9 Certified Funds
9.1 The on-site examination program for 2014 consisted of a combination of general Supervision examinations of certified funds against the requirements of the Collective Investment Funds (Jersey) Law 1988 and CIF Codes, as well as a thematic review: ‘Eligibility of Investors’, focusing on investors’ eligibility against the requirements of the Expert Fund Guide.
9.2 Thematic review – Eligibility of Investors
9.2.1 The themed review was conducted on eight Jersey Collective Investment funds and resulted in a small number of findings.
9.2.2 Some findings related to investors not meeting the minimum investment criteria outlined in the fund’s constitutive documents. In one instance this was a legacy issue from a previous fund service provider. However, it is the Commission’s expectation that the new service provider would ensure that investors meet the investment criteria when conducting periodic reviews.
9.2.3 Another finding was in relation to a small number of investors in an expert fund not signing the investment risk warning required by paragraph 3.7 of the Expert Fund Guide. This warning is mandatory as it serves to satisfy the requirement that an investor understands the risks associated with investing in an expert fund.
9.2.4 A further finding involved the situation whereby a client engages an investment manager to make the investment in an expert fund on his/her behalf. The client was a non-discretionary managed client but the investment manager failed to get the client to sign the investment warning in their own right.
9.2.5 Generally most of the expert funds reviewed had appropriate policies and procedures in place to ensure that investors are eligible and meet the requirements in the Expert Fund Guide.
9.3 Supervision examinations
9.3.1 Other findings from the Supervision examinations mirror those for fund services business, but relate to the certified fund’s obligations under the CIF Codes and the Commission’s Outsourcing and Delegation Policy.
9.3.2 For example some certified funds had not conducted a business risk assessment or the business risk assessment was inadequate and did not reflect the key risks in the funds, such as the risk rating of the underlying investors.
9.3.3 Other findings relate to monitoring the performance of the service provider to which the fund activity has either been outsourced or delegated, such as the absence of an outsourcing agreement, or an agreement being in place but not properly followed. Examples include failure to conduct annual due diligence visits to Administrators to whom the fund had delegated the CDD function.
9.3.4 There were also instances of the compliance monitoring program for the fund not referring to the CIF Codes and little underlying testing being conducted. For example, for a small number of funds there was no evidence that the Administrator conducted testing to monitor, and ensure, that the fund’s investment restrictions were being adhered to.
For the full list of findings please click here
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