In a welcome development, Jersey's Chief Minister has signed
into law new legislation designed to simplify and encourage the
establishment and operation of hedge fund management businesses in
To date, hedge fund managers established in Jersey who operate
managed accounts as well as managing funds have often been required
to be regulated under Jersey's 'investment business'
regulations as well as under Jersey's 'funds'
regulations. This has brought a degree of complexity, as businesses
have had to operate simultaneously under two (similar but
different) regulatory frameworks.
The new legislation (the Financial Services (Investment Business
(Qualifying Segregated Managed Accounts - Exemption)) (Jersey)
Order 2014 - the "QSMA Order") has addressed this, by
enabling hedge fund managers to be regulated solely under
Jersey's 'funds' regulations, provided the managed
accounts are 'qualifying segregated managed accounts'.
The relevant criteria include:
Investors in a qualifying managed account must commit at least
US$ 1 million to the managed account, and acknowledge a prescribed
A qualifying managed account must pursue one or more hedge fund
strategies which replicate, or contain material elements from,
hedge-fund strategies pursued by a fund also managed by the
A qualifying managed account cannot be held in the name of the
manager, and the manager cannot have custody of the managed account
If all requirements are met, the QSMA Order grants an exemption
from 'investment business' regulation, although the Jersey
Financial Services Commission retains relevant regulatory powers.
The Commission will also be issuing guidance to industry adding
detail on the scope and intended application of the exemption.
Bedell Cristin partner
Martin Paul has been heavily involved in designing the new
regime and commented:
"The new exemption is a proportionate response intended to
simplify matters and encourage growth in the hedge fund sector in
Jersey, whilst retaining appropriate levels of regulation. Of
particular benefit is that the use of managed entities will now be
possible where managed account activity is undertaken, which will
facilitate the incubation and hosting of start-up and smaller hedge
fund businesses in Jersey."
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