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Jersey Introduces an Unregulated Funds Regime

As the value of funds under administration in Jersey reached a new record high of £210 billion, Jersey recently widened its fund capabilities with the launch of an unregulated funds regime, to compete with other, more lightly-regulated jurisdictions.

The new regime allows eligible funds to merely notify the Jersey Financial Services Commission of their establishment, rather than going through a full authorisation process. The speed and simplicity of the system will provide Jersey with a significant advantage in competing with other European and offshore jurisdictions and will help it become a funds jurisdiction of choice, particularly for alternative/hedge funds and sophisticated investors.

Two forms of unregulated fund have been introduced; an Unregulated Eligible Investor Fund and an Unregulated Exchange Traded Fund.

A. Unregulated Eligible Investor Fund

An Unregulated Eligible Investor Fund is only available to (i) an investor who inject a minimum of US $1 million, (ii) an institutional or professional investor or (iii) other prescribed sophisticated eligible investors. All investors will be required to acknowledge in writing their acceptance of the risks involved.

The fund may be open-ended or closed-ended and may take the form of a company (or cell company), unit trust or partnership.

There will be no requirement for an Unregulated Eligible Investor Fund to have a Jersey-based administrator or custodian, nor for it to have any Jersey resident directors. There is also no need for Jersey-based auditors to be appointed to the fund.

The fund may only list on a stock exchange which permits restrictions upon transfers of interests within the fund. This is in order to ensure that only eligible investors are allowed to invest in the fund.

B. Unregulated Exchange Traded Fund

An Unregulated Exchange Traded Fund is a form of unregulated listed fund which need not be regulated by the Jersey Financial Services Commission (the “JFSC”) on the basis that it is already regulated by a stock exchange. A list of stock exchanges for which funds listed on them may classify as Unregulated Exchange Traded Funds is provided by the JFSC.

Exemption from regulation is claimed by filing a notice with the JFSC. Although the offer documentation must include an investment warning since the fund will not be regulated the JFSC does not approve such documentation.

An Unregulated Exchange Traded Fund may only take the form of a closed-ended fund, but may be established as a company (or cell company), unit trust or partnership. There is no restriction on the type of investor who may invest in this type of fund.

It is not possible for existing funds to convert to an Unregulated Exchange Traded Fund.

As with an Unregulated Eligible Investor Fund, there is no need for Jersey-based auditors to be appointed to the fund.

Conclusion

The new regime allows Jersey to compete with other jurisdictions already offering lightly-regulated fund products. In particular, Jersey will continue to make strong advances in the alternative/hedge funds market. As such, the unregulated fund regime is an exciting and innovative development for Jersey and will provide both investors and Jersey fund advisers with attractive new fund structures.

Crill Canavan’s Investment Funds Team is able to provide advice on both types of unregulated fund, alongside its existing funds expertise.For more information, please contact a member of the Investment Funds Team:-

Andrew Pinel
Advocate, Investment Funds Team
Tel: +44 (01534) 601754
Email

Paul Wilson
English Solicitor, Investment Funds Team
Tel: +44 (01534) 601751
Email

Carl O’Shea
English Solicitor, Investment Funds Team
Tel: +44 (01534) 601751
Email

David Dorgan
Jersey Solicitor, Investment Funds Team
Tel: +44 (01534) 601751
Email