Jersey: Servicing Non-Jersey Funds And The Circulation Of Non-Jersey Fund Prospectuses

Last Updated: 16 October 2009
Article by Ben Robins, Edward Devenport and Gareth Rigby

Since the introduction of the FSB Codes and related changes to the funds legislation in Jersey, in most cases, a Jersey entity that wishes to carry on Fund Services Business in relation to a publicly-offered non-Jersey fund will be able to do so entirely under its FS Law registration acting in accordance with the FSB Codes.

As an entity would only be carrying on Fund Services Business in respect of a non-Jersey fund if the fund is publicly-offered, this briefing distinguishes between non- Jersey funds which are publicly-offered and those which are not.

Key features from a regulatory perspective of servicing a publicly-offered non-Jersey fund

  • Any entity proposing to carry on Fund Services Business in Jersey in respect of a publicly-offered non- Jersey fund must be registered to conduct Fund Services Business under the FS Law.
  • A Fund Service Provider acting for a publicly-offered non-Jersey fund must comply with the full FSB Codes unless it is a Managed Entity acting for a non-Jersey fund "materially equivalent" to a Jersey expert fund in which case it need only comply with the core principles of the FSB Codes plus the standard conditions attached to its registration under the FS Law.
  • A Fund Service Provider is required to notify the JFSC that it has been appointed to act for a new publicly offered non-Jersey fund.
  • Fund Service Providers of non-Jersey funds no longer require a CIF Permit nor do non-Jersey funds need a Fund Certificate.
  • COBO consent may be required (see below).
  • The prior approval of the JFSC is only required in limited circumstances.

Non-Jersey funds "materially equivalent" to a Jersey expert fund

As mentioned above, if a non-Jersey fund is "materially equivalent" to a Jersey expert fund, a Managed Entity acting for such non-Jersey fund will not need to comply with the full FSB Codes. To be classed as "materially equivalent" to a Jersey expert fund, a non-Jersey fund must satisfy the following requirements set out in section 2.1.2 of the JFSC's Non-Jersey Domiciled Fund Guide:

  1. The fund must describe itself as only being suitable for a specific class of investors. This class may be described as expert, experienced, institutional, sophisticated or in some other way, but the fund must clearly not be aimed at the retail investor.
  2. The fund must impose a minimum initial investment requirement of at least US$100,000 (or currency equivalent) in the fund. This requirement need not apply to investors who fall within classes defined on the basis of substantial net worth, professional knowledge, a relationship between investor and either the fund or any entity appointed to be a functionary of the fund, or of carried interest arrangements.
  3. The offer document must contain a clear investment warning. The exact nature of the warning is not prescribed, but the warning must indicate that the fund is not suitable for all investors, be commensurate to the risks involved in investing in the fund and sufficient to give investors a true understanding of the total potential losses that may occur.
  4. The offer document must contain all the material information that investors would reasonably require and reasonably expect to have drawn to their attention for the purposes of making an informed judgement about the merits of participating in the fund.
  5. The fund must produce independently audited accounts on at least an annual basis that are made available to all investors in the fund.

Other than this section, since the introduction of the FSB Codes and related changes to the funds legislation in Jersey, the Non-Jersey Domiciled Fund Guide has very limited application.

Liaising with the JFSC in relation to a publicly-offered non- Jersey fund

Registration under the FS Law to carry on Fund Services Business:

Each Jersey Fund Service Provider of a publicly-offered non-Jersey fund must be registered under the FS Law to carry on Fund Services Business.

All registered Fund Service Providers are required to comply with the FSB Codes which consist of seven core principles together with detailed requirements in respect of each of these principles. However, Managed Entities acting in relation only to expert funds, related expert funds or "materially equivalent" funds (including non-Jersey funds "materially equivalent" to a Jersey expert fund) are subject only to the seven core principles and a set of standard conditions attaching to their registration under the FS Law unless they have elected to comply with the FSB Codes in full.

Notification:

A Fund Service Provider is required to notify the JFSC that it has been appointed to act in respect of a new publiclyoffered non-Jersey fund by submitting Form FSB/NDF. This allows the JFSC to record details for statistical and fees purposes. The notification form must be submitted within 28 days of acceptance of the appointment unless COBO consent is required in which case the form must be submitted five days prior to acceptance of the appointment.

COBO consent:

This may be required if it is proposed to raise money in Jersey by the issue of interests in the non-Jersey fund, or if interests in the non-Jersey fund are to be registered in Jersey or, in certain circumstances, where the offer document is to be circulated in Jersey (see below).

Prior JFSC approval:

The prior approval of the JFSC to the appointment of an entity to act for a publicly-offered non-Jersey fund is not required unless COBO consent is required; and/or, in the case of an existing Managed Entity, pursuant to a standard condition on its registration under the FS Law which requires the Managed Entity to obtain the prior approval of the JFSC to act for new or further funds.

Statutory Fees

Statutory fees are payable by Jersey Fund Service Providers. A fee of £1,000 is payable for a Fund Service Provider's application for registration under the FS Law. The annual fees payable by a Fund Service Provider depend on the number of pools of assets in all the collective investment funds in relation to which it is a Fund Service Provider. This ranges from £2,000 to £20,000. From 1 July 2009, a Fund Service Provider is required to pay the minimum annual fee of £2,000 even if the number of pools of assets in all the collective investment funds in relation to which it carries on Fund Services Business is zero.

If the Fund Service Provider registered on a day after 1st July the annual fees are calculated pro rata for each complete month of the year to the following 1st July.

Key features from a regulatory perspective of servicing a non-Jersey fund which is not publicly-offered

  • Any entity proposing to provide services in Jersey to a non-Jersey fund which is not publicly-offered does not need to be registered under the FS Law for Fund Services Business. However, such an entity may need to be registered under the FS Law for Trust Company Business and/or Investment Business (as such terms are defined in the FS Law) unless an exemption applies.
  • Non-Jersey funds do not need a Fund Certificate.
  • COBO consent may be required if it is proposed to raise money in Jersey by the issue of interests in the non-Jersey fund, or if interests in the non-Jersey fund are to be registered in Jersey or, in certain circumstances, where the offer document is to be circulated in Jersey. The COBO consent may form a vital part of the relevant Jersey Fund Service Provider's exemption from the requirement to register under the FS Law for Trust Company Business or Investment Business.
  • The prior approval of the JFSC to the appointment of an entity to act for a non-Jersey fund which is not publicly-offered is not required unless COBO consent is required; and/or in the case of an existing Managed Entity, pursuant to a standard condition on its registration under the FS Law which requires the Managed Entity to obtain the prior approval of the JFSC to act for new or further funds (this would include a new non-Jersey fund which is not publiclyoffered).

Non-Jersey fund prospectuses

Corporate and unit trust funds

COBO consent is required to the circulation in Jersey of the prospectus of a non-Jersey corporate or unit trust fund unless the offer:

  • does not constitute an offer to the public; or
  • is valid in the UK or the Bailiwick of Guernsey (An offer is valid in the UK if an identical offer to that made in Jersey is for the time being circulated in the UK without contravening, inter alia, the Financial Services and Markets Act 2000 or the Companies Act 1985 in the UK); and
  • the offer is circulated in Jersey only to persons similar to those to whom and in the manner similar to that in which it is for the time being circulated in the UK or the Bailiwick of Guernsey, as the case may be.

The exemptions set out above are disallowed if the non- Jersey corporate or unit trust fund has a relevant connection with Jersey. A relevant connection arises in the following circumstances (in summary):

  • management or administration is wholly or partly carried on in Jersey;
  • control is exercised in or from within Jersey;
  • at the time of the offer, one or more of every three members of the board of directors of the corporate fund or company providing services to the unit trust fund is resident in Jersey;
  • the corporate fund or a company providing services to the unit trust fund has entered into, or is about to enter into, an agreement with a person resident in Jersey material to the offer;
  • a business material to the offer is carried on directly or indirectly by the corporate fund or a company providing services to the unit trust fund in or from within Jersey; or
  • the offer is an offer for exchange of securities of the corporate fund or unit trust fund for the securities of a company incorporated in Jersey or units of a unit trust governed by Jersey law or the units of which are or are to be registered in Jersey.

If it can be established that there is no offer to the public and the non-Jersey corporate or unit trust fund does not have a connection with Jersey, then no Jersey regulatory consent to the circulation of the offer will be required.

Limited partnership funds

COBO consent is always required to the circulation in Jersey of a prospectus of a non-Jersey limited partnership fund. There are currently no exceptions to this rule but most applications for approval (involving submission of the draft prospectus for review) are dealt with swiftly by the JFSC.

Contents of a non-Jersey fund prospectus

While the JFSC has no set requirements as to the contents of a non-Jersey fund prospectus, it would expect the offer document to meet best international practice in providing information to investors. In particular, the JFSC would expect the offer document to contain:

  • a responsibility statement which is in accordance with published policy;
  • in the case of a non-Jersey fund "materially equivalent" to a Jersey expert fund, a clear investment warning; and
  • all the material information that investors would reasonably require and reasonably expect to have drawn to their attention for the purposes of making an informed judgement about the merits of participating in the non-Jersey fund.

Non-Jersey funds are only required to file their prospectus or any amendments thereto with the JFSC if a condition attaching to a relevant COBO consent or registration under the FS Law requires them to do so.

Other relevant briefings

The following briefings are also available:

  • Holding board meetings in Jersey or Guernsey of funds not domiciled there
  • Exemption for distributors in Jersey of certain foreign regulated funds

Glossary

CIF Law: the Collective Investment Funds (Jersey) Law 1988

CIF Permit: a permit issued by the JFSC pursuant to the CIF Law

COBO: the Control of Borrowing (Jersey) Order 1958

FSB Codes: the Codes of Practice for Fund Services Business

FS Law: the Financial Services (Jersey) Law 1998

Fund Certificate: a certificate issued by the JFSC pursuant to the CIF Law

Fund Services Business: a person carries on fund services business if by way of business the person is:

  1. a manager, manager of a managed entity, administrator, registrar, investment manager, or investment adviser;
  2. a distributor, subscription agent, redemption agent, premium receiving agent, policy proceeds paying agent, purchase agent, or repurchase agent;
  3. a trustee, custodian, or depositary; or
  4. a member (except a limited partner) of a partnership, including a partnership constituted under the law of a country outside Jersey;

in relation to an Unclassified Fund or an Unregulated Fund.

Fund Service Provider: a person who carries on Fund Services Business within the meaning of the FS Law

JFSC: the Jersey Financial Services Commission

Managed Entity: a Fund Services Business which relies upon the services of a third party service provider in Jersey to satisfy any part of its regulatory obligations

Publicly-offered: a fund is considered to be publiclyoffered where the offer is not addressed exclusively to a restricted circle of persons. An offer is not considered to be addressed to a restricted circle of persons unless:

  1. the offer is addressed to an identifiable category of persons to whom it is directly communicated by the offeror or his agent;
  2. the members of that category are the only persons who may accept the offer and they are in possession of sufficient information to be able to make a reasonable evaluation of the offer;
  3. the number of persons in Jersey or elsewhere to whom the offer is so communicated does not exceed 50; and
  4. the units which are the subject of the offer are not to be listed on any stock exchange within one year of the offer being made.

Unclassified Fund: a collective investment fund (as defined in the CIF Law) that is not a recognised fund

Unregulated Fund: a Jersey domiciled fund which is either offered to certain eligible investors only or is listed on an approved exchange or market and opts out of regulation as a fund in Jersey

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