FUNDS & SECURITIES ISSUES
Frequently Asked Questions (FAQ)
|| Collective Investment Fund
| CIF Law
|| Collective Investment Funds (Jersey) Law 1988
|| Fund Services Business
|| Financial Services (Jersey) Law 1998
|| Limited Partnership
|| General Partner
|| Control of Borrowing (Jersey) Order 1958
|| Manager of a Managed Entity
Q1: If I am not sure if a fund-related activity needs authorisation from the Commission can I ask you for advice?
CIFs and FSBs are regulated under the provisions of the CIF Law and the FS(J)L respectively. Commission staff will be happy to provide general explanations of what activities these laws cover. However, Commission staff cannot provide legal advice in respect of specific circumstances and if you are in any doubt as to the position you should seek advice from a lawyer qualified in Jersey law.
Q2: How can I find out if a fund or the functionary of a fund is regulated by you?
The Commission’s website lists all regulated FSBs. On the home page, click on the “Regulated Entities” box or click here to go direct to the relevant page.
Q3: What can I do if I have a complaint against an FSB?
The Commission has issued a guidance note on consumer complaints, which can viewed by clicking here.
Q4: What are the fees charged by the Commission?
To view the Fees Notice please click here.
Q5: How do I apply for an FSB registration certificate or an additional class of FSB, and is there a fee payable?
Application for can be made on the form ‘Application for registration as a fund services business’ which is available on the Commission’s website, please click here.
A fee of £2,250 is payable in respect of each application for a registration certificate, and an additional class or classes of FSB.
Q6: Why am I charged an application fee for a new GP to hold a CIF certificate, when I also pay an application fee for the GP’s FSB registration?
The process for authorizing LPs and GPs has been split into two; the Jersey fund itself requires a certificate under the CIF Law which is issued to the GP. Meanwhile, the GP, must be registered under the FS(J)L to conduct fund services business.
Q7: What conditions will my FSB registration carry?
The conditions attaching to an FSB registration will vary according to the entity concerned. The approach adopted with respect to the FSB Codes of Practice has been to incorporate the most common conditions issued under the CIF Law into the FSB Codes of Practice with the result that those conditions do not need to be repeated in the FS(J)L registration conditions. The vast majority of registrations will, therefore, not have conditions attached with the exception of managed entities established for the purpose of acting for an expert fund, related expert funds or a materially equivalent fund. In such cases the conditions are:
||the registered person may not act for new or further funds without first obtaining the consent of an officer of the Commission;
||the registered person must appoint a person registered to act as MoME;
||the registered person must notify the Commission of its intention to change its MoME at least 28 days prior to the change
||the registered person must adhere with such notification and consent requirements as the Commission has set out in the FSB Codes of Practice as may be updated or revised from time to time;
||the registered person must permit, and shall procure that any agent or subcontractor resident or established in Jersey and appointed by the registered person permits, officers of the Commission to conduct inspections of any part of the activities in relation to which this registration is granted, and the registered person will (and will procure the agreement of any such agent or subcontractor) give all assistance in connection with any such inspection which they are reasonably able to give;
||the registered person must adhere to such advertising standards as the Commission has set out in the FSB Codes of Practice as may be updated or revised from time to time;
||the registered person must adhere to such record keeping requirements as the Commission has set out in the FSB Codes of Practice as may be updated or revised from time to time, which requirement will be satisfied where a MoME provides the registered person with the necessary means to comply; and
||the registered person must appoint a compliance officer and money laundering reporting officer, which requirement will be satisfied where a MoME provides the registered person with the necessary means to comply.
||the registered person must, where relevant, comply with the applicable sections of the Code of Practice for Alternative Investment Funds and AIF Services Business.
Q8: The FSB Codes of Practice are described as applying to managed entities that have been established for the purpose of acting for an expert fund, related expert funds or materially equivalent funds? What is meant by ‘materially equivalent’ in this context?
Reference should be made to the Non-Jersey Domiciled Fund Guide to be found on the Commission’s website by clicking here.
Any entity carrying on fund services business in Jersey in respect of a non-Jersey domiciled fund will require to be registered. Where the fund in question is materially equivalent to a Jersey expert fund, the entity need only comply with the high level principles set out in the FSB Codes of Practice together with the standard conditions set out at 7. above.
Q9: In what circumstances may a Jersey fund established prior to the introduction of the Jersey Expert Funds regime be treated as "materially equivalent" to an Expert Fund for the purposes of the FSB Codes of Practice?
The manager, GP or trustee of the fund, together with any person acting as a MoME to the manager, GP or trustee, must certify to the Commission that the fund complies with paragraphs 18.104.22.168 to 22.214.171.124 of the Non-Jersey Domiciled Fund Guide issued by the Commission in February 2007, as may be amended from time to time.
The Commission would expect the persons providing such certification to document and retain their review of the fund and may inspect the relevant documentation as part of any on-site examination. Certification should be provided in the following form:
"To the Commission,
We [ ] and [ ], being the manager/general partner/trustee (delete as appropriate) of the Fund and the MoME appointed to the manager/general partner/trustee of the Fund respectively, certify to the Commission that the Fund complies with paragraphs 126.96.36.199 to 188.8.131.52 of the Non Domiciled Fund Guide issued by the Commission in February 2007, as may be amended from time to time."
Q10: Where a managed entity does not opt to comply with the FSB Codes of Practice in full, the suggested registration conditions do not make clear to what extent the Codes should be followed. For example, does the condition that “The registered entity must adhere to such record-keeping requirements as the Commission has set in the fund services business Codes of Practice” mean that a managed entity must comply with the whole of paragraph 3.7 of the Codes or only paragraph 3.7.4 relating to how long records must be kept?
The record-keeping requirement in section 3.7 of the Codes applies in full. The Commission anticipates that this requirement will be satisfied in the vast majority of cases by the managed entity simply adopting the procedures of its MoME by way of board resolution.
It should be noted that all notification requirements set out in the Codes also apply to managed entities.
Q11: For a non-domiciled fund when must I submit the Fund Services Business/Non-Domiciled Fund notification form?
Within 28 days of the appointment of the FSB or, if COBO consent or approval is required, then at least 5 working days prior to the appointment.
Q12: Why does a Jersey GP of a non-Jersey LP not require a CIF certificate?
A non-Jersey LP is not regulated in Jersey. However, if the GP of that LP is based in Jersey, then that activity counts as fund services business for which the GP must be registered under the FS(J)L.
Q13: When does a distributor need an FSB registration, and are there any exemptions for overseas distributors?
Acting as distributor was a regulated activity for which a permit was required under the CIF. Following the integration with the FS(J)L, acting as distributor is a regulated class of FSB (Class Z) for which an FSB registration is required.
Where a distributor is established outside Jersey but acts as distributor within the Island, it will require an FSB registration unless it falls within one of the categories of exemption provided by Schedule 2, paragraph 22 of the FS(J)L. Broadly, where a distributor is authorized by the UK Financial Services Authority, it may distribute fund material in Jersey provided the fund itself is a UCITS, a Class A Scheme in Guernsey or an Authorized Fund in the Isle of Man.
Q14: Does the Financial Services (Advertising)(Jersey) Order 2008 (the "Advertising Order") apply to the circulation of prospectus or offering document which is:
The Commission does not regard the offer of securities or the circulation of a prospectus or offering document in relation to a certified fund or an unregulated fund to fall within the definition of financial service business provided at Article 2 of the FS(J)L or that such a prospectus or offering document falls within the definition of financial service advertisement provided at Article 1(1) of the FS(J)L; accordingly, such activity is not regarded as being subject to the Advertising Order.
(i) issued by a certified fund but in respect of which the consent of the Commission does not need to be obtained(1); or
(ii) issued by an unregulated fund?(2)
Note (1) A certified fund has the meaning given in the CIF Law.
Note (2) An unregulated fund is a fund established in accordance with the Collective Investment Funds (Unregulated Funds)(Jersey) Order 2008
Q15: What regulatory statement do I need to include on my letterheads and business cards?
The minimum requirement is to state that the entity is regulated by the Jersey Financial Services Commission. It is open to an entity to go on and state the types of activity for which it is authorised but there is no obligation to do so.
Q16: What fund administration activities are required to be conducted in Jersey?
This information was previously included as section 2 of part VI of the Commission' s Outsourcing Policy issued May 2011 which is superseded by the March 2017 Outsourcing Policy and Guidance Notes. However, as it generally refers to what activities can be conducted in and outside Jersey it relates more to corporate governance than outsourcing. Moreover, the existing Outsourcing Policy exempts certain funds and fund services businesses of funds from the Outsourcing Policy and these requirements exist whether the exemption is applicable or not.
2. Subscription Monies
Investors' subscription monies may be received outside Jersey as long as the money is transferred to the account of the fund within a reasonable period. Anyone receiving monies in this way would normally be a distributor or subscription agent and hold the monies in client accounts. The Commission would need to be satisfied as to the quality of the firm before allowing such a structure.
3. Accounting Records
Accounting records of a fund may be maintained outside Jersey provided the Registered Person always has access to the records e.g. by computer link, and that a backup copy of the records is retained in Jersey. The backup may be in printed form or in computer readable form. Periodic checks should be carried out in Jersey to ensure that entries are being made on an accurate and timely basis.
The Jersey office of the Registered Person should always be capable of answering any routine queries and resolving all others.
5. Valuations and Monitoring
The Commission would normally expect valuations of the fund's net asset value to be carried out in the Island. However, valuations of the fund's assets may be prepared outside Jersey where there is a reasonable rationale (e.g. where the assets are based in another jurisdiction). Depending on the frequency of the valuations, type of asset and value of the asset(s) (as a proportion of the fund's portfolio) valuations must either always be checked (e.g. large value property asset) or sample checked by the Registered Person in Jersey. Evidence of the Registered Person's valuation checks should always be available in the Island.
It will be satisfactory for the Registered Person to receive confirmation at each valuation point from the service provider that all necessary valuation procedures have been carried out and evidenced by a sign off in accordance with the service provider's internal signatory arrangements, provided the Registered Person is entirely satisfied with the service provider's control environment. It is acknowledged that it will not always be possible to complete such procedures prior to the valuation being issued but there is an expectation that such procedures would be completed within 24 hours of issuing the valuation so that any issues can be identified quickly. This must be supplemented by a detailed review of the fund valuation at a certain date and relevant reconciliation procedures and results involving the local functions once a month for each sub-fund.
The Commission would normally expect the checks undertaken by the Custodian/Trustee or other monitoring fund service provider to verify the accuracy of the valuation of the fund's assets, the fund's net asset value and compliance with investment restrictions to be carried out in Jersey. However the day-to day- work may be carried on outside Jersey provided the management and control of those tasks remains in Jersey.
Creation and cancellation instructions to the banks and the Custodian should at least be authorised in Jersey on the day of delivery unless such instructions are for the payments of amounts which are not material and within parameters set by the Registered Person. Where the Registered Person is not a signatory on bank accounts it should ensure that appropriate systems and controls exist commensurate with its business activities and that payments above set parameters and are duly authorised by the Registered Person.
7. Share Register
The share register (or equivalent) of the fund, whether the fund is a Jersey company, Jersey limited partnership or Jersey unit trust, should be available in the Island.
There should be no non-routine communication between any local fund service provider (e.g. a Custodian) and the non-Jersey fund service provider without the Jersey resident manager or fund's Governing Body being involved. The local fund service providers should always notify the Jersey resident manager or the fund's Governing Body if there is a problem.
As a minimum, all reconciliations should be reviewed, held and signed off in Jersey (e.g. cash, stock and dividends).
Q17: What are some of the considerations when a Certified Fund or a Registered Person licensed to conduct Fund Services Business under FS(J)L outsource the investment management function?
This information was previously included as section 2 of part VI of the Commission's Outsourcing Policy issued May 2011 which is superseded by the March 2017 Outsourcing Policy and Guidance Notes. However, it generally relates more to corporate governance than outsourcing. Moreover, the existing Outsourcing Policy exempts certain funds and fund services businesses of funds from the Outsourcing Policy and these requirements exist whether the exemption is applicable or not.
Prior to the appointment of a service provider, undertake a full due diligence exercise, focussing in particular, on the service provider's ability to carry out the outsourced activity and the control environment in which it operates.
Monitor the performance of the service provider on an ongoing basis by, for example, considering at board level:
a) the investment performance of the service provider against relevant benchmarks;
b) the compliance of the portfolio against its investment guidelines; and
c) receiving periodic reports from the service provider concerning the performance of the fund.
In some cases investment committees may be established who will meet periodically (independent of the fund's board or management) to discuss investment performance and report back to the full board.
3. Control and Oversight
In determining the level of control and oversight needed in any particular outsourcing proposal, the following factors can be taken into account:
a) the substance and reputation of the service provider;
b) the strength of the service provider's control environment;
c) the availability of information from the service provider;
d) whether outsourcing is in-house or external; and
e) the number and sophistication of shareholders/unitholders in the fund(s) affected by the outsourcing.
4. Code of Practice
Even taking these factors into account, monitoring and oversight of outsourcing of the investment management function will always be required in accordance with principle 3 of the relevant code of practice.