Jersey: Forging Ahead:

Innovations in Jersey's Fund Industry
Last Updated: 24 January 2008
Article by Andrew Weaver

Since Jersey introduced the Expert Fund Guide in February 2004 its status as a jurisdiction for alternative investment funds has grown, to the point where it now comes second only to the industry leader the Cayman Islands. Subsequent developments, including the Non-Domiciled Fund Guide, the Listed Fund Guide, recognition of the jurisdiction by the Dutch financial services regulator, and a push at government level to invite fund management businesses and family offices to relocate to the Island have enhanced this position. But Jersey is not resting on its laurels and significant developments are taking place in the legislative regime governing funds and their functionaries. Further radical proposals have just been approved which could result in Jersey claiming a leading position alongside Cayman.

Key Regulatory Issues:

Jersey has worked hard to maintain its position as a jurisdiction where regulation is adequate for the protection of investors, without being too intrusive, recognising that different categories of investors require, and may appreciate, different degrees of regulation and protection. The focus of the Jersey Financial Services Commission ("JFSC") over the past few years appears to have been to reduce, where applicable, the scope of prescriptive regulation in relation to investment funds and at the same time to ensure that service providers of those funds are appropriately regulated.

This desire to regulate more effectively service providers resident in Jersey and to be less prescriptive about the fund vehicles themselves, has achieved formal recognition in a significant legislative change to be implemented in November, 2007 pursuant to which fund service providers (including investment management, investment advisory, fund administration, custody, depository and registrar functions) will cease to be regulated under the Collective Investment Funds (Jersey) Law 1988 and will fall to be regulated as a new class of financial services business to be named Fund Services Business under the Financial Services (Jersey) Law 1998. The Collective Investment Funds Law will remain in place as the principal source of regulation for the fund vehicles themselves, but it is intended that the regulatory emphasis should fall upon the functionaries in Jersey. In addition to moving the regulatory umbrella to the Financial Services Law, the JFSC is introducing for the first time codes of practice with which the Jersey funds service providers will be expected to comply. The basis of this regulation, however, is that of establishing a set of clear principles to which industry participants are required to adhere without being prescriptive as to the manner in which these requirements can be met. In this way the JFSC is able to allow a degree of flexibility to industry participants without imposing upon them a particular model or method of acting.

New Class Of Unregulated Funds

There is a substantial degree of co-operation and collaborative effort between the JFSC and private participants in the funds industry in Jersey in framing, developing and introducing regulatory change. A prime example of this is the announcement by the JFSC of the introduction early in 2008 of an unregulated class of fund. Over the summer a team comprising representatives of the Jersey Funds Association, Jersey Finance Limited and the JFSC, have worked together to consider the terms of reference for such a class. The new class of fund will be available only to ‘eligible investors’ – those with a minimum initial investment of $1m or certain defined classes of high net worth, sophisticated or institutional investors. Provided the fund can ensure compliance with this requirement there will be no other regulatory obligations placed upon it in Jersey and, in particular, it will not be required to appoint any Jersey-based service providers. If introduced this will, at last, create a very credible European alternative to the Cayman Islands as a domicile of choice for hedge funds and other alternative investment funds. It will also mean that fund sponsors and promoters will have a wide and flexible choice of fund categories in Jersey to choose from.

Pressing Home The Advantage

These and other initiatives can only strengthen Jersey’s position as a key player in the global offshore funds industry, particularly as Jersey also has some other pretty convincing weapons in its armoury. These include Expert Funds which are lightly regulated investment vehicles which can be established on a fast track basis and are available to expert and sophisticated investors. The success of these funds – 105 launched in the twelve months ending in August 2007 giving a total of 319 since their introduction – has surpassed industry expectations and flags to the world Jersey’s intention to target different products, such as property, venture capital and private equity funds.

There will, of course, be challenges along the way. The European-based fund market is an obvious prime target, but other competitor jurisdictions in the region, such as Guernsey, Dublin and Luxembourg will be refining their fund legislation and products to attract a share of the business. Cayman will continue to have some advantages in attracting U.S. based fund business, namely proximity and familiarity, but there is certainly scope for attracting European and other managers and investors who want a flexible jurisdiction coupled with the security and enhanced reputation which arises from association with Jersey.

Despite these challenges, Jersey has good reason to feel confident that it can beat the competition. New and innovative products added to a solid funds tradition put Jersey in a strong position. It may have been the case in the early days of the hedge fund industry that managers were seeking to set up in the least regulated jurisdictions. However, the industry has matured and investors and managers are increasingly seeking top-quality jurisdictions with sufficient, but not excessive regulation. A further driving force is the fact that tax authorities in the home jurisdictions of both the managers and investors are increasing their scrutiny to ensure that offshore status in each case is legitimate, and if, for example, board meetings are required, Jersey is clearly a logical choice for European managers and directors rather than the Caribbean jurisdictions. Coupled with all of this, and adding weight to its reputation generally, is Jersey’s initiative to attract hedge fund managers to become resident themselves in Jersey.

Jersey is at the forefront in developing legislation which responds to the demands of managers, lawyers and investors for increasingly complex fund products. An obvious example is the introduction of segregated cell legislation with innovations to make it more attractive than similar structures in other jurisdictions. Protected Cell Company legislation was introduced in 2006 allowing segregation of assets within separate cells. However, there was some concern that other jurisdictions might not recognise this segregation, particularly as the PCC, including its cells, remained as one legal entity. The response has been to introduce the innovative Incorporated Cell Company. Each cell in the ICC has separate legal status, which enhances the ability to ring-fence the assets, but still allows the manager and other service providers to maintain greater control than if each cell were replaced by separate subsidiaries in a traditional umbrella structure. The potential for the innovative use of the ICC structure is only gradually being realised, and will spread beyond funds.

Conclusion

Ultimately, the success of any jurisdiction hinges upon the willingness of the private and government sectors to co-operate to create a business-friendly environment. In Jersey there is a consensus that maintaining a certain level of regulation actually attracts the best business and reassures investors and onshore jurisdictions. Couple this with an increasingly user-friendly legislative framework and you have a winning combination.

This article first appeared in Legal Week on 1 November 2007.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions