Since 2012, the Jersey Expert Fund (the "JEF") has been a popular choice for fund promoters wanting to establish a fund in Jersey with no limit on the number of investors targeted or admitted.
Investors must either make a minimum initial investment or commitment into the JEF of USD$100,000 (or other currency equivalent) or otherwise fall within at least one of the other 9 (nine) limbs of the definition of an "Expert Investor" set out in the Jersey Expert Fund Guide (the "JEFG") published by the Jersey Financial Services Commission (the "JFSC") [link here].
An Expert Investor that is a discretionary investment manager may invest on behalf of non-expert investors provided that it is satisfied that the investment is suitable for its underlying investors, and that its underlying investors are able to bear the economic consequences of investment in the JEF.
Key Features of a JEF include:
- A straightforward application and approval process, which can be issued in respect of the JEF in as little as 3 (three) working days from the point of filing a complete application, subject to all personal questionnaires having been previously approved (see below for further details on personal questionnaires).
- A JEF may be open or closed-ended. Where a JEF is open-ended it must appoint a Jersey custodian, However, where the JEF is a hedge fund, a Jersey custodian is not required, provided the JEF appoints a prime broker with a credit rating of A1/P1.
- A JEF can be established in the form of a Jersey company (including a protected cell company or an incorporated cell company), a Jersey limited partnership, separate limited partnership or incorporated limited partnership, or a Jersey unit trust. A Jersey limited liability partnership cannot carry on the business of a collective investment fund in Jersey.
- A JEF which takes the form of a unit trust or limited partnership must have a Jersey trustee/general partner, which in turn must have at least two Jersey-resident directors and a JEF that takes the form of a company must have at least two Jersey-resident directors.
- Each JEF must appoint an auditor.
- A JEF requires an offer document, which complies with the relevant requirements for Jersey collective investment funds and JEFs, together with all information that target investors would reasonably require to enable them to make an informed judgement about an investment in the JEF.
- A JEF may be listed on a stock exchange provided that the stock exchange permits restrictions on transfers of interests, so as to ensure that only Expert Investors become registered holders of interests in the JEF.
Service Providers to the JEF
- The promoter of a JEF does not require the prior approval of the JFSC. However, the JEF's investment manager/advisor must be of good standing and, in particular, must: not have had any convictions or disciplinary sanctions imposed on it; be solvent; where a non-Jersey entity, be regulated in relation to managing or advising on investment funds in an OECD state or jurisdiction or any other state or jurisdiction with which the JFSC has entered into a Memorandum of Understanding (or equivalent) on investment business and collective investment funds or (if a Jersey entity) must be approved by the JFSC; have relevant experience in managing/advising funds using similar investment strategies to those to be adopted by the JEF; and satisfy the JFSC's principles around corporate governance by maintaining an appropriate span of control over its business.
- A JEF must appoint a Jersey based service provider (the "Jersey service provider"), such as an administrator or manager (or in the case of a closed-ended unit trust, a trustee), which is appropriately regulated in Jersey, with its own staff and office on Islands. This Jersey service provider will be required to monitor the investment manager/advisor's compliance with any investment or borrowing restrictions set out in the JEF's offering document and must have access to the investment manager's/advisor's records in order to do so.
- Each Jersey service provider to the JEF must be registered under the Financial Services (Jersey) Law 1998 and comply with the Code of Practice for Fund Services Business issued by the JFSC.
- Directors and certain other "principal persons" of JEFs are required to submit "personal questionnaires" to the JFSC and to meet the JFSC's assessment of them as "fit and proper". This process can take several weeks and involves certain criminal record checks. Accordingly, personal questionnaires are generally filed early on in the fund establishment process and in advance of the preparation of the JEFs fund documentation.
The Alternative Investment Fund Managers Directive (the "AIFMD")
- JEF's can be marked into the UK/EU/EEA under AIFMD through national private placement regimes. There are no additional regulatory consents required in Jersey in this respect provided the JFSC have been notified of this intention as part of the JEF's application.
- Where the JEF is proposed to be an AIF (i.e. marketed into the UK/EU/EEA), the offering document must also comply with the disclosure requirements of the Code of Practice for Alternative Investment Funds and AIF Services Business issued by the JFSC (the "AIF Code"), which essentially mirror the transparency and asset stripping provisions of the AIFMD
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.