As it currently stands, different legislative regimes apply to the content of a prospectus issued by a Jersey Certified Fund (that is a fund certified under Article 8(B) of the Collective Investment Funds (Jersey) Law 1988 (the 'Law')), depending on the Certified Fund's legal form and whether or not it is open or closed ended.
The current legislation is contained in the Collective Investment Funds (Unclassified Funds)(Prospectuses)(Jersey)(Order) 1995 (the 'UFPO') and the Companies (General Provisions)(Jersey) Order 2002 (the 'CGPO'). Whilst generally fit for purpose, these two orders are now dated and do not provide sufficient regulatory oversight or ease of use for modern funds practice. In particular, the orders do not meet the current IOSCO Methodology requirements and do not apply at all to partnership structures or closed ended unit trusts (although equivalent requirements have generally been applied, by analogy, by the Jersey Financial Services Commission (the 'JFSC')).
Accordingly, a new prospectus order has been made, entitled the Collective Investment Funds (Certified Funds – Prospectuses)(Jersey) Order 2012 (the 'CFPO'). The CFPO will come into force on 17 November 2012 and will replace the UFPO and the CGPO. The UFPO will be revoked, and the CGPO will cease to apply to Certified Funds.
The new CFPO will provide one source of formal legislation for the content requirement of Certified Fund prospectuses, regardless of the legal form and whether they are open or closed ended. The additional disclosure language required by the Expert Fund Guide and the Listed Fund Guide will continue to apply to Expert and Listed Funds, respectively; such requirements being part of the necessary approval process for these categories of Certified Fund (although not technically a legislative requirement).
Note that the CFPO does not apply to recognized funds (UK style retail funds established in Jersey), private funds, unregulated funds or non-Jersey domiciled funds.
THE PROSPECTUS REQUIREMENTS
Under the CFPO, a prospectus must (i) be prepared in the English language and (ii) having regard to the type of prospective investor, present the information required by the CFPO in a format that is designed to be easy for such person to understand. It must include appropriate annual and half-annual reports.
The detailed content requirements are set out in the schedule to the CFPO and are based, in large part, on the requirements in the UFPO. We expect that the vast majority of the required content will already be included in a prospectus, although certain areas may require supplementing with additional details and the form of some specified disclosures will change slightly.
The JFSC may consent to derogations from the CFPO in appropriate cases, where it is satisfied that any deviation from the statutory requirements does not materially affect the substance of the prospectus and is not calculated to mislead.
Once the prospectus has been prepared, a copy must be delivered to the JFSC and to any trustee, custodian or depositary in relation to the Certified Fund.
As far as ongoing requirements are concerned, the prospectus will need to be revised or supplemented if (i) a new issue of units is marketed (e.g. another class of shares) and (ii) whilst any units are being marketed, if there is a significant change or new matter that ought to be included.
AVAILABILITY OF PROSPECTUS
A purchaser of units in a Certified Fund is entitled to a copy of the prospectus free of charge and a copy of the prospectus must also be made available for inspection by any prospective investor free of charge at all times during ordinary office hours at the certificate holder's principal place of business in Jersey.
Subject to certain exceptions, the following persons are responsible for a prospectus and may be liable to pay compensation to a purchaser of units in a Certified Fund who has suffered loss as a result of any untrue or misleading statement in the prospectus or part of the prospectus, or the omission from the prospectus or part of the prospectus of any matter required by the CFPO to be included in it:
- the certificate holder
- the manager (where the manager has prepared the prospectus on behalf of the certificate holder)
- every person who has authorised the contents of the prospectus
- the directors (where the certificate holder is a company)
- where the certificate holder is a protected cell company in respect of a cell, the directors of the cell.
Note that a trustee of a unit trust (and the directors of such trustee) may be exempted from responsibility if (a) the Certified Fund's manager, investment manager and/ or investment adviser gives notice to the JFSC, on or before the submission of the prospectus, that it is responsible for the prospectus and (b) the prospectus contains the specified statement to such effect.
A responsible person will not be liable under the CFPO for loss caused by an untrue or misleading statement, in broad terms, if he reasonably believed, having made reasonable enquiries, that the statement was true and not misleading (or any matter omitted was properly omitted) and that this state of affairs continued when the purchaser acquired the units or, if he becomes aware of the true nature of the statement, either it was too late to bring the fact to the attention of the purchaser or he took reasonable steps to bring a correction to the attention of prospective purchasers. In each case, the burden of proof is on the responsible person to demonstrate these facts.
In general, the CFPO does not apply in the case of a fund certified before 17 November 2012 until the earlier of:
- during any time when units in the Certified Fund are being marketed, a significant change occurring in the matters stated in the prospectus or a new matter arising which ought to be stated in the prospectus and
- 17 November 2013.
Specific provision is made for the application of the CFPO to funds which, immediately before the Commencement Date, were subject to the UFPO or the CGPO.
Please note that certain terms used in this briefing note have particular legal significance, not detailed in full herein. Please refer to our guide entitled 'Jersey Funds Overview' for additional information regarding Jersey funds generally.
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.
Specific Questions relating to this article should be addressed directly to the author.