Jersey
Table of Statutes
This is a non-exhaustive list of the main Jersey statutes
affecting offshore and non-resident business. The statutes
are listed in alphabetical order – click on the statute
for a fuller description of the statute, the legal regime
it forms part of, or in some cases the text of the law.
Banking
Business (Jersey) Law 1991
Banking Business (General Provisions) (Jersey)
Order 1991
Collective Investment Funds Law 1988
Companies (Jersey) Law 1991
Companies (Amendment No.6) (Jersey) Law 2000
Companies (Amendment No.8) (Jersey) Law 2006
The
Financial Services (Extension) (Jersey) Law
2000
Foundations (Jersey)
Law 2009
Income Tax (Jersey) Law 1961
Income
Tax (Amendment No. 28)(Jersey) Law 2007
Income Tax (Amendment No. 29)(Jersey)
Law 2007
Insurance Business (Jersey) Law 1996
Insurance Business Law (General Provisions)
(Jersey) Order 1996
Limited
Partnerships (Jersey) Law 1994
Money Laundering (Jersey) Order 1999
Proceeds
of Crime (Amendment) (Jersey) Law 2008
Trusts (Jersey) Law 1984
Trusts (Jersey) Amendment No. 4 Law
2006
Terrorist Financing Order 2001
Gambling (Remote Gambling Disaster Recovery) Regulations
2008
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In
June, 2004, the Jersey Financial Services Commission unveiled
a restructuring programme that has seen the island’s regulator
organised more along industry lines.
Under the changes, the previous divisions, Compliance, Authorisation
and Insurance, were replaced by four new divisions: Banking;
Securities (including Funds and Investment Business); Trust
Companies; and Insurance.
Each of the Divisions is headed by an Executive Director who
is responsible for regulatory and supervisory oversight of
their respective industry sectors. The Directors are responsible
for delivering regulatory and supervisory policies for those
sectors and they are assisted in this by a Research and Development
Unit.
The four Directors report to the Deputy Director General who
has overall responsibility for co-ordinating their activities,
including policy development.
Other Divisions of the Commission, including Enforcement and
the Registry report directly to the Director General. This
includes a new Risk Unit which is be responsible for risk
management, quality assurance and internal audit.
The new structure created two new Director posts. But this
has been offset by the deletion of the current Director, Authorisation
post and of other vacant posts. The changes have been self-financing
and have not resulted in an increase in headcount with the
exception of a junior post in the Registry.
Commenting at the time that the changes were announced, David
Carse, then Director General of the Commission noted: "The
new structure will provide a greater industry focus to the
Commission's work, promote greater industry expertise within
the Commission and lead to greater cohesiveness in its policy-making."
In
July 2008, the Jersey Financial Services Commission issued
an updated version of the Licensing Policy in respect of activities
that require registration under the Financial Services (Jersey)
Law 1998 (the FS(J)L).
The
document commonly referred to as the “Licensing Policy”
published on the Commission website is dated May 2002. Consequently
the policy document was prepared and approved at a time when
the only types of financial service business falling to be
registered under the FS(J)L were Trust Company Business and
Investment Business. Subsequent to May 2002, the FS(J)L has
been amended such that it is now the primary legislation for
the regulation and supervision of five financial sectors,
including:
- Fund
Services Business;
-
General Insurance Mediation Business;
-
Investment Business;
-
Money Service Business; and
-
Trust Company Business.
In
November 2007 a number of key changes to Jersey's Companies
Law were proposed by then Minister for Economic Development,
Senator Philip Ozouf, with the aim of both updating and introducing
more flexibility to the Companies Law. These came into effect
in January 2008.
One
of the most significant changes benefits the funds sector
by allowing a company to hold treasury shares. This change
means that a company can purchase its own shares and hold
them for a period of time, rather than cancel them. This means
that a company would be able to purchase its own shares from
one investor and then transfer them to a new investor.
Another
change, which was intended to benefit the trust industry,
allows a regulated financial services business to act as a
corporate director of a Jersey company. It is common practice
for directors of companies to be employees provided by a regulated
business. This change benefits the trust industry by reducing
the administration burden on companies when an employee leaves.
A
further change relaxed previously complicated, time consuming
and often expensive procedures when certain types of companies
wish to reduce capital or distribute money to shareholders.
The key to these changes is the adoption of a simplified procedure
requiring directors to make a statement in relation to the
company’s solvency. This boosts the ability of a company
to make payments to its shareholders while maintaining protection
for creditors.
Some
rules were removed under the changes, including a rule preventing
a person acquiring a company using a loan, and at the same
time using the shares in the company as security for that
loan. This rule was technically known as the prohibition against
a company giving financial assistance for the purchase of
its own shares. As with many of the changes to the Companies
Law, the new rules permitting financial assistance act to
safeguard the interests of creditors by concentrating on the
solvency of the company.
Additional
changes which simplify procedures when certain types of companies
wish to reduce capital or make distributions to shareholders
came into effect in Jersey in the second quarter of 2008.
These amendments also included new provisions designed to
make Jersey a more attractive jurisdiction for public limited
companies, including the ability for public companies to use
the suffix ‘plc’ as an alternative to ‘limited’.
These changes aimed to bring further flexibility and a far
wider range of options for legal and finance professionals
setting up companies in the Island. The measures are particularly
advantageous for those establishing special purpose companies,
group holding companies or joint venture vehicles.
In
June 2009, Jersey's Privy Council approved an order allowing
Foundations to be set up in Jersey.
Foundations
have a long history in continental Europe. In medieval times
they were used for charitable or religious purposes. They
are now commonly used for wealth management, and residents
of jurisdictions like the Middle and Far East are more familiar
with foundations than with trusts, which do not exist in their
legal systems. Jersey is the first of the Crown Dependencies
to bring in a genuine foundation product.
The
regulations will permit foundations to migrate in and out
of Jersey. They also provide for existing Jersey companies
to convert to foundations.
The
approval of the Jersey Foundations Law by Jersey’s Privy
Council was welcomed by Jersey Finance as a hugely positive
step in affirming the island as a centre of excellence for
private wealth management business.
Foundations
sit alongside existing vehicles such as companies, trusts
and limited partnerships for use in financial planning and
private wealth management strategies.
A
consultation on two new draft limited partnership laws was
published by Jersey’s Economic Development Department
in September 2009.
The
two laws are the draft Separate Limited Partnerships (Jersey)
Law 200- and the draft Incorporated Limited Partnerships (Jersey)
Law 200-. These provide respectively for the establishment
of Separate Limited Partnerships (SLPs) and Incorporated Limited
Partnerships (ILPs).
The
SLP will have legal personality but without being a body corporate
(as is already the case for a Scottish limited partnership),
whereas the ILP will be a body corporate.
The
Department believes that a wider range of uses of Jersey limited
partnerships would be made by consumers if they had the option
of creating a limited partnership with legal personality.
In
February 2010, the Jersey government requested views on whether
the Companies law should be amended to allow for the merger
of Jersey companies with foreign entities.
At
present, it is only possible to merge a Jersey company with
another Jersey company, however, in an increasingly globalized
world, more and more business is conducted across national
borders and there is a growing demand for Jersey companies
to be able to merge with foreign companies.
A
consultation paper has been prepared to give all interested
parties an opportunity to contribute their views on the proposed
changes. Issues include which foreign entities should be allowed
to merge with Jersey companies, the requirements for consent
from the Jersey Financial Services Commission and measures
for the protection of company shareholders and creditors.
Welcoming
the consultation, Minister for Economic Development, Senator
Alan Maclean, said: “I’m pleased that we’re
working on this excellent initiative which will ensure that
Jersey’s company law remains competitive. Some other
jurisdictions have already successfully introduced this added
flexibility into their company law and I’m confident
that Jersey will benefit from taking a similar approach.”
The
consultation closed on April 2, 2010.
IMF
Review 2008
The
Financial Services Commission was notified that the International
Monetary Fund would carry out a second review of Jersey’s
regulatory and supervisory framework in 2008. This review
was to examine in detail the extent of observance of Codes
of Practice. The Commission has undertaken a comprehensive
self-assessment exercise - reviewing the Island’s regulatory
framework, including practical application of the framework,
against the standards set by the international regulatory
bodies.
The
resulting IMF report, released in September 2009, praised
Jersey for the regulation and supervision of its financial
sector and for its money laundering and terrorist financing
defences. The report concluded that financial sector regulation
and supervision are of a "high standard" and "comply
well" with international standards.
The
Financial System Stability Assessment (FSSA) Update said that
Jersey has put in place a "comprehensive and robust"
framework for countering money laundering and terrorist financing
and has achieved a "high level of compliance" with
almost all aspects of the Financial Action Task Force’s
40+9 Recommendations.
The
report also said that financial soundness indicators for banks
are satisfactory and that Jersey’s banking system is
resilient to a range of shocks.
The
detailed assessment reports that form the basis for most of
the FSSA show compliance ratings for each of the international
standards against which the island has been assessed.
The
reports show that Jersey complies or largely complies with:
-
All of the Basel Committee’s Core Principles for Effective
Banking Supervision;
-
24 of the 27 Insurance Core Principles that it has been
assessed against;
-
44 of the 49 FATF Recommendations, and 15 of the 16 "core"
and "key" FATF Recommendations (Singapore and
the United States comply, or largely comply, with 43 of
the FATF Recommendations, and Belgium with 42).
These
ratings place Jersey in the "top division" of international
finance centers, including those in the G20 and European Union.
While
compliance with the International Organization of Securities
Commissions’ Objectives and Principles of Securities
Regulation was not assessed, the FSSA says it is evident that
the regulation of investment business, particularly funds
business, has been "significantly strengthened"
since the last IMF report in 2003. The FSSA also says the
trust and company services business sector enjoy a "comprehensive"
regulatory and supervisory framework.
The
FSSA highlighted two particular areas that are specific to
Jersey’s business model and where further enhancements
could be considered.
- Reference
is made to the common business practice of “up-streaming”,
where Jersey banks take deposits from customers (in Jersey
and elsewhere) and then place these funds with group entities
(mostly in the United Kingdom and other Member States of
the European Union) – providing liquidity to the group.
The report says that, in the event that the health of the
group deteriorates, the exposure of Jersey banks would require
careful management;
-
Mention is made of the reliance that may be placed by Jersey
businesses on third parties (in Jersey and elsewhere) to
have carried out customer due diligence measures for anti-money
laundering and combating the financing of terrorism (AML/CFT)
purposes. The IMF encourages the insular authorities to
review the use of this concession, which is described as
“overly generous."
Despite
the very positive assessment, the Jersey authorities accept
there is no room for complacency. In particular, the FSSA
says the Jersey Financial Services Commission will be "challenged"
to react to changes in supervisory standards coming out of
the global financial turmoil and implement them "proportionately
to the risks on the island."
In
a joint statement, the Chief Minister, Senator Terry Le Sueur,
and Commission Chairman, Colin Powell said of the report:
“This
is an excellent outcome and we attach tremendous importance
to the IMF’s assessment. We are delighted that it has
yet again demonstrated Jersey’s high degree of compliance
with international standards. The FSSA and other reports will
provide a strong base from which to continue discussions with
our European neighbours about recognizing the equivalence
of what we have in place in Jersey.”
“Jersey
remains committed to maintaining and enhancing its adherence
to international standards and welcomes the recommendations
made within the FSSA. These recommendations will assist Jersey
in further strengthening its regulatory, supervisory and AML/CFT
arrangements and in developing its capacity to deal with financial
sector shocks.”
“The
assessment reinforces Jersey’s position as a member
of the community of nations that adhere to international standards
in prudential, tax and AML/CFT areas.”
On
September 7, 2009, just prior to the publication of the IMF's
report, the Jersey Financial Services Commission published
a consultation paper disclosing proposed amendments to the
Money Laundering (Jersey) Order 2008.
The
Order requires businesses within its scope to apply customer
due diligence measures, to keep records, and to have policies
and procedures in place to prevent and detect money laundering
and terrorist financing.
Businesses
that are covered by the Order include banks, investment businesses,
trust companies, lawyers, accountants, and estate agents.
The
main purpose of the draft Money Laundering (Amendment No.
4) (Jersey) Order is to deal with some of the technical points
that were raised in IMF report.
Among
the proposed amendments, the paper also considers the possibility
of extending power to the Minister for Treasury & Resources
to apply countermeasures, where this may address a particular
risk of money laundering or terrorist financing.
The
main effects of Amendment No. 4 would be to:
-
Clarify the application of customer due diligence measures
to trusts and other legal arrangements;
-
Clearly set out the records that a Money Laundering Compliance
Officer and Money Laundering Reporting Officer must have
access to in order to carry out their statutory functions;
-
Require particular attention to be paid to implementing
policies and procedures that are sufficient to prevent and
detect money laundering and terrorist financing in subsidiaries
and branches that are situated in countries and territories
that do not, or insufficiently apply, the Financial Action
Task Force Recommendations;
-
Restate the requirement that customer information must always
be collected before a relationship is established - where
a customer is introduced by one business to another; and
-
Amend the scope of some of the concessions that may be used
when applying due diligence measures to a customer who is
considered to present a low risk of money laundering or
terrorist financing.
The
proposed amendments have been discussed with the Commission’s
Steering Group for the Prevention and Detection of Money Laundering
and Terrorist Financing.
The
consultation received seven responses, including from Deutsche
Bank International, Dominion Corporate Services, Kedge Capital
Fund Management, Lloyds TSB Offshore, Ogier, Royal Bank of
Scotland International, and S G Hambros Trust Company (Channel
Islands).
Another
endorsement of Jersey's supervisory regime was made in September
2009 when Jersey was invited to take on the role of Vice Chair
for a new Peer Review Group (PRG) set up by the OECD at its
recent Global Forum on Tax Transparency and Exchange of Information.
Almost
90 jurisdictions and a large number of international organizations
met in Mexico, and agreed that the PRG should develop terms
of reference for a robust, transparent process to assess how
effectively the international standards of transparency and
exchange of information for tax purposes are being implemented
by individual jurisdictions.
The
OECD Global Forum elected France (Francois d’Aubert)
to Chair the PRG, with India, Japan, Singapore, and Jersey
as Vice Chairs.
The
States of Jersey’s Advisor for International Affairs,
Colin Powell, who took on the role, said: “It is a great
honor to be invited to sit on the Peer Review Group as one
of the Vice Chairs. This position is further confirmation
that Jersey is seen by the international community as a cooperative
jurisdiction and as a member of the community of nations committed
to the international principles of transparency and information
exchange. I am looking forward very much to playing my part
in this important exercise.”
Jersey Trust
Law
Jersey trusts are governed by The Trust (Jersey) Law 1984,
which codified trust law largely along the lines of English-based
common law, and the Trusts (Amendment) (Jersey) Law 1989.
'Purpose' trusts were recognized in 1996.
The Trusts (Jersey) Amendment No. 4 Law 2006 introduced settlor-reserved
powers to provide greater statutory certainty regarding the
level of control and influence a settlor may exercise over
the ongoing administration of assets placed into trust. Appeal
against judgements of the Royal Court of Jersey lie to the
Jersey Court of Appeal and finally to the English Privy Council.
There is no registration
requirement for trusts and no fees are payable. The trustees
of a non-resident trust (ie one whose beneficiaries are non-resident)
are not required to submit returns or provide accounts of
the trust to the Comptroller of income tax. Trust accounts
must be maintained but audit is not required. Trust documents
are normally in English.
Jersey has ratified
the Hague Convention on the Law Applicable to Trusts. Jersey
permits migration of trusts: trusts may be 'imported' or 'exported'
by the simple replacement of trustees and by changing the
proper law of the trust.
Jersey
has not implemented legislation for Asset Protection Trusts.
However, Jersey trust law specifically excludes foreign inheritance
laws and provides for non-recognition of foreign judgements.
In
November 2000 The Financial Services (Extension) (Jersey)
Law came into effect. It is designed to protect consumers
by imposing strict new rules on companies specialising in
setting up trusts and offshore companies.
The law extends
the remit of the Financial Services Commission (FSC) under
the Investment Business (Jersey) Law 1998 over banking, investment
funds and insurance activities into trust and company management,
if the underlying activity is connected with financial services.
Under the law
trust companies need to be licensed to continue in business.
The Codes of Practice reinforce the existing requirements
for a business to know its customers, to establish the source
of their wealth and to report any suspicions. They must also
adhere to high standards of integrity, solvency and competence
including strong protections for customer money with additional
requirements for high levels of qualifications and experience.
Furthermore, the FSC will be able to visit businesses to check
that they abide by the regulations.
In 2008, the
Economic Development Department issued a consultation paper
reviewing Jersey’s trusts law. This consultation will
help ensure that Jersey’s trusts law remains up to date,
reflects recent international developments, and continues
to provide a framework that confirms Jersey’s position
as a market leader.
Senator
Philip Ozouf, the Minister for Economic Development, commented:
“The Trusts Law has been to a great extent the engine
for the growth of our financial services industry in the last
20 years. Our Law was the first in the market place and others
have followed our lead. Subsequently, trusts laws in other
places have evolved and in some cases moved ahead of our own
product. This consultation is designed to see how we should
develop our Trusts Law so as to hone our competitiveness.”
The
consultation paper covers ten 'discrete' areas of possible
reform, with proposals and questions for respondents to consider
in each case. Responses were invited by September 19, 2008.
The
Jersey Financial Services Commission launched a consultation
in March 2010 on proposed changes to trust company
business exemptions with regard to persons undertaking
the activity of a director under the Financial Services
(Jersey) Law (FS(J)L) 1998.
The
Commission said that the proposed changes would affect
in particular:
-
Individuals that act as directors, on a professional basis,
of companies that they do not beneficially own; and
-
Individuals that are currently relying on ‘the connected
persons exemption’.
The
Consultation Paper proposes the following two changes
in respect of Trust Company Business exemptions:-
-
To present a new exemption that introduces “de minimis”
provisions which will allow an individual to hold a maximum
of six directorships (in addition to any that would otherwise
be exempt) before the need to register under the FS(J)L
is triggered.
-
To restrict the scope of the ‘Connected Persons’
exemption contained in the note to paragraph 1 of the
Schedule to the Financial Services (Trust Company Business
(Exemptions No 4)) (Jersey) Order 2000.
The
Financial Services (Trust Company Business) (Exemptions Amendment
No. 2) (Jersey) Order 2010 came into force partly on November
24, 2010, when the "de minimis" provision was introduced.
The remainder of the Order, dealing with the 'Connected Persons'
exemption came into force on February 17, 2011.
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Jersey
Banking Law
Banks
are registered in Jersey under the Banking Business (Jersey)
Law, 1991 and the associated Banking Business (General Provisions)
(Jersey) Order, 1991 which is administered by the Jersey Financial
Services Commission. Applications for new banks or branches
(more usual) are carefully vetted both from a prudential point
of view and commercially.
The
Banking Law has three main objectives:
- To protect
depositors
- To protect
the reputation of Jersey as an International banking centre
- To protect
the best economic interests of Jersey.
It contains capital
adequacy rules which are stiffer than the Basle requirements.
The Commission's information requirements are contained in
Article 25 of the 1991 Law and include submission of annual
audited accounts.
Under Article
31 of the Law all registered banks are required to keep copies
of their current audited accounts available for inspection
by any person. In the case of branches, this means the Group's
published accounts and for Jersey incorporated subsidiaries,
it means their own audited accounts.
In
November 2009, Jersey’s States Assembly approved legislation
to establish a Depositors Compensation Scheme (DCS) in the
island with immediate effect.
The
key features of the DCS are that:
- It
provides protection of up to GBP50,000 per person, per Jersey
banking group, for local and international depositors in
line with international standards;
-
An interim payment of up to GBP5,000 will be made within
seven working days and the balance of compensation within
three months;
-
The GBP50,000 limit will apply per person, so a GBP100,000
deposit held in a joint account by two people would be completely
covered;
-
The DCS will be operated by an independent Board that will
be appointed by the States as soon as possible;
-
The maximum liability of the DCS will be capped at GBP100m
in any five-year period, in line with the Guernsey scheme;
and
-
The majority of the cost of the compensation will be borne
by the banking industry, with the States making up any shortfall.
In most cases, the DCS would be funded solely by levies
on the banking industry with any States contribution being
fully repaid from the liquidation proceeds.
The
DCS was designed according to the findings of expert economic
analysis of the Jersey banking sector by Oxera, and, according
to Jersey's government, the scheme is "robust, competitive
and credible."
Welcoming
the introduction of the DCS, the Minister for Economic Development,
Senator Alan Maclean, said:
“We
have always believed that the best protection for depositors
lies in the strength of Jersey's banks, all of which are in
the top 500 banking groups in the world; and in our sound
regulatory position, which is designed to prevent the bank
failure occurring in the first place.”
“However,
it is important to be able to provide depositors with the
additional reassurance that this statutory Depositors Compensation
Scheme will give. This scheme provides an appropriate level
of protection for depositors and meets the latest international
standards.”
In
February 2010, the Jersey Financial Services Commission released
a consultation paper in respect of an Order – the Banking
Business (Reporting and Disclosure) (Jersey) Order 201-. Among
several regulatory changes to reporting requirements on Jersey
banks, depositors will benefit from greater access to information
on the financial standing of bank, and relevant information
in respect of Depositor Compensation Schemes.
According
to the consultation paper, the proposed order will bring together
in one Order the existing requirements for Jersey registered
banks in respect of:
- reporting
certain financial information to the Commission; and
-
the publication of financial accounts.
The
proposed Order will also establish new requirements of banks
in respect of disclosures to the public, depositors and potential
depositors.
Certain
changes to the Banking Business (General Provisions) (Jersey)
Order 2002 (the GPO) and the Codes of Practice for Deposit-taking
Business (the Banking Codes) are proposed that would require
disclosures regarding Depositor Compensation Schemes (DCSs),
following the recent introduction of a DCS in Jersey. Changes
are also proposed to the GPO and Banking Codes to reflect
the requirements in the Proposed Order.
The
Commission said it would consult with Industry during early
2010 with a view to amending the Banking Law, and other regulatory
Laws, to enable the Minister for Economic Development to make
Orders (such as the Proposed Order) that will establish:
- requirements
in respect of the publication of financial information;
and
-
powers to object to the appointment of an auditor.
According
to the consultation paper, the Proposed Order will bring together
existing regulatory requirements in respect of the provision
of financial accounts and prudential returns to the Commission.
The Order will better establish these as requirements under
the Law, set out required timescales for the provision of
reports and establish public disclosure requirements.
In
accordance with the Deposit-taking Business Fees Notice, first
issued in January 2008 and last updated in February 2010,
a fee of GBP100 per month will be payable in respect of late
filing of reports against the deadlines set out in the proposed
Order.
Existing
banks will not be significantly affected by most of these
proposals as the requirements in respect of reporting to the
Commission already exist. The Commission intends mirroring
as far as possible the provisions established by the Financial
Services (Trust Company and Investment Business (Accounts,
Audits and Reports)) (Jersey) Order 2007. Approximately 70%
of banks are already subject to the TCB/IB Order, due to their
being multi-licensed, which should reduce the impact on industry.
According
to the Commission, the proposals are intended to establish
a basis for introducing financial reporting provisions that
are consistent with those for other sectors of industry, and
their coming into force will be dependent upon the amending
Law being adopted by the States and receiving the sanction
of Privy Council, the timescale for which is likely to be
in the first half of 2011.
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Jersey Investment
Funds
Collective
Investment Funds are supervised by the Financial Services
Commission under the Collective Investment Funds (Jersey)
Law 1988, and if 'recognised' are allowed to be marketed in
the UK. This has been a stimulus for the growth of a substantial
managed funds sector on the island. Other types of fund, both
public and private, are also licensed and supervised by the
Financial Services Commission, and are usually directed at
professional investors since public marketing would not be
allowed in most countries, particularly not in the EU. Indeed
the ability of Ireland and Luxembourg as EU members to host
funds for public distribution in the member states of the
EU has created strong competition for Jersey.
In
February, 2004, the Jersey Financial Services Commission launched
the ‘Expert Funds’ regime in the jurisdiction, which aims
to streamline the authorization process for new funds whilst
maintaining rigorous compliance criteria.
"Expert
Funds are a significant new business opportunity for Jersey,”
commented David Carse, then Director General of the Commission.
"To protect less experienced investors, we have laid down
strict criteria so that these funds will only be offered to
investors with the expertise and resources to accept any extra
degree of risk involved as a result of the nature of the investment."
Expert Funds are designed as flexible investment vehicles
that can take any form recognised under the laws of Jersey.
They may be open-ended or closed-ended, there are no investment
or gearing restrictions, and for the majority of Expert Funds
there are flexible requirements in respect of custody or prime
brokerage arrangements.
The JFSC noted that the new funds regime is particularly suited
to hedge funds and other more sophisticated investment products
aimed at the more experienced investor.
Investors in the funds must certify that they qualify as 'expert'
- meeting strict criteria laid down by the Commission - and
sign their agreement to an investment warning before investing,
explains the Commission.
According to the JFSC, it is possible to establish Expert
Funds in a matter of days. The Commission's proposals enable
'authorised functionaries' on the Island - for example, administrators,
fund managers and trustees- to self-certify Expert Funds which
meet criteria set down by the Commission in its Expert Fund
Guide.
Every Expert Fund must appoint a functionary, who must be
part of a Jersey regulated entity, and whose duties include
taking steps to satisfy themselves that the actions of the
Expert Fund's investment manager are in accordance with the
investment and borrowing restrictions set out in the prospectus.
In addition, such functionaries are also required to maintain
adequate records in the Island should they be needed for regulatory
purposes. Licensed functionaries are also subject to visits
by the Compliance Division of the Financial Services Commission.
The
first fund authorised under the Expert Fund regime was launched
in March 2004 and there were more than 400 such funds by the
end of 2008.
In
June 2004, the JFSC unveiled the Non-Domiciled Fund Guide,
which streamlines the approval process for Jersey functionaries
acting for non-Jersey funds.
According
to the Financial Services Commission, the streamlined approval
process for non-domiciled funds can be applied to funds materially
equivalent to Jersey Expert Funds, Jersey Recognised Funds
or those compliant with the latest EU UCITS Directive.
In
2007, ministerial approval was given to new proposals involving
the regulation of collective investment funds. These proposals:
- provide
a mechanism for the regulation of collective investment
funds;
- implement
international standards in the regulation of collective
investment funds in Jersey – in preparation for the
IMF assessment in 2008;
- improve
compatibility with the European Convention on Human Rights;
- enhance
the ability of the Commission to co-operate with supervising
authorities in countries and territories outside Jersey;
and
- make
other minor drafting changes
The
proposals were embodied in the Collective Investment Funds
(Amendment No. 4) (Jersey) Law 2008.
In
2008, Jersey launched two new classes of investment fund which
can be established without regulatory approval under Jersey’s
funds legislation. There are two types of unregulated fund:
- Unregulated
Eligible Investor Funds, which may be open or closed ended
and are restricted to sophisticated investors (including
those who make a minimum initial investment or commitment
of USD1 million or equivalent).
-
Unregulated Exchange Traded Funds, which must be listed
on one of 50 pre-approved stock exchanges including London,
New York, the Channel Islands Stock Exchange, AIM, Nasdaq
and Euronext.
Within
the new regime, there is no audit requirement, no limit on
the number of investors, no investment or borrowing restrictions
and no requirement for Jersey service providers. Promoters
are offered a choice of fund vehicle including company, protected
cell or incorporated cell company, unit trust or limited partnership.
Details
of the new fund regime were first announced in late 2007.
Commenting at the time, Geoff Cook, Chief Executive of Jersey
Finance Limited, said that: “This is a significant step
forwards for the Funds Industry in Jersey and is seen as a
natural progression in our goal to become the European jurisdiction
of choice for the Alternative Funds sector. Fund promoters
of high net worth, sophisticated investors and institutions
will have greater flexibility when choosing Jersey and will
be able to structure their funds to suit both commercial and
tax requirements.”
Robert
Kirkby, Technical Director, Jersey Finance, commented upon
the launch of the new fund classes: “Jersey is now a
much more attractive prospect for the typical hedge fund or
private equity manager who invariably wants a fund set up
and ready to trade in short timescales with no local minimum
regulatory input. When combined with Jersey’s convenient
time zone and its existing reputation for funds business,
we believe the new regime is a welcome addition to our capabilities
as a funds jurisdiction and will be particularly attractive
to European managers and promoters.”
The
Collective Investment Funds (Unregulated Funds) (Jersey) Order
2008 came into force on February 19, 2008.
In
June 2009, the Jersey Financial Services Commission published
a consultation paper in respect of prospectuses for collective
investment funds issued with a certificate in accordance with
the Collective Investment Funds (Jersey) Law 1988.
Currently
regulations relating to the contents of prospectuses are split
between the Collective Investment Funds (Unclassified Funds)
(Prospectuses) (Jersey) Order 1995 and the Companies (General
Provisions) (Jersey) Order 2002 depending on whether the fund
is constituted as a company or a unit trust, and whether it
is open-ended or closed-ended.
There
are no formal regulations covering certified funds constituted
as limited partnerships, limited liability partnerships or
closed-ended unit trusts. Hitherto, the Commission has imposed
requirements on those funds based upon the two existing Orders,
although there is no formal basis for doing so. The intention
is to remedy that situation by having just the one Order covering
all types of certified fund no matter how the fund is constituted
and irrespective whether it is open-ended or closed-ended.
The
Commission has therefore proposed the Collective Investment
Funds (Certificated Funds – Prospectuses) (Jersey) Order
200- as an amalgam of the two existing Orders together with
some new prospectus requirements. For example:
- The
prospectus must make clear what happens to any funds raised
if the launch of the fund does not proceed.
- The
prospectus must state any limitations on the custodian’s
duty to safeguard fund assets.
According
to a statement from the Commission, many of the new provisions
have been required for some time as a matter of best practice.
The Certified Funds Prospectuses Order puts these requirements
on a formal footing for the first time. Following the change,
the Companies (General Provisions) (Jersey) Order 2002 will
apply only to public companies that are not collective investment
funds, and the Collective Investment Funds (Unclassified Funds)
(Prospectuses) (Jersey) Order 1995 will be revoked.
The
consultation closed on August 31, 2009.
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Jersey
Money Laundering Legislation
Jersey's
first major piece of money laundering legislation was the
Money Laundering (Jersey) Order 1999. It has been amended
several times since.
Jersey moved
quickly after the September 11, 2001, terrorist attacks in
the United States to implement new legislation to counter
terrorist funding threats, including the implementation of
a Terrorist Financing Order and the UN Convention for the
Suppression of Terrorist Financing. This means that Jersey
is able to try an individual for terrorist crimes, in particular
for terrorist financing crimes, committed outside Jersey.
The Terrorist
Financing Order came into force on October 10 and is virtually
identical to the legislation introduced in the City of London
in late September 2001. The Order enables Jersey to freeze
any assets held by suspects named by the President of the
United States in Executive Orders.
Important
changes to the Island's money laundering regime were made
in 2006:
- A
risk-based approach to customer due diligence was set out,
that permits reduced or simplified measures in the case
of lower risk relationships, and requires enhanced customer
due diligence in the case of higher risk relationships.
- Much
more emphasis was placed on customer due diligence measures
other than identification and verification of identity,
and, in particular, on ongoing monitoring of unusual, complex,
and higher risk activity and transactions.
- More
customer friendly ways of verifying the identity of applicants
for business or customers were introduced, including scope
for greater reliance on a single document to verify identity
in lower risk circumstances, for example, a passport.
- Measures
to guard against the financial exclusion of Jersey residents
were clarified. In particular, in the case of a lower risk
minor, whose parent or guardian is unable to provide standard
documentation to verify the minor’s identity, identity
may be verified through use of the minor’s birth certificate.
- The
responsibilities of senior management in preventing and
detecting money laundering were emphasised as part of a
section addressing corporate governance.
A
number of amendments to the Proceeds of Crime (Jersey) Law
1999 were introduced in 2008 under the Proceeds of Crime (Amendment)
(Jersey) Law 2008 in preparation for an IMF visit.
This
law now provides the necessary legal framework to oversee
those employed in any business or profession where money laundering
or financing of terrorism could take place – including
finance companies, lawyers, accountants and insolvency practitioners.
Also
included are other groups such as estate agents, casino operators
and sellers of high value goods.
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