Investors must either make a minimum initial investment or commitment into the JEF of USD$100,000 (or other currency equivalent) whether through the initial offering or by subsequent acquisition, or otherwise fall within at least one of the other nine limbs of the definition of an "Expert Investor" set out in the Jersey Expert Fund Guide (the "JEFG") published by the Jersey Financial Services Commission (the "JFSC") (link here). Each Expert Investor must acknowledge, in writing, a specific investment warning, confirming that they understand that the JEF is only suitable for Expert Investors.
An Expert Investor that is a discretionary investment manager may invest on behalf of non-expert investors provided that it is satisfied that the investment is suitable for its underlying investors, and that its underlying investors are able to bear the economic consequences of investment in the JEF.
Authorisation Process
To establish a JEF, a standard application form must be completed and filed with the JFSC along with a copy of the offer document in respect of the JEF, relevant fees and a declaration certifying that the JEF complies with the requirements of the JEFG.
The JEF application is a straightforward application and the approval can be issued in respect of the JEF in as little as three working days from the point of filing a complete application, subject to all personal questionnaires having been previously approved (see below for further details on personal questionnaires).
Upon completion of the JEF application, the JFSC will issue a fund certificate in relation to the JEF to:
- the JEF, where the JEF is a company;
- the trustee, where the JEF is a unit trust; and
- the general partner, where the JEF is a limited partnership.
Key features of a JEF include
- A JEF may be open or closed-ended. Where a JEF is open-ended it must appoint a Jersey custodian. However, where the JEF is a hedge fund, a Jersey custodian is not required, provided the JEF appoints a prime broker with a credit rating of A1/P1.
- A JEF can be established in the form of a Jersey company (including a protected cell company or an incorporated cell company), a Jersey limited partnership, separate limited partnership or incorporated limited partnership, or a Jersey unit trust. A Jersey limited liability partnership cannot carry on the business of a collective investment fund in Jersey.
- A JEF which takes the form of a unit trust or limited partnership must have a Jersey trustee or general partner, which in turn must have at least two Jersey-resident directors with appropriate experience and a JEF that takes the form of a company must have at least two Jersey-resident directors with appropriate experience.
- Each JEF must appoint an auditor.
- A JEF requires an offer document, which complies with the relevant content requirements for Jersey collective investment funds and JEFs set out in the JEFG and in the Collective Investment Funds (Certified Funds - Prospectuses) (Jersey) Order 2012, together with all information that target investors would reasonably require to enable them to make an informed judgement about an investment in the JEF.
- A JEF may be listed on a stock exchange provided that the stock exchange permits restrictions on transfers of interests, so as to ensure that only Expert Investors become registered holders of interests in the JEF.
Service Providers to the JEF
- The promoter of a JEF does not require the prior approval of the JFSC. However, the JEF's investment manager or advisor must be of good standing and, in particular, must not have had any convictions or disciplinary sanctions imposed on it; be solvent; where a non-Jersey entity, be regulated in relation to managing or advising on investment funds in an OECD state or jurisdiction or any other state or jurisdiction with which the JFSC has entered into a Memorandum of Understanding (or equivalent) on investment business and collective investment funds or (if a Jersey entity) must be approved by the JFSC; have relevant experience in managing or advising on funds using similar investment strategies to those to be adopted by the JEF; and satisfy the JFSC's principles around corporate governance by maintaining an appropriate span of control over its business.
- A JEF must appoint a Jersey-based service provider (the "Jersey service provider"), such as an administrator or manager (or in the case of a closed-ended trust, a trustee), which is appropriately regulated in Jersey, with its own staff and office in Jersey. This Jersey service provider will be required to monitor the investment manager's or advisor's compliance with any investment or borrowing restrictions set out in the JEF's offer document and must have access to the investment manager's or advisor's records in order to do so.
- Each Jersey service provider providing fund services business to the JEF (as specified in the Financial Services (Jersey) Law 1998 (the "FS Law")) must be registered under the FS Law to carry on fund services business and comply with the Code of Practice for Fund Services Business issued by the JFSC.
- Directors and certain other "principal persons" of JEFs are required to submit "personal questionnaires" to the JFSC and to meet the JFSC's assessment of them as "fit and proper". This process can take several weeks and involves certain criminal record checks. Accordingly, personal questionnaires are generally filed early on in the fund establishment process and in advance of the preparation of the JEF's fund documentation.
The Alternative Investment Fund Managers Directive (the "AIFMD")
- JEFs can be marketed into the UK, EU or EEA under AIFMD through national private placement regimes. There are no additional regulatory consents required in Jersey in this respect provided that the JFSC have been notified of this intention as part of the JEF's application.
- Where the JEF is proposed to be an AIF (ie marketed into the UK, EU or EEA), the offering document must also comply with the disclosure requirements of the Code of Practice for Alternative Investment Funds and AIF Services Business issued by the JFSC (the "AIF Code"), which essentially mirror the transparency and asset stripping provisions of the AIFMD.
The Proceeds of Crime (Jersey) Law 1999 (the "POCL")
The JEF will need to notify the JFSC under the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008 that it intends to carry on certain Schedule 2 activities as a fund, as specified in the POCL, and the JFSC will then issue notice that the JEF is "deemed to be registered" in respect of such Schedule 2 activities.
The information contained in this guide is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter.
