Jersey: Guide To Unregulated Funds In Jersey

Last Updated: 10 May 2012
Article by Mark Lewis, James Gaudin and Andrew Weaver

PREFACE

In 2008, Jersey introduced two new classes of fund which, while domiciled in Jersey, are free from regulation by the Jersey Financial Services Commission. The new classes were created by exemption from the Collective Investment Funds (Jersey) Law 1988 and are named the Unregulated Eligible Investor Fund and Unregulated Exchange Traded Fund.

This Guide is supplemental to the Appleby Guide to Jersey Investment Funds and relates to funds which meet the criteria to qualify as Unregulated Eligible Investor Funds or Unregulated Exchange-Traded Fund as further set out in this Guide. We recognise that this Guide will not completely answer detailed questions which clients and their advisers may have. The Guide is, therefore, designed as a starting point for a more detailed and comprehensive discussion of the issues.

1. UNREGULATED ELIGIBLE INVESTOR FUND

An Unregulated Eligible Investor Fund is required simply to notify the Registrar of Companies of its establishment and to include a prescribed investment warning in its offering document.

An Unregulated Eligible Investor Fund is available only to eligible investors; these will be investors who invest a minimum of US$1,000,000 (or currency equivalent) or who otherwise fall within the definition of eligible investor set out in the statutory instrument establishing the new exemption. The full definition of an Eligible Investor is included in Schedule 1. Eligible investors are deemed able to evaluate the financial risks of investing in the Unregulated Eligible Investor Fund and to bear the economic consequences of investment in the Unregulated Eligible Investor Fund including any possibility of the loss of the entire investment. Eligible investors in an Unregulated Eligible Investor Fund must acknowledge in writing receipt and acceptance of an investment warning in a prescribed form, a copy of which is included in Schedule 2.

An Unregulated Eligible Investor Fund may only list on a stock exchange which permits restrictions on transfers of interests in order to ensure that only eligible investors are permitted to invest in the fund.

2. UNREGULATED EXCHANGE TRADED FUND

An Unregulated Exchange Traded Fund is required simply to notify the Registrar of Companies of its establishment and to include a prescribed investment warning in its offering document, a copy of which is included in Schedule 3.

An Unregulated Exchange Traded Fund is not subject to the investor criteria or restrictions on transfer applicable to an Unregulated Eligible Investor Fund, however the fund must be closed-ended and the fund units must be listed only on one or more of the exchanges listed in Schedule 4 no later than 90 days after notice of the establishment of the fund is given to the Registrar of Companies (or such longer period as is approved by the Jersey Financial Services Commission).

3. GENERAL

Unregulated Eligible Investor Funds may be open-ended or closed-ended, whilst Unregulated Exchange Traded Funds may only be closed-ended, but either class of fund may take any form recognized under the laws of Jersey including a company, unit trust or limited partnership. Limited partnerships shall have at least one general partner which is a Jersey incorporated company. Unit trusts shall have a trustee or manager which is a Jersey incorporated company.

As the Unregulated Eligible Investor Fund and the Unregulated Exchange Traded Fund are not regulated, there is no requirement for a Jersey resident administrator or any other Jersey resident functionary, nor is there any requirement for Jersey resident directors. In each case, however, the registered office of the fund that is a company must be provided by a person registered in Jersey to carry on fund services business.

It is a requirement that the Unregulated Eligible Investor Fund and the Unregulated Exchange Traded Fund must have procedures in place to ensure that the conditions applicable to the fund continue to be satisfied.

SCHEDULE 1

WHO IS AN ELIGIBLE INVESTOR?

  1. For the purposes of this Schedule, an eligible investor in relation to a fund is a person who at the time of making in relation to the fund a subscription, purchase, or exchange, referred to in paragraph 4 or an acquisition referred to in paragraph 5 is a person specified in any of the clauses of sub-paragraph (2).
  2. The following persons are specified for the purposes of sub-paragraph (1)–

    1. a person who has agreed to pay consideration of not less than one million United States dollars, or the equivalent of that amount in another currency, for the subscription, purchase, exchange or acquisition;
    2. a person whose ordinary business or professional activity includes or could be reasonably expected to include–

      • the acquisition, underwriting, management, holding or disposal of investments, whether as principal or agent, or
      • the giving of advice on investment;

    3. subject to sub-paragraph (3), an employee, director or shareholder of, or consultant to, a person specified in clause (b);
    4. a functionary in relation to the fund or an associate of such a functionary;
    5. subject to sub-paragraph (3), a person who –

      • is an employee, director or shareholder of, or consultant to, such a functionary or associate, and
      • in making the relevant subscription, purchase, exchange or acquisition would acquire units in the fund as remuneration, or reward, as such an employee, director or shareholder or consultant;

    6. an individual whose property has a total market value of not less than 10 million United States dollars or the equivalent of that amount in another currency;
    7. a company, partnership, limited partnership or limited liability partnership, trust, or unincorporated association, in relation to which one or both of the following requirements is met –

      • its property (or its property and that of its associates) has a total market value of not less than 10 million United States dollars or the equivalent of that amount in another currency,
      • every shareholder of the company, every partner of the partnership, limited partnership or limited liability partnership, every beneficiary of the trust or every member of the association (as the case requires) would, himself or herself, be an eligible investor in relation to the fund if he or she made in relation to the fund a subscription, purchase, or exchange, referred to in paragraph 4 or an acquisition referred to in paragraph 5;

    8. a wholly-owned subsidiary of a company that satisfies clause (g);
    9. a trustee of a trust established by a person who is specified in any of clauses (b), (c), (d), (f), (g) and (h) or is an employee, director, shareholder, or consultant, specified in clause (e)(i);
    10. a trustee of a trust established for the benefit of –

      • a person who is specified in clause (b) or (c) or is an employee, director, shareholder, or consultant, specified in clause (e)(i),
      • any one or more persons in any one or more of the following classes –

        1. the spouse or civil partner of a person specified in sub-clause (i),
        2. the issue of such a person,
        3. the dependants of such a person, or

      • a person specified in sub-clause (i) and any one or more persons in any one or more of the following classes–

        1. his or her spouse or civil partner,
        2. his or her issue,
        3. his or her dependants; or

    11. a person who in making the subscription, purchase, exchange or acquisition is acting as or for a public sector body.

  3. For the purposes of –

    1. sub-paragraph (2)(c), a reference to a shareholder of a person specified in subparagraph (2)(b) is a reference to a shareholder in respect of whom the person has signed a declaration that the investment is suitable for the shareholder and that the shareholder is able to bear the economic consequences of the investment, including the possibility of the loss of the entire investment; or
    2. sub-paragraph (2)(e), a reference to a shareholder of a functionary or associate specified in sub-paragraph (2)(d) is a reference to a shareholder in respect of whom the functionary or associate (as the case requires) has signed a declaration that the investment is suitable for the shareholder and that the shareholder is able to bear the economic consequences of the investment, including the possibility of the loss of the entire investment.

  4. To calculate the total market value of an individual's property for the purposes of subparagraph (2)(f) –

    1. add the market value of the movable and immovable property (in Jersey and elsewhere) of the individual (determined as if there were no liability in respect of any of that property) to the market value of the movable and immovable property (in Jersey and elsewhere) of the individual's spouse (determined as if there were no liability in respect of any of that property);
    2. deduct any liability that is secured over that property of the individual by mortgage, charge or other security or encumbrance;
    3. deduct any liability that is secured over that property of the individual's spouse by mortgage, charge or other security or encumbrance;
    4. deduct any liability of the individual that is not secured as referred to in clause (b); and
    5. deduct any liability of the individual's spouse that is not secured as referred to in clause (c).

  5. However, if the sum of the deductions that would be made under sub-paragraph (4)(c) and (e) exceeds the total market value of the movable and immovable property (in Jersey and elsewhere) of the spouse, then –

    1. treat the latter total market value as zero; and
    2. do not make the deductions referred to in sub-paragraph (4)(c) and (e).

  6. A reference to property in sub-paragraph (4) or (5) shall not include the individual's principal residence, or the spouse's or civil partner's principal residence.
  7. For the purposes of sub-paragraph (2)(g)(i), except in the case to which sub-paragraph (8) applies, to calculate the total market value of the property of a company, partnership, limited partnership or limited liability partnership, trust, or unincorporated association –

    1. find the total market value of its movable and immovable property (in Jersey and elsewhere) as if there were no liability in respect of that property;
    2. deduct any liability that is secured over that property by mortgage, charge or other security or encumbrance; and
    3. deduct any liability of the company, partnership, limited partnership or limited liability partnership, trust, or unincorporated association, being a liability that is not so secured.

  8. For the purposes of sub-paragraph (2)(g)(i), in the case where the total market value of the property of a company, partnership, limited partnership or limited liability partnership, trust, or unincorporated association, and of its associates, is to be calculated –

    1. find the total market value of its and their movable and immovable property (in Jersey and elsewhere) as if there were no liability in respect of that property;
    2. deduct any liability that is secured over that property by mortgage, charge or other security or encumbrance; and
    3. deduct any liabilities of the company, partnership, limited partnership or limited liability partnership, trust, or unincorporated association, and of its associates, being liabilities that are not so secured.

  9. For the purposes of this paragraph –

    "associate" means –

    1. in relation to a company –

      • a company that is a subsidiary or a holding body of the first-mentioned company or a subsidiary of any such holding body,
      • an individual, partnership, limited partnership or limited liability partnership, trust, or unincorporated association that has direct or indirect control of the first-mentioned company, or
      • a company that is directly or indirectly controlled by any such individual, partnership, limited partnership or limited liability partnership, trust, or unincorporated association; or

    2. in relation to an individual, partnership, limited partnership or limited liability partnership, trust, or unincorporated association, a company directly or indirectly controlled by the individual, partnership, limited partnership or limited liability partnership, trust, or unincorporated association;

    "holding body" has the same meaning as in the Companies (Jersey) Law 1991;

    "public sector body" means –

    1. the States or the government of any country (or territory) outside Jersey;
    2. a local government of any part of a country (or territory) outside Jersey;
    3. any international organization the members of which include Jersey or a member state of the European Economic Community; or
    4. the central bank of any sovereign State, the European System of Central Banks or any other system of central banks;

    "subsidiary" has the same meaning as in the Companies (Jersey) Law 1991;

    "wholly-owned subsidiary" has the same meaning as in the Companies (Jersey) Law 1991.

INVESTMENT MANAGER WHO INVESTS IN FUND ON BEHALF OF NON-ELIGIBLE INVESTORS

  1. This paragraph applies in the case where a person –

    1. applies for the subscription, purchase, or exchange, of units in the fund as an investment that is, directly or indirectly, for or on behalf of investors who are not eligible investors; or
    2. acquires units in the fund on a stock exchange or stock market as an investment that is, directly or indirectly, for or on behalf of investors who are not eligible investors.

  2. In that case, a declaration referred to in paragraph 4(2)(b) in relation to the subscription, purchase or exchange, or a declaration referred to in paragraph 5(2)(c) in relation to the acquisition, being a declaration that is signed by the person referred to in sub-paragraph (1), is not complete unless it contains an additional declaration signed by the person that he or she is satisfied –

    1. that the investment is suitable for the investors referred to in sub-paragraph (1)(a) or (b), as the case requires; and
    2. that they are able to bear the economic consequences of the investment, including the possibility of the loss of the entire investment.

SCHEDULE 2

WARNING TO ELIGIBLE INVESTOR IN AN UNREGULATED ELIGIBLE INVESTOR FUND

"This fund has been established in Jersey as an unregulated eligible investor fund. It is only open to eligible investors (within the meaning of Schedule 1 to the Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008).

This fund has not been approved or authorized by the Jersey Financial Services Commission. The fund is not regulated by the Jersey Financial Services Commission and is only suitable for professional or experienced investors, or those who have taken appropriate professional advice. Regulatory requirements, which may be seen as necessary for the protection of retail or non-expert investors, do not apply to unregulated funds.

By declaring that you have received this warning and understood and accepted its terms you are expressly agreeing that you are an eligible investor within the meaning of Schedule 1 to the Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008. You are also expressly agreeing that you accept the risks in the investment accordingly.

If you are an investment manager acquiring units in this fund as an investment that is, directly or indirectly, for or on behalf of persons who are not eligible investors (within the meaning of Schedule 1 to the Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008), by additionally declaring that you are satisfied that the investment is suitable for those investors and that they are able to bear the economic consequences of the investment, including the possibility of the loss of the entire investment, you are declaring that you have sufficient information in order to be satisfied as to the truth of that statement.

You are wholly responsible for ensuring that all aspects of this fund are acceptable to you (and to any persons referred to in the preceding paragraph). Investment in an unregulated fund may involve special risks that could lead to a loss of all or a substantial portion of that investment. Unless you (and those persons, if any) fully understand and accept the nature of this fund and the risks inherent in investing in this fund you should not invest in this fund."

SCHEDULE 3

WARNING ON OFFER DOCUMENT OF UNREGULATED EXCHANGE TRRADED FUNDS

A prospectus relating to the fund must contain a prominent warning in the following words –

"This unregulated exchange-listed fund is not regulated in Jersey. The Jersey Financial Services Commission has neither evaluated nor approved –

  1. the scheme or arrangement of the fund;
  2. the parties involved in the promotion, management or administration of the fund; or
  3. this prospectus.

The Jersey Financial Services Commission has no ongoing responsibility to monitor the performance of the fund, to supervise the management of the fund or to protect the interests of investors in the fund.".

SCHEDULE 4

EXCHANGES AND MARKETS

Australia

Australian Stock Exchange

Austria

Wiener Bourse

Belgium

Euronext

Bermuda

Bermuda Stock Exchange

Bulgaria

Bulgaria Stock Exchange

Canada

- Bourse de Montreal Inc
- Toronto Stock Exchange

Channel Islands

Channel Islands Stock Exchange

China

Hong Kong Exchanges and Clearing Limited

Cyprus

Cyprus Stock Exchange

Czech Republic

Prague Stock Exchange

Denmark

Copenhagen Stock Exchange

Estonia

Tallinn Stock Exchange

Finland

Helsinki Stock Exchange

France

Euronext

Germany

Deutsche Bourse

Greece

Athens Stock Exchange

Hungary

Budapest Stock Exchange

Iceland

Iceland Stock Exchange

Ireland

Irish Stock Exchange

Italy

Borsa Italiana

Japan

- Osaka Securities Exchange
- Tokyo Stock Exchange

Latvia

Riga Stock Exchange

Lithuania

National Stock Exchange of Lithuania

Luxembourg

Bourse de Luxembourg

Malta

Malta Stock Exchange

Mexico

Bolsa Mexicana de Valores

Netherlands

Euronext

New Zealand

New Zealand Stock Exchange

Norway

Oslo Bors

Poland

Warsaw Stock Exchange

Portugal

Lisbon Stock Exchange

Romania

Bucharest Stock Exchange

Singapore

Singapore Exchange

Slovakia

Bratislava Stock Exchange

Slovenia

Ljubljana Stock Exchange, Inc

South Africa

Johannesburg Stock Exchange

South Korea

Korea Stock Exchange

Spain

Bolsas y Mercados Espanoles

Sweden

Stockholmborsen

Switzerland

Swiss Stock Exchange

United Kingdom

- London Stock Exchange (the Main Market, Alternative Investment Market ("AIM"), and Specialist Fund Market but not the Professional Securities Market)

United States of America

- American Stock Exchange
- Chicago Stock Exchange
- National Association of Securities Dealers Automated Quotations ("NASDAQ")
- New York Stock Exchange
- Pacific Exchange
- Philadelphia Stock Exchange

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Mark Lewis
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
Accounting and Audit
Anti-trust/Competition Law
Consumer Protection
Corporate/Commercial Law
Criminal Law
Employment and HR
Energy and Natural Resources
Environment
Family and Matrimonial
Finance and Banking
Food, Drugs, Healthcare, Life Sciences
Government, Public Sector
Immigration
Insolvency/Bankruptcy, Re-structuring
Insurance
Intellectual Property
International Law
Law Practice Management
Litigation, Mediation & Arbitration
Media, Telecoms, IT, Entertainment
Privacy
Real Estate and Construction
Strategy
Tax
Transport
Wealth Management
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.