A streamlined authorisation process is available in Jersey for closed-ended funds that are or will be listed on designated stock exchanges or markets recognised by the Commission.
The "listed funds" category of unclassified funds in Jersey's collective investment scheme regime enables a closed-ended fund, which is to be listed, to minimise its regulatory burden, as the Commission recognises that the investment vehicle will have to satisfy the requirements of the exchange or market concerned, and is therefore satisfied to streamline the authorisation process in the prescribed circumstances for such vehicles. This contrasts extremely favourably with the often lengthy and involved multi-stage in-principle consent, document review and final approval process for collective investment schemes otherwise carried out by the Commission.
QUALIFICATION AS A LISTED FUND
Generally, a collective investment fund will qualify as a listed fund if the following are satisfied:
- The fund must be incorporated as a company (the
Commission may, in time, extend the benefit of the listed
fund regime to other forms of funds: for instance, unit
trusts or limited partnerships).
- The company must be a collective investment fund for the
purposes of the Collective Investment Funds (Jersey) Law
1988, as amended (the
- The company must be incorporated in Jersey.
- The company must have a listing on a stock exchange or
market recognised by the Commission.
- The company must be a closed-ended fund, which for these
purposes is defined as "a fund which is not open for
redemptions at the option of holders of
- The company's board must be ultimately
responsible for the management and control of the fund and
this ultimate responsibility cannot be delegated.
- At least two Jersey resident directors with appropriate
experience must be appointed to the board of the
- A majority of the company's directors must be
independent. The board will be responsible for ensuring that
a director meets any such requirements prescribed by the
relevant listing authority. However, as a minimum, a director
should not be a past (within the foregoing five years) or
present employee of the Manager1 or Investment
Manager2 or any of their Associates3
even if permitted by the listing authority concerned.
A listed fund must have an auditor appointed, and annual audited accounts must be prepared and filed with the Commission within seven months of the end of the listed funds financial year.
There are no requirements as to investment or borrowing restrictions applicable to listed funds, provided that the approach to borrowing or gearing is clearly disclosed in the offering documentation. However, if the listed fund is permitted to borrow money in excess of 200% of the net asset value of the fund, full details of the manner in which the risk posed by such borrowing will be managed must be disclosed to the Commission and in the offering documentation.
There are no limitations on marketing or, in particular, on the number of persons to whom a listed fund can be marketed.
REGULATORY REQUIREMENTS AND KEY FEATURES
Investor protection is maintained through the requirements that:
- full disclosure must be made in any offering document
issued by the listed fund; and
- any Jersey entity that provides services to the listed
fund must be licensed to provide such services by the
At present, listed funds may only take the form of companies, incorporated under the laws of Jersey, meaning that the Companies (Jersey) Law 1991, as amended (the "Companies Law") will apply to the listed fund. Key features to note are:
- the Companies Law is a modern statute, based upon
internationally familiar English company law
- there is no minimum authorised or issued share capital
- a number of different types of company are available
(see, for further information, our briefings entitled
"Companies in Jersey" and "Cell Companies in
The Commission will, at some time in the future, give consideration to the inclusion of unit trusts and limited partnerships to the listed funds category.
The promoter of a listed fund will not generally be subject to any regulatory review or approval.
The investment manager must either have been previously approved by the Commission or it must:
- have relevant experience in managing assets similar to
those of the listed fund;
- have no criminal convictions or regulatory sanctions
imposed on it;
- be solvent;
- be established and regulated in an OECD member state (or
another jurisdiction – as agreed with the
Commission – which subjects the investment manager
to appropriate regulatory oversight); and
- satisfy the Commission's general principles of
corporate governance and span of control requirements
(meeting the "four-eyes" principle if it cannot
handle client monies, and the "sixeyes" principle
if it can handle such monies).
If an investment manager does not meet these requirements, it may approach the Commission for approval on a case-by-case basis, with the Commission taking a flexible approach commensurate with offering adequate protection to the listed fund's investors and the Island's reputation.
If a distributor is the "prime mover" behind the fund, then that distributor will be required to meet similar tests to those imposed upon the investment manager.
Once the Commission approves the investment manager, provided there are no material changes to its circumstances, the Commission will not require the investment manager to seek its further approval to act as investment manager to additional listed funds.
The offering document must set out clearly and fully all material information that a prospective investor (including a person who cannot be expected to have any special knowledge of investments of the nature being offered) would reasonably require to enable them to make an informed judgement about investing in the listed fund. This should include the basis upon which the value of the listed fund is calculated.
The offering documentation will be required to include the relevant investment warnings contained in the Commission's guidelines explaining that the fund is only suitable for professional or experienced investors as well as any investment warnings required by any applicable legislation.
Full details of the investment and borrowing strategy of the fund must be set out in the prospectus. No investment or gearing restrictions will be prescribed by the Commission in relation to listed funds, though the approach to borrowing and gearing must be clearly disclosed to investors.
Every listed fund must appoint an administrator or manager that is regulated by the Commission and has a physical presence in Jersey. The administrator or manager is responsible for ensuring that the investment manager complies with the terms of the offering documentation and all applicable law when managing the fund. This responsibility cannot, generally, be delegated.
Safe custody arrangements
A listed fund must have adequate safe custody or prime brokerage arrangements (if applicable) in place in respect of the fund assets, although there is no requirement for these to be carried out by an independent Jersey custodian.
If the listed fund is a hedge fund and a prime broker is appointed, the prime broker must be part of a group with a minimum credit rating of A1/P1.
Administration and monitoring of the investment manager
There must be a regulated Jersey manager or administrator with staff and a physical presence in the Island appointed to provide services to the listed fund.
The responsibility of the administrator or manager (as applicable) shall include taking reasonable measures to satisfy itself that the actions of the investment manager do not breach the investment and borrowing restrictions applicable to the listed fund as set out in the offer document, and to promptly notify the board of directors of the fund company of any concerns it has in that regard so that appropriate action may be taken.
The "reasonable measures" that the administrator or manager to fulfil their responsibility may be outsourced in accordance with the Commission's policy, though the responsibility itself cannot be outsourced.
As well as the monitoring function, the fund company's board of directors must regularly review the fund's investment strategy and risk profile, including all associated matters and the investment strategy of the investment manager.
The administrator or manager (as applicable) will be required to maintain in Jersey sufficient records in relation to the listed fund in order to fulfil its obligations.
Each Jersey functionary of a listed fund must obtain a permit from the Commission and must be managed and operated in accordance with the terms of the codes of practice to be published by the Commission from time to time.
THE AUTHORISATION PROCESS
Assuming that the fund complies with all of the criteria of the listed funds category, the authorisation process itself is quick and straightforward and, provided the Commission are satisfied that the fund meets the Commission's criteria for a listed fund, the relevant consents and permits for a new listed fund should be issued within a matter of (generally, three) days.
The administrator or manager of the fund must complete and sign an application form setting out the main features of the listed fund and confirming that the fund meets the Commission's requirements for listed funds. This application form must be countersigned by the directors of the fund company and then lodged with the Commission together with the draft offering documentation and prescribed fee.
The Commission will review the application form to confirm that it has been completed properly, but will not carry out a regulatory review of the listed fund nor will it review the fund documentation, save in exceptional circumstances.
If satisfied that the Fund satisfies the Commission's criteria for a listed fund, the Commission will authorise the listed fund on the basis of the application form, and will then issue the relevant consents and permits.
POST LAUNCH REQUIREMENTS
The Commission does not undertake any on-going proactive supervision of funds, so post-launch requirements are principally dictated by the terms of the consents granted.
The terms of the consents
The Commission will tailor the consents to suit each particular case.
Filing of audited accounts
Public companies must file with the Registrar of Companies a signed copy of the accounts for each financial period together with a copy of the report thereon by the auditors.
All consents granted under the COBO4 for the issue of securities will include a condition which will require the directors of the fund to confirm on an annual basis that to the best of their knowledge, having taken reasonable steps to ascertain the position, there have been no breaches of the consent, other than those (if any) previously disclosed to the Commission.
All material changes to any information provided to the Commission in connection with a listed fund must be notified to the Commission as soon as possible within twenty-eight days of any such change.
Further, the Commission must be notified immediately if a listed fund is refused permission to be listed on a recognised market or exchange or permission is revoked or any other material event occurs in connection with the listing.
1. The term "Manager" means any functionary
to whom the board of directors has delegated overall
responsibility for the executive management of the fund.
2. The term "Investment Manager" includes an
investment adviser and may be the Manager if no separate
investment manager is to be appointed.
3. The term "Associate" means any company
which is a subsidiary or a holding body of that company or a
subsidiary of any such holding body and any individual,
partnership or other unincorporated association or firm which
has direct or indirect control of that company and any company
which is directly or indirectly controlled by any such
individual, partnership or other unincorporated association, or
firm. 4 COBO means the Control of Borrowing (Jersey) Order
1958, as amended. The COBO regulates the raising of money, the
issue of securities and the circulation of offers for the
subscription, sale or exchange of securities in Jersey or by
4. COBO means the Control of Borrowing (Jersey) Order 1958, as amended. The COBO regulates the raising of money, the issue of securities and the circulation of offers for the subscription, sale or exchange of securities in Jersey or by Jersey vehicles.
Jonathan Heaney, Partner
Jonathan Tonge, Partner
Mark Lewis, Partner
David Whittome, Partner
British Virgin Islands
Heidi de Vries, Partner
Philip Millward, Partner
Carol Hall, Partner
Rod Palmer, Partner
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.