Rationalisation and Consolidation of Jersey’s Private Fund and Unregulated Fund Regimes – A joint consultation paper on proposals to:

1. › introduce a new very private placement fund guide;
2. › introduce a new multi-purpose Jersey “professional investor” definition;
3. › introduce modern regulatory powers in the Control of Borrowing (Jersey) Law 1947;
4. › phase out COBO only funds; and
5. › phase out unregulated exchange-traded funds.

INTRODUCTION

As part of the continuing work to secure Jersey’s future as a leading international finance centre and to ensure that Jersey’s funds sector continues to flourish, a comprehensive jurisdictional review [PROJECT] was undertaken to consider the future direction of Jersey’s financial services industry. The project was undertaken in association with McKinsey & Company.

One of the initiatives recommended by the jurisdictional review was;

1. to simplify Jersey’s funds legislation and regulation process
2. whilst retaining flexibility and innovation.
3. Securing a competitive advantage in the fast moving funds sector means having flexible regulation with responsive processes.

This Consultation Paper arises from the work undertaken as part of the funds review project (Funds Review Project) by a working group comprised of members from the Government, the Commission, Jersey Finance Limited and industry (including the Jersey Funds Association) (together, the Working Group).

The Working Group have been tasked with the Funds Review Project. Specifically, a smaller sub-set of the Working Group (Smaller Working Group) have been asked to design a series of proposed enhancements to Jersey’s funds regime that address the jurisdictional review’s recommendation.

Subject to consultation, it is intended that the proposed enhancements which have been identified as a series of initiatives by the Smaller Working Group be divided into three separate phases of the Funds Review Project:

PHASE I

1. Which forms the basis of this Consultation Paper is aimed at rationalising Jersey’s private fund space and consolidating Jersey’s unregulated fund space is described in detail below.

Phase II

1. Which the JFSC intend to issue a Government/Commission consultation paper in respect of later this year, is aimed principally at consolidating the public fund space by reducing the number of CIF REGIMES TO THREE, namely:

(i) a new and improved Expert Fund (which will include listed);

(ii) a refined retail fund product (which will ‘wrap up’ existing Unclassified Open-Ended Funds and Recognized Funds); and

(iii) an AIFMD compliant regime.

1. Regarding the AIFMD compliant regime, the proposal that the Smaller Working Group is currently developing and intending to consult on as part of this second phase involves the conversion of the JEIF into a Jersey registered alternative investment fund (JRAIF).
2. The JRAIF will be supervised by the Commission by proxy as it will be the relevant AIFM that must be authorised and supervised by the Commission and who will be responsible for ensuring the JRAIF’s compliance with the applicable sections of the AIFMD.
3. Accordingly, it would not be necessary for the JRAIF to adhere to the Certified Funds Code.
4. Summary Rationalisation and Consolidation of Jersey’s Private Fund and Unregulated Fund Regimes Page 9 of 43 1.1.4.4
5. The JFSC will also look to reduce the existing number of FSB classes under Article 2(10) of the FSJL and stream-line the authorisation process for CIFs and FSBs as part of this second phase.

Phase III

1. Which the JFSC intend to issue a Government/Commission consultation paper in respect of next year, is aimed at reviewing the effectiveness of all the investment fund related FSJL exemptions, including the PIRS Orders. We also intend to consider what enhancements, in addition to the changes
2. to the COBO Law proposed under Phase I (i.e. the introduction of modern regulatory supervision, enforcement and co-operation powers) should be made to the COBO Law and the COBO.

What is proposed and why?

This Consultation Paper sets out the details of, and invites responses on, the proposed implementation of Phase I of the Funds Review Project, namely the rationalisation and consolidation of Jersey’s private fund and unregulated fund space which will broadly involve the:

1. introduction of a VPPF Guide;
2. introduction of a new and universal Professional Investor Definition;
3. introduction of modern regulatory powers in the COBO Law;
4. phasing out of COBO Only Funds; and
5. phasing out of Unregulated Exchange-Traded Funds.

The details of the proposed implementation of Phase I of the Funds Review Project are more fully described in this Consultation Paper when read with Appendices C and D.

Who would be affected?

The proposals in this Consultation Paper have the potential to affect

1. any person operating in Jersey’s private fund or unregulated fund space and who, for the avoidance of doubt and subject to various regulatory exemptions, may not be a registered person; and
2. any person applying to the Commission for a relevant consent in respect of a non-fund product which is a Jersey unit trust or a non-Jersey domiciled structure.

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