FUNDS & SECURITIES ISSUES

Frequently Asked Questions in respect of the change over of regulation of functionaries from the Collective Investment Funds (Jersey) Law 1988 (the “CIF Law”) to the Financial Services (Jersey) Law 1998 (the “FSJL”)

Unclassified Funds

Q1: How has the terminology in relation to funds and functionaries changed?

The migration of the regulation of functionaries to the FSJL has required the introduction of some new terminology. A glossary of terms is provided below:

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Q2: Who will require a certificate under CIF?

Certificates are now issued under CIF in relation to unclassified funds. In the case of a company issuing units, the certificate is issued to the fund company. In the case of limited partnerships and unit trusts, the certificate is issued in relation to the fund and held by the general partner or trustee, as appropriate.
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Q3: When will existing unclassified funds receive their certificate?

Unclassified funds structured as a company issuing units enjoy a grandfathering provision whereby their existing permits are deemed to be certificates; no certificate needs to be issued in such cases.

This is not the case for limited partnerships and unit trusts and the Commission is currently in the process of producing certificates for these funds.
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Q4: Do offering documents need to be altered so as to refer to the fund “certificate” rather than the permit?

Offering documents should be amended to refer to a fund certificate at the point that they are next subject to a material change.
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Q5: Who still requires a CIF permit?

Now that Amendment No. 4 to CIF has taken effect, the term “permit” only relates to recognized funds. A CIF permit is therefore only issued to functionaries acting for recognized funds.
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Q6: How have the requirements under the Control of Borrowing (Jersey) Order 1958 (“COBO”) changed?

Certified funds, that is to say, unclassified funds in relation to which a certificate has been issued, are entirely exempted from the requirements of COBO.

Whilst the Commission is still in the process of issuing such certificates, we would never the less take the view that any existing Jersey unclassified fund that is entitled to receive a certificate is able to enjoy the exemption with immediate effect. Existing COBO consents granted in relation to certified funds may therefore be disregarded.

The requirements under COBO will continue to apply to non-domiciled funds and to Jersey funds that are in the process of applying for, but have yet to be granted, a certificate under CIF.
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Q7: What are the fees charged by the Commission?

To view the Fees Notice please click here.
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Q8: Why am I charged an application fee for a new General Partner to hold a CIF certificate, when I also pay an application fee for the General Partner’s FSB registration?

The process for authorizing limited partnerships (“LPs”) and general partners (“GPs”) has been split into two; the Jersey fund itself requires a certificate under CIF which is issued to the GP. Meanwhile, the GP, must be registered under the FSJL to conduct FSB.
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Q9: Why does a Jersey General Partner of a non-Jersey Limited Partnership 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 FSJL.
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Q10: Have the Commission's timescales for processing fund applications changed?

Essentially there are no changes to the Commission’s timescales for authorizing new funds.  For unclassified funds, the time scale is 20 working days from the application and for expert and listed funds the time scale is 72 hours.  These times are on the basis of a fully completed application and satisfactory responses to our enquiries.

An entity already registered to conduct FSB, subject to any condition on its registration, need not apply in circumstances where it intends to conduct the same type of business.  If an entity does not have an existing FSB registration, the authorization process will involve submitting a full application to conduct FSB and may require a pre-authorization visit by the Funds Supervision Team.
 
The same may also be true where a further class of FSB needs to be added to an existing FSB registration.  The timing of this application will depend on the additional class of FSB requested and the classes of FSB already conducted.

Fund Services Business

Q11: When do I receive my FSB registration certificate?

FSB registration certificates are in the process of being issued. Priority is being given to those registered persons that had special conditions attached to their CIF permits in order to ensure that the same conditions attach to their FSB registration. In addition, those persons registered to act as manager of managed entities, are also being given priority.

That said, if any registered person needs to demonstrate it holds a registration certificate - perhaps to show to other regulators or listing authorities - a certificate will be issued as soon as practicable on request.

Q12: How do I apply for an additional class of FSB and is there a fee payable?

Application for an additional class of FSB can be made on the form ‘FSJ/FSB’ which is available on the Commission’s website, please click here

A fee of £1,000 is payable in respect of each application for an additional class or classes of FSB.
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Q13: What conditions will my FSB registration carry?

The conditions attaching to a 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 CIF into the Codes with the result that those conditions do not need to be repeated in the FSJL 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:

(a) The registered person may not act for new or further funds without first obtaining the consent of an officer of the Commission;

(b) The registered person must appoint a person registered to act as Manager of a Managed Entity (“MoME”);

(c) The registered person must notify the Commission of its intention to change its MoME at least 28 days prior to the change taking effect;

(d) 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;

(e) 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;

(f) 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;

(g) 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. This requirement will be satisfied where a MoME provides the registered person with the necessary means to comply; and

(h) The registered person must appoint a compliance officer and money laundering reporting officer. This requirement will be satisfied where a MoME provides the registered person with the necessary means to comply.
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Q14: What if there is a conflict between my existing CIF certificate conditions, my FSB registration conditions and the FSB Codes of Practice?

Where an entity holds both a FSB registration and a CIF certificate (for example, for a general partner or trustee), the Commission would expect that, to the extent that there is any conflict between its CIF certificate conditions and equivalent requirements under the FSJL or FSB Codes of Practice, the latter should take precedence.  This issue will be resolved as we proceed through the FSB licensing process by removing any CIF certificate conditions that are superseded by the FSB Codes of Practice, the FSJL or related Orders.

Where there is uncertainty as to the combined effect of such conditions and the new regime, the Commission will promptly assist to resolve the situation.

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Q15: 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.
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Q16: Do I have to be in full compliance with the FSB Codes of Practice immediately?

While the Codes have immediate effect, the Commission recognises that certain aspects of the Codes may take some time to implement. So long as an entity is acting in good faith and making credible efforts to comply, the Commission will be sympathetic where all aspects of the Codes are not met, and will give reasonable time for compliance.
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Q17a: 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 FSB 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 3. above. The Non-Jersey Domiciled Fund Guide is currently under review in light of these changes.
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Q17b: 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, general partner or trustee of the fund, together with any person acting as a MoME to the manager, general partner or trustee, must certify to the Commission that the fund complies with paragraphs 2.1.2.1 to 2.1.2.3 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 2.1.2.1 to 2.1.2.3 of the Non Domiciled Fund Guide issued by the Commission in February 2007, as may be amended from time to time."
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Q18: Where a managed entity opts not to comply with the FSB Codes of Practice in full, when do any conditions attaching to its registration start to apply?

Technically, the managed entity conditions cannot apply until such time as they are attached to the FSB registration. This obviously creates something of a gap for the time being therefore we are working on the MoME and managed entity registrations as a matter of priority. In the meantime, managed entities are advised to study and prepare to implement the standard conditions set out at point 13 above.
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Q19: 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.
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Q20: Do you have an interactive PDF version of the subordinated loan agreement contained in the FSB Codes of Practice?

An interactive PDF version of the subordinated loan agreement is being prepared and will shortly be available on the Commission’s website.
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Q21: When does a distributor need a 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 FSJL, acting as distributor is a regulated class of FSB (Class Z) for which a FSB registration is required.

Where a distributor is established outside Jersey but acts as distributor within the Island, it will require a FSB registration unless it falls within one of the categories of exemption provided by the Financial Services (Fund Services Business – Overseas Persons Exemption) (Jersey) Order 200-]. 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.  

Q22: What is the position where ancillary functions have been conducted pursuant to a previous Manager or Administrator permit?

The Commission will apply the same approach as previously under the CIF regime.  For example, where an entity is  registered to act as fund manager, it will be able to apply to add other classes of FSB to its registration where the activity requested is, or may be, inherent in its current role.  Acting as manager might also involve performing distribution, administration and so on.  Each case will be considered on its merits and will depend on the circumstances of each licence holder.  Prior to formally granting a FSB registration certificate, the Commission will discuss with the registered person whether other classes of business are to be included on its certificate.
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Q23: 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.
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Q24: Prospectuses and the Commission’s disclaimer - where a prospectus contains wording to the effect that "the Administrator is regulated to conduct fund services business under the FSJL”, should it also include a Commission disclaimer?

No disclaimer is required in respect of a person registered to conduct FSB under the FSJL.  The requirements for disclaimers under COBO and CIF remain.
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Q25: Some COBO consents are conditional on there being a fund permit under the CIF. Do such consents remain valid?

Some COBO consents contain the following wording:

"On the basis of the information provided to the Jersey Financial Services Commission (the “Commission”), and for as long as a permit pursuant to the Collective Investment Funds (Jersey) Law, 1988, as amended to a functionary in respect of the Fund is in force, CONSENT IS HEREBY GRANTED pursuant to the Control of Borrowing (Jersey) Order 1958, as amended (the “Order”) in relation to the Fund".

Although certain fund service providers to unclassified funds are no longer required to hold a CIF permit, this will not invalidate their COBO consent. In time all COBO consents containing this wording will be replaced. If an amended COBO consent is required sooner, please contact the Commission.

Please also refer to the guidance provided at point 6 above.

Q26: Does the Financial Services (Advertising)(Jersey) Order 2008 (the "Advertising Order") apply to the circulation of prospectus or offering document which is:
(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 Collective Investment Funds (Jersey) Law 1988.
Note (2) An unregulated fund is a fund established in accordance with the Collective Investment Funds (Unregulated Funds)(Jersey) Order 2008

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 Financial Services (Jersey) Law 1998 or that such a prospectus or offering document falls within the definition of financial service advertisement provided at Article 1(1) of that Law; accordingly, such activity is not regarded as being subject to the Advertising Order.
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