In April 2017, the Jersey Financial Services Commission ("JFSC") introduced a new private investment fund regime, the "Jersey Private Fund" ("JPF"). The introduction of the JPF amalgamated and replaced three other Jersey private fund products: the Very Private Fund, Private Placement Fund and COBO Only Fund. New applications under the older regimes are no longer possible.
Speed of establishment, together with appropriate and proportionate regulation for the sophistication of the investor base, are the unique selling points of this new fund product.
What does this mean for existing private funds?
Despite the phasing out of the aforementioned Jersey private products, existing private funds under the old regimes will be able to continue to operate as such until the end of their natural life. Alternatively, existing private funds have the ability to convert to the new JPF regime, provided key requirements are met.
Key requirements and eligibility criteria
First and foremost, a JPF requires a consent to be issued by the JSFC. For an application to the JFSC to be made, the JPF must comply with the JPF Guide, as published by the JFSC.
The key features of a JPF are as follows:
- 50 or fewer
offers/investors – marketing can only be to 50 or
fewer "professional" or "eligible" investors
(generally those investors who invest or commit to invest a minimum
of GBP250,000 or currency equivalent) and a JPF may only have a
maximum of 50 investors at any one time:
- where there are 15 or fewer offers – the DSP (defined below) may be registered for any class of Fund Services Business ("FSB"), Trust Company Business ("TCB") and/or Investment Business ("IB"); or
- where there are 16 – 50 offers – the DSP (defined below) must be registered by the JFSC as a Class V (Administrator), Class U (Manager), Class X (Investment Manager) and/or Class ZG (Trustee) of FSB.
- Structure – can be formed as a company, partnership or unit trust and, if established outside of Jersey, shall be incorporated or constituted in such equivalent form as is permitted under the laws of such country or territory outside of Jersey;
- Open or closed-ended – open-ended or closed-ended funds are permitted, provided that there are no more than 50 offers/investors in the JPF;
- Promoter – no requirement for the promoter to be approved by the JFSC, although the DSP (defined below) must conduct due diligence on the promoter;
- Directors – no requirement for Jersey-resident directors;
- Offering document – no requirement for an offering document, although where there is an offer document, it must contain all of the material information which investors (and any professional advisers) would reasonably require, and expect to find and have brought to their attention, for the purpose of making an informed judgement about the merits of investing in the JPF and the associated risks;
- Investment warning and disclosure statement – no set restrictions on investment and borrowing, but there is a requirement for a specific investment warning and disclosure statement;
- Accounts – no requirement for audited accounts, although any qualified audit must be reported (except in the circumstances when adopting modified GAAP);
- DSP – must appoint a designated service provider ("DSP"), which is registered pursuant to the Financial Services (Jersey) Law 1998 (generally the Jersey based fund administrator);
- Notice of changes – must have any notice of change or event signed off by the DSP (eg amendment of offering material, structural changes) and notified to the JFSC within 28 calendar days;
- Annual return – must file an annual return that has been signed off by the DSP;
- No Personal Questionnaires ("PQs") – no requirement for the Directors to complete and file personal questionnaires in relation to the JPF itself;
- AIFMD – additional requirements may apply where the JPF is marketed into the EU/EEA, including compliance with the applicable sections of the Jersey AIF Code; and
- No listing – a JPF must not be listed (including a technical listing) on any stock exchange.
What happens to qualifying funds
Funds qualifying under the JPF regime will receive approval within 48 hours from when a complete and satisfactory application has been received by the JFSC. At the time of writing, a one-off application fee of GBP1,105 will be due, followed by an annual fee of GBP1,000 (which shall be pro-rated from the date on which the JPF is approved).
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.