In 2016 the JFSC issued x3 consultations, as follows, will you be ready for their application?

1. Outsourcing +
2. AML +
3. Private fund consultation papers

Remind yourself of what is coming…..

Outsourcing consultation

In July 2016 the JFSC issued a consultation paper about proposed amendments to its outsourcing policy.

It aims to eliminate the confusion historically caused by the distinction between outsourcing and delegation and amend the scope to include all outsourced activity that may have a material impact on regulated activity.

The proposed policy will result in an increase in the costs associated with outsourcing and make an already highly regulated entity subject to additional procedural burdens.

1. One of the issues with the proposed revised outsourcing policy is that it now requires a registered person to provide notice to the JFSC of its intention to outsource any material activities or to make material changes to any existing arrangements. Registered persons must procure a ‘no-objection’ from the JFSC in respect of the outsourcing and cannot proceed until the no-objection has been received.
2. Also, as part of any arrangements sought to be put in place, the registered person must conduct due diligence on any service provider that may be appointed.

These matters will increase YOUR corporate governance required (and evidence to be maintained thereof) regarding;

• internal arrangements to be put in place to ensure adherence to the revised policy, and
• may potentially require the re-negotiation of existing contracts, with costs of additional warranties that may be requested.

The consultation closed at the end of September, AND the intention is that the revised outsourcing policy will come into force in the first quarter of 2017; however, no response to industry feedback has been issued by the JFSC since the end of the consultation period, so the timing remains uncertain.

AML consultation

This consultation, published on September 23, 2016, sought input on the proposed new fund’s section to the Anti-money Laundering/Combating the Financing of Terrorism (AML/CFT) Handbook for the regulated financial services business.

The new section is aimed at providing additional clarification and guidance on certain aspects of the AML/CFT regime and, as such, it would not amend any existing statutory or regulatory AML/CFT obligations for funds or fund operators, nor would it contain any new codes of practice.

Following a November 15, 2016, briefing session on the proposals hosted by the JFSC for individuals in the fund’s sector on the consultation, the consultation closed on November 25, 2016.

Private fund consultation paper

In August 2016 the Jersey Financial Services Commission (JFSC) issued a consultation paper about the proposed rationalisation and consolidation of Jersey’s private funds and unregulated funds regimes.

The paper is the result of work undertaken by a funds working group comprised of members of the government, the JFSC, Jersey Finance, the Jersey Funds Association and industry experts. It aims to simplify Jersey’s fund’s legislation and regulation process while retaining flexibility and innovation.

In summary, the consultation paper proposes to;

• introduce the new Very Private Placement Fund Guide to provide greater certainty on the eligibility conditions and regulatory approach to the authorisation process for very private funds (to be re-branded subject to consultation);
• introduce a new and universal definition of ‘professional investor’ to avoid the uncertainty that is created by having multiple non-retail investor definitions spread across the Private Placement Fund Guide, the Professional Investor-regulated Scheme orders, the Expert Fund Guide, the Restriction of Scope Order and the Unregulated Funds Order;
• introduce modern regulatory powers in the Control of Borrowing (Jersey) Order (COBO) 1958 Law, including supervision, enforcement and cooperation powers in line with the powers available to the JFSC under the Collective Investment Funds (Jersey) Law 1988;
• phase out COBO-only funds, which have seen a decline in applications since the introduction of private placement funds in 2012; and
• phase out unregulated exchange traded funds, which the JFSC has seen being misused, given that they can be established simply by giving notice to the Companies Registry (as long as they are listed on a prescribed exchange) with no restrictions in relation to the number or types of investor or a minimum investment amount.