managed accounts in Jersey were
considered to be carrying on 'investment business' rather
than 'funds services business' for FS(J)L purposes, and
accordingly these managers were potentially subject to a more
onerous regulatory burden and the 10% rate of Jersey income
Compliance with the Order will enable any eligible manager to
take two simple steps which will trigger exemption from the
requirement to be regulated for investment business when managing a
QSMA – first, they must file a notice (together with an
initial fee) with the Jersey Financial Services Commission
("JFSC") confirming that they will
manage the QSMA and intend to take advantage of the exemption.
Secondly, they must send a prescribed form of investment
warning to each investor (receipt of which must be acknowledged in
Once the exemption is triggered, there are some light ongoing
reporting requirements and an annual fee must be paid, but there is
no need to make any further notification or application to the JFSC
when additional managed accounts are taken on.
What is a QSMA for the purposes of the Order?
Under the Order, a QSMA has four key characteristics:
the minimum amount committed for investment must be at least
there must be a single investor who has received and signed the
prescribed investment warning (ie the account must be in the name
of a single legal person save in certain scenarios where a) members
of the same family or b) employees of the manager are jointly
the account is managed in accordance with defined hedge-fund
strategies which replicate (or are comprised of material elements
from) one or more hedge-fund strategies currently employed by the
manager in respect of one or more existing funds that they manage;
the Jersey manager must the only manager of the managed account
and cannot hold or otherwise have custody of the assets under
Which managers can use
In order to trigger and maintain the benefit of the exemption,
the manager must:
be regulated under FS(J)L for funds services business as a
manager, investment manager, trustee or general partner;
be appointed to undertake the investment management of one or
more hedge-funds and either hold itself out as being a hedge-fund
manager or be generally perceived as such;
file a notice with the JFSC confirming that it intends to take
advantage of the exemption together with payment of an annual
ensure that all its clients (ie funds under management and
investors in QSMAs) are, as between each other, dealt with fairly
and that no client is given any unfair advantage; and
report to the JFSC on an ongoing basis the number of QSMAs
managed pursuant to the exemption and the value of the investments
under management in connection with those QSMAs (reported as a
single aggregated figure only).
Importantly, managers established in Jersey who are themselves
'managed entities' (ie they are provided with
infrastructure and support by a locally regulated administrator)
can utilise the new exemption. This will enable many existing
Jersey managers to start offering managed account services without
the need for additional infrastructure or expense, and new managers
wishing to establish a presence in Jersey and utilise the exemption
will typically benefit from a quicker and more economic set-up
Interested? We can help
Jersey is seeing a marked increase in the number of hedge fund
managers who have established a presence in the island –
everything from a basic office to a full operational base. Carey
Olsen advise many of these managers and our funds partners have
been directly involved in the formulation and implementation of the
Order. The contacts below will be happy to assist you with
any queries you may have.
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.
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