funds

Who is caught

Jersey regulates collective investment funds principally through the Collective Investment Funds (Jersey) Law 1988, while the firms that service funds are regulated under the Financial Services (Jersey) Law 1998. Alternative investment funds and their managers sit in a parallel regime under the Alternative Investment Funds (Jersey) Regulations 2012 and the Alternative Investment Funds (Jersey) Order 2013. A web of subordinate Orders then addresses particular fund categories, prospectuses, exemptions and accounts.

• Funds and functionaries: Under the Collective Investment Funds (Jersey) Law 1988, functionaries (managers, trustees, custodians, administrators and general partners) of recognized funds, and unclassified funds themselves, are within scope.
• Fund categories: The instruments distinguish recognized funds, certified funds, unclassified funds, unregulated funds and eligible investor funds, each with its own rules on constitution, prospectuses and conditions.
• Fund services business: The Financial Services (Jersey) Law 1998 and the Financial Services (Financial Service Business) (Jersey) Order 2009 bring fund services business and AIF services business providers (managers, administrators, registrars, investment managers and advisers, distributors, agents, trustees, custodians, depositaries) into registration under their listed classes.
• Alternative investment funds: The AIF Regulations 2012 capture AIFs, the relevant AIF entity (company, trustee, general partner or LLC manager), AIFMs, their principal and key persons, and service providers; the AIF Order 2013 prescribes depositary and AIFM services and an approval regime for service providers.
• Offers of fund interests: The Control of Borrowing (Jersey) Order 1958 subjects the raising of money and the circulation in Jersey of offers of units in unit trust schemes, and the establishment of Jersey fund vehicles, to Commission consent.

The Financial Services Commission (Jersey) Law 1998 confirms that collective investment fund functionaries and certificate holders, and alternative investment fund service providers, fall within the JFSC's supervisory remit.

Sources: Alternative Investment Funds (Jersey) Regulations 2012 · Alternative Investment Funds (Jersey) Order 2013 · Collective Investment Funds (Jersey) Law 1988 · Collective Investment Funds (Certified Funds – Prospectuses) (Jersey) Order 2012 · Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003 · Collective Investment Funds (Unclassified Funds) (Prospectuses) (Jersey) Order 1995 · Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008 · Control of Borrowing (Jersey) Order 1958 · Financial Services (Jersey) Law 1998 · Financial Services (Financial Service Business) (Jersey) Order 2009 · Financial Services Commission (Jersey) Law 1998

Key duties

Authorisation

• Permits and certificates: Under the CIF Law 1988, functionaries of recognized funds must hold a permit, and unclassified funds must hold a certificate, before carrying on the relevant activity in or from Jersey.
• AIF certificate: Under the AIF Regulations 2012, an AIF entity must hold a JFSC certificate before the AIF carries on business and must apply in the prescribed manner.
• Fund services registration: Persons carrying on fund services business or AIF services business must register under the Financial Services (Jersey) Law 1998 in the class corresponding to the activity listed in the 2009 Order.
• Service provider approval: Under the AIF Order 2013, a service provider must be approved by the Commission before carrying out a prescribed service, unless deemed approval applies.

Notifications and governance

• Principal and key persons: Permit, certificate and AIF certificate holders must notify the Commission of changes in principal persons, key persons (including compliance, money laundering compliance and money laundering reporting officers) and shareholding or control; failure to notify is itself a breach.
• Display: Permit, certificate and AIF certificate holders must display their permit or certificate and any attached conditions.
• Auditor communication: Auditors and approved professionals of permit, certificate and registered persons must communicate specified matters to the Commission.
• Codes of practice: Holders and registered persons must comply with applicable codes of practice issued under the CIF Law, the Financial Services Law and the AIF Regulations.

Prospectuses

• Certified funds: Under the Certified Funds Prospectuses Order 2012, certificate holders must prepare a compliant English-language prospectus, give a copy to the Commission and any trustee, custodian or depositary before marketing, revise it on significant change, and make it available to investors.
• Unclassified funds: The Unclassified Funds Prospectuses Order 1995 requires a compliant prospectus to be prepared, filed with the Commission and the trustee or custodian, revised on significant change, and offered to purchasers.
• Recognized funds: Under the Recognized Funds Rules Order 2003, managers must prepare, publish and keep accurate a prospectus and produce annual and half-yearly reports.

Accounts, audit and reporting

• Fund services business accounts: The Fund Services Business (Accounts, Audits and Reports) Order 2007 requires Commission-approved accounting periods, accounting records kept and retained for at least 10 years, use of a Commission-approved auditor, and financial statements provided to the Commission within 4 months of period end (extendable to up to 8 months), with a declaration and auditor's report.
• Recognized fund permit conditions: The Permit Conditions for Functionaries Order 1988 requires relevant holders to maintain financial resources, submit annual, quarterly and monthly financial statements, appoint qualified auditors, keep prescribed records, and hold client money on trust in designated accounts.
• Compensation scheme reporting: Under the Recognized Funds (Compensation for Investors) Regulations 1988, functionaries must co-operate with the Viscount, keep accounting records, furnish fee-income statements with an auditor's report when required, and pay any compensation levy.

Sources: Alternative Investment Funds (Jersey) Regulations 2012 · Alternative Investment Funds (Jersey) Order 2013 · Collective Investment Funds (Jersey) Law 1988 · Collective Investment Funds (Certified Funds – Prospectuses) (Jersey) Order 2012 · Collective Investment Funds (Recognized Funds) (Compensation for Investors) (Jersey) Regulations 1988 · Collective Investment Funds (Recognized Funds) (Permit Conditions for Functionaries) (Jersey) Order 1988 · Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003 · Collective Investment Funds (Unclassified Funds) (Prospectuses) (Jersey) Order 1995 · Financial Services (Jersey) Law 1998 · Financial Services (Financial Service Business) (Jersey) Order 2009 · Financial Services (Fund Services Business (Accounts, Audits and Reports)) (Jersey) Order 2007

Exemptions and carve-outs

Several Orders carve entities out of the fund or registration regimes, either because they are regulated elsewhere, lack a Jersey presence, or meet prescribed conditions.

• Permit exemptions: The Permits (Exemptions) Order 1994 exempts from the Article 5(1) permit requirement certain UK-authorized and EU-authorized insurers, Jersey insurance permit holders, friendly societies, and non-Jersey domiciled companies issuing units that have no established place of business in Jersey.
• Securitisation vehicles: The Restriction of Scope Order 2000 removes special purpose securitisation or asset-repackaging schemes from the definition of a collective investment fund, provided the prescribed bold-type warning appears in the offer document.
• Unregulated funds: The Unregulated Funds Order 2008 places unregulated eligible investor funds and unregulated exchange traded funds outside the CIF Law regime where the structural, registered office, registrar-notice and investor conditions are met.
• AIF exemptions: The AIF Order 2013 exempts AIFs holding specified recognized fund or Article 8B certificates with Commission permission to market in the UK, EU or EEA, and exempts certain AIFMs from the approval requirement in defined circumstances.
• Non-Jersey fund companies: The Financial Services (Collective Investment Funds) (Exemptions) Order 2007 exempts qualifying non-Jersey domiciled unit-issuing companies from Article 7(1) registration, while Articles 12, 23 to 39 and 41 of the Financial Services Law continue to apply.
• QSMA operators: The Qualifying Segregated Managed Accounts Exemption Order 2014 exempts operators meeting its conditions from most of the Financial Services Law for QSMA activity, subject to continuing conduct and Commission-powers provisions.
• Restricted investment business: The Restricted Investment Business Exemption Order 2001 exempts functionaries of professional investor regulated schemes from Article 7 registration where investors meet the subscription or professional-investor threshold and sign the prescribed warning, with specified Articles still applying.
• Eligible investor fund prospectus: Under the Certified Funds Prospectuses Order 2012, a Jersey eligible investor fund is exempt from the prospectus requirement if it gives investors the prescribed investment warning.
• Certified fund audit: The Companies (Exemptions) Order 2014 allows a certified fund company to disapply the statutory audit requirement by resolution in prescribed circumstances.
• Advertising: The Financial Services (Advertising) Order 2008 excludes certain fund prospectuses from parts of its advertising requirements.

Sources: Alternative Investment Funds (Jersey) Order 2013 · Collective Investment Funds (Certified Funds – Prospectuses) (Jersey) Order 2012 · Collective Investment Funds (Permits) (Exemptions) (Jersey) Order 1994 · Collective Investment Funds (Restriction of Scope) (Jersey) Order 2000 · Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008 · Companies (Exemptions) (Jersey) Order 2014 · Financial Services (Advertising) (Jersey) Order 2008 · Financial Services (Collective Investment Funds) (Exemptions) (Jersey) Order 2007 · Financial Services (Investment Business (Qualifying Segregated Managed Accounts – Exemption)) (Jersey) Order 2014 · Financial Services (Investment Business (Restricted Investment Business – Exemption)) (Jersey) Order 2001

Enforcement and penalties

Enforcement is spread across the fund Laws, the Financial Services Law and the Financial Services Commission Law; the civil penalty power and the criminal offences sit in different instruments and should be kept distinct.

• Civil financial penalties: The Financial Services Commission (Jersey) Law 1998, Articles 21A to 21G, lets the Commission impose civil financial penalties on registered persons, principal persons and key persons for specified contraventions, with a late payment surcharge and enforcement for non-payment.
• CIF Law offences: Under the CIF Law 1988, misleading statements or practices in relation to a fund, obstruction of investigations, and aiding and abetting breaches are offences carrying penalties.
• Financial Services Law offences: The Financial Services (Jersey) Law 1998 prohibits unauthorised financial service business and creates offences of insider dealing, market manipulation and providing misleading information.
• Fund services accounts offences: The Fund Services Business (Accounts, Audits and Reports) Order 2007 makes breach of its accounting-period, record-keeping, auditor and financial-statement obligations, and false declarations, a criminal offence punishable by a fine.
• Supervisory and intervention powers: The CIF Law, the Financial Services Law and the AIF Regulations empower the Commission to require information and documents, issue directions, conduct investigations, enter and search premises, and issue public statements, with associated appeal rights.
• Appointment of a manager: The Collective Investment Funds (Appointment of Manager) Order 2008 and the Financial Services (Appointment of Manager) Order 2008 set out the prescribed circumstances in which the Commission may apply to the Royal Court to appoint a manager over a fund person's or registered person's affairs.
• Civil liability: Civil actions for damages are available under Article 35 of the CIF Law as delineated by the Recognized Funds (Actions for Damages) Regulations 2008, and the prospectus Orders impose compensation liability for untrue or misleading prospectuses.

Sources: Alternative Investment Funds (Jersey) Regulations 2012 · Collective Investment Funds (Jersey) Law 1988 · Collective Investment Funds (Appointment of Manager) (Jersey) Order 2008 · Collective Investment Funds (Certified Funds – Prospectuses) (Jersey) Order 2012 · Collective Investment Funds (Recognized Funds) (Actions for Damages) (Jersey) Regulations 2008 · Collective Investment Funds (Unclassified Funds) (Prospectuses) (Jersey) Order 1995 · Financial Services (Jersey) Law 1998 · Financial Services (Appointment of Manager) (Jersey) Order 2008 · Financial Services (Fund Services Business (Accounts, Audits and Reports)) (Jersey) Order 2007 · Financial Services Commission (Jersey) Law 1998