mutual funds

Who is caught

These instruments regulate collective investment funds (commonly called mutual funds) established or serviced in Jersey. The core framework is the Collective Investment Funds (Jersey) Law 1988 (the CIF Law), under which funds are certified or recognized and their functionaries hold permits or certificates, together with the fund services business regime under the Financial Services (Jersey) Law 1998. The Jersey Financial Services Commission (JFSC) is the regulator throughout.

Funds and functionaries

• Fund persons: Anyone holding a permit or certificate under the CIF Law, or whom the Commission reasonably believes is carrying on fund business in breach of Article 5 or Article 8 of the Law, is a fund person within scope of the intervention regime.
• Certified and unclassified funds: Jersey certified funds (regulated by certificate holders) and unclassified funds (Jersey funds that are not recognized funds) are subject to prospectus and related requirements.
• Recognized funds: Recognized funds and their functionaries acting as manager, trustee, custodian or depositary are covered by the investor compensation and civil-damages regimes.
• Functionaries and service providers: Managers, trustees, custodians, depositaries, investment managers, investment advisers, administrators and registrars connected to Jersey funds are caught, as are persons registered to carry on fund services business under the Financial Services (Jersey) Law 1998.

Fund classes and forms

• Classified fund types: Distinct application and guidance regimes exist for Jersey Expert Funds, Eligible Investor Funds, Listed Funds, open-ended classified funds offered to the public (OCIFs) and COBO-Only funds.
• Unregulated funds: The Unregulated Funds Order 2008 creates unregulated eligible investor funds and unregulated exchange traded funds, which fall outside the CIF Law where their conditions are met.
• Non-Jersey domiciled fund companies: Companies incorporated outside Jersey that issue units, and Jersey fund services businesses acting for non-Jersey domiciled funds, are addressed by dedicated exemption and notification rules.
• Retail offers by foreign persons: Foreign domiciled persons circulating offers of securities, unit trust interests or partnership interests to Retail Investors in Jersey are caught by the consent requirement under the Control of Borrowing (Jersey) Order 1958 (COBO), separate from the CIF Law.

Sources: 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 (Recognized Funds) (Compensation for Investors) (Jersey) Regulations 1988 · Collective Investment Funds (Unclassified Funds) (Prospectuses) (Jersey) Order 1995 · Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008 · Financial Services (Collective Investment Funds) (Exemptions) (Jersey) Order 2007 · Circulation in Jersey of offers to retail investors by foreign domiciled persons · Promoter Policy (Revised October 2019) · Certificate in relation to an unclassified fund (CIF/UCF) application form · Jersey Eligible Investor Fund Application Form · Jersey Expert Fund Application Form · Jersey Listed Fund Application Form for Authorisation · Notification of fund service business acting in respect of a non-domiciled collective investment fund (FSB/NDF)

Key duties

The continuing obligations fall into prospectus and disclosure duties, accounting and audit duties, compensation-scheme duties, and notification and fee duties. Several carry fixed deadlines; others are triggered by events such as marketing units, accepting an appointment, or a change in fund circumstances.

Prospectus and disclosure

• Prepare a prospectus: For certified funds the certificate holder, and for unclassified funds the manager or directors, must prepare an English-language prospectus containing the prescribed Schedule information and (for certified funds) the latest annual and half-yearly reports and audited accounts before units are marketed.
• File and give copies: Units may not be marketed unless a compliant prospectus (or one for which the Commission has consented to deviations) exists and a copy has been given to the Commission and to any trustee, custodian or depositary.
• Revise on change: The prospectus must be revised by substitution or supplement whenever a new issue of units is marketed or a significant change or new matter arises while units are being marketed.
• Investor access: Purchasers must be offered a free copy of the prospectus (and, for unclassified funds, the latest annual and any half-yearly report), sent one free on request for non face-to-face or telephone sales, and allowed free inspection at the Jersey principal place of business.

Accounts, audit and reporting

• Accounting periods: Registered fund services businesses must obtain Commission approval of a first accounting period (maximum 18 months) and subsequent periods (normally 12 months), and cannot change an approved period without approval.
• Records retention: Accounting records must be kept, stored securely, backed up, and retained for at least 10 years.
• Auditor: Only a Commission-approved auditor may be engaged; on termination the auditor must notify the Commission within 7 days of any relevant circumstances.
• Filing deadline: Financial statements must be provided to the Commission within 4 months of the accounting period end, extendable to up to 8 months in agreed special circumstances, accompanied by a declaration and auditor's report.
• Standards: Financial statements must follow IFRS, UK GAAP or another standard agreed with the Commission and give a true and fair view.

Compensation scheme (recognized funds)

• Co-operation: Functionaries of a recognized fund must co-operate with the Viscount by providing information, books and documents needed to run the compensation scheme.
• Levy contributions: Compensators must keep adequate accounting records, furnish audited fee-income statements when required, and pay any levy or interim levy by the date specified in the notice (not earlier than 4 weeks from the notice).

Notifications and fees

• Unregulated fund notice: A fund relying on the Unregulated Funds Order must give written notice of the fund's establishment to the registrar in the approved form, with a declaration that the relevant conditions are met, and must observe those conditions on an ongoing basis.
• Non-domiciled fund notification: A Jersey fund services business must file the FSB/NDF notification within 28 days of accepting an appointment for a non-Jersey domiciled fund, or at least 5 working days before appointment where COBO consent is required, and must notify the JFSC immediately of significant changes.
• Material change duty: Fund applicants (Expert, Eligible Investor, Listed and Unclassified fund forms) must notify the JFSC as soon as possible of any material change to the information supplied before the fund launches, and register principal and key persons via myProfile.
• Annual fees: CIF permit holders and other fee-paying registrants must pay annual fees; the feedback papers indicate CIF annual fees are due by 31 July and that invoiced fees must be paid within 30 days, with a 5% late-payment surcharge on unpaid amounts.

Sources: Collective Investment Funds (Certified Funds – Prospectuses) (Jersey) Order 2012 · Collective Investment Funds (Recognized Funds) (Compensation for Investors) (Jersey) Regulations 1988 · Collective Investment Funds (Unclassified Funds) (Prospectuses) (Jersey) Order 1995 · Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008 · Financial Services (Fund Services Business (Accounts, Audits and Reports)) (Jersey) Order 2007 · Feedback on Consultation No. 5 2022: Fund Fees · Feedback on Consultation No. 3 2021: Fund Services Business Fees · Feedback on Consultation Paper No. 2 2020 - Fund Services Business, AIF, CIF, CoBO and QSMA Fees · Certificate in relation to an unclassified fund (CIF/UCF) application form · Jersey Eligible Investor Fund Application Form · Jersey Expert Fund Application Form · Jersey Listed Fund Application Form for Authorisation · Notification of fund service business acting in respect of a non-domiciled collective investment fund (FSB/NDF)

Exemptions and carve-outs

The instruments provide several carve-outs, both from the permit requirement under the CIF Law and from registration under the Financial Services (Jersey) Law 1998, and they define fund structures that fall outside regulation entirely.

• Permit exemptions (1994 Order): UK-authorised insurers, EU-authorised insurers, Jersey insurance permit holders, qualifying friendly societies, and non-Jersey domiciled unit-issuing companies without an established place of business in Jersey are exempt from the Article 5(1) permit requirement.
• Unregulated funds (2008 Order): Unregulated eligible investor funds and unregulated exchange traded funds meeting the Schedule 1 or Schedule 2 conditions fall outside the CIF Law's licensing regime.
• Eligible investor fund prospectus: A Jersey eligible investor fund is exempt from the prospectus requirement under the Certified Funds Prospectuses Order 2012 provided it gives investors the prescribed investment warning.
• Non-Jersey fund companies (2007 Order): A prescribed person (a company issuing units, incorporated outside Jersey, without an established place of business there) is exempt from Article 7(1) of the Financial Services (Jersey) Law 1998, but must still comply with the specified Articles listed in that Order.
• FSB accounts relief: The Commission may exempt a registered person from all or part of the accounts, audit and reporting obligations if satisfied no client is likely to be prejudiced, subject to conditions.
• COBO retail offers: Limited exemptions apply under Article 8 of COBO where an offer is not to the public and is valid in and circulated in the UK or Guernsey with no relevant Jersey connection; no exemption exists under Article 10(1)(c) for LP interests.
• Promoter policy exclusions: The Promoter Policy does not apply to Jersey Expert Funds, Eligible Investor Funds, Listed Funds or Private Funds, which are governed by their own classification guides.

Sources: Collective Investment Funds (Certified Funds – Prospectuses) (Jersey) Order 2012 · Collective Investment Funds (Permits) (Exemptions) (Jersey) Order 1994 · Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008 · Financial Services (Collective Investment Funds) (Exemptions) (Jersey) Order 2007 · Financial Services (Fund Services Business (Accounts, Audits and Reports)) (Jersey) Order 2007 · Circulation in Jersey of offers to retail investors by foreign domiciled persons · Promoter Policy (Revised October 2019)

Enforcement and penalties

Enforcement powers across these instruments include criminal liability for accounting breaches, court-appointed management, civil damages and compensation, public warning statements, and fee surcharges.

• Criminal offence (FSB accounts): Under the Fund Services Business (Accounts, Audits and Reports) Order 2007, breach of most substantive obligations, including accounting-period approval, record keeping, auditor appointment, provision of financial statements, auditor co-operation and false declarations, is a criminal offence punishable by a fine (amount not specified in the summary).
• Appointment of a manager: Where satisfied that a prescribed circumstance exists (such as dishonesty, inadequate resources, persistent AML/CFT or Law breaches, or carrying on business without a permit), the Commission may apply to the Royal Court to appoint a manager over a fund person's affairs under Article 34A of the CIF Law.
• Civil actions for damages: The Recognized Funds (Actions for Damages) Regulations 2008 designate specified provisions whose breach can give rise to a damages claim under Article 35, insofar as they relate to a functionary acting as manager, trustee, custodian or depositary of a recognized fund.
• Prospectus compensation liability: Persons responsible for a prospectus (certificate holders, managers, directors and authorising persons) are liable to compensate purchasers who suffer loss from untrue or misleading statements or required omissions, subject to statutory defences.
• Investor compensation scheme: On a functionary's default in a recognized fund, the Viscount pays compensation up to statutory limits (fully covered to 30,000 pounds, tapering above, capped at 48,000 pounds per investor and an overall 5,000,000 pounds annual cap), funded by levies on other functionaries.
• Public warning statements: The JFSC issues public warning notices naming unauthorised entities (for example Apex Continental Bank, Euroswift Private Bank, FEAF Bank, GTFG, Nedcredit Bank, Trustshore/Integris and Wizzell Bank) and stating that conducting fund business without registration breaches the CIF Law.
• Late fee surcharge: Unpaid fees attract a 5% late-payment surcharge on the unpaid principal, applied the day after the due date and on the first day of each subsequent month.

Sources: 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 (Recognized Funds) (Compensation for Investors) (Jersey) Regulations 1988 · Financial Services (Fund Services Business (Accounts, Audits and Reports)) (Jersey) Order 2007 · Feedback on Consultation No. 5 2022: Fund Fees · Feedback on Consultation No. 3 2021: Fund Services Business Fees · Feedback on Consultation Paper No. 2 2020 - Fund Services Business, AIF, CIF, CoBO and QSMA Fees · Euroswift Private Bank (2005-10-04) · Nedcredit Bank (2005-04-26) · Apex Continental Bank PLC (2004-11-30) · FEAF Bank (2004-11-29) · Wizzell Bank (2004-09-16) · Global Trust Finance Group ("GTFG") (2004-07-23) · Trustshore Bank & Trust Corporation and Integris Group of Mutual Funds (2003-03-06)