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Promoters of public and private collective investment funds

Document Overview

• Who is a Promoter
• What is the Policy?
• The type of investor to whom the Fund will be offered
• Notes

Which type of Funds does the Policy apply to?

The policy applies to both public and private collective investment funds.

The requirements imposed in this area upon certain types of funds are set out in classification guides published by the Jersey Financial Services Commission (the "Commission"). In these instances, the terms of the relevant guides will apply rather than the Policy.

Accordingly, the Policy does not apply to:

a) Jersey Expert Funds;
b) Non-domiciled Funds falling within sections 2.1 or 2.2 of the Non-domiciled Fund Guide.

Who is a Promoter? Top

A promoter will be identified by one, or all of the following:-

1. A promoter is a person who is the driving force behind a scheme, such that, if the person were to withdraw from the proposals the scheme would not go ahead (unlike a manager or custodian who can be replaced).

2. A promoter is a person who, in the minds of the investor, is regarded as the "brainchild" behind the scheme. Evidence of this would be:-

i) The name of the fund is linked with the person concerned;
ii) Responsibility for investment strategy/advice rests with this person;
iii) His fee is a performance based fee rather than a fixed fee.

3. The majority of investors going into the fund are put into the fund by the promoter or his agents.

4. A promoter can be recognized by the roles carried out. If an organisation has responsibility for all aspects of a scheme (ie. administration, investment and marketing) then it can be regarded as the promoter.

What is the Policy?Top

The Commission, when considering an application by a promoter, applies the following policy:-

The general policy of the Commission is to strengthen further the Island's reputation as a high quality and well regulated centre for the establishment and administration of collective investment funds.

When considering an application from a promoter, either under the Collective Investment Funds (Jersey) Law 1988 or under the Borrowing (Control) (Jersey) Law 1947, the Commission will have regard to:-

1. The type of investor to whom the fund will be offered Top

Investor protection is one of the primary reasons for this policy. The Commission's view of the promoter therefore will depend very much on the type of investor to which the fund is targeted. The more the fund is available for investment only by professional or institutional investors who have knowledge of the industry and have the experience and resources to look after themselves, the more the Commission might be inclined to take a relaxed view on stature.

Where the fund is more widely available, the Commission will look for greater stature.

For the purposes of this policy statement the remainder of the criteria will be considered at the two extremes under the headings:-

(1) "Very Private Funds" (that is closed ended with a high minimum subscription and offered to a restricted circle of professional or institutional investors) and

(2) "Very Public Funds" (being those more widely marketed).

However, it must be recognized that there are many variations lying between these two extremes.

Very Public Funds Very Private Funds
2. Track record and relevant experience of the promoting group
The promoter would be expected to demonstrate relevant experience operating equivalent funds in a jurisdiction where regulation is deemed to be at least equivalent to that of Jersey. This requirement will be specially relevant in the case of specialist funds and those perceived to be high risk, for example, futures and options funds, property funds and venture capital funds. The track record of other functionaries of the fund may also be taken into account. The position will be the same as for public funds. However, where evidence of a track record is not available for the promoters, it may be sought in the directors and other persons behind it, who have perhaps gained such experience in previous employment.
3. Reputation of the promoting group
The organisation's reputation would be expected to be such that its presence in the Island would contribute to the Island's good name rather than draw from it. The promoter should be associated with an organisation it will be concerned to safeguard. The Commission would be looking for a promoter which has an international (or at least a national reputation). The Commission will want evidence that the promoters are persons/organisations held in high regard by the business community in which they operate. Such evidence can be in the form of newspaper articles, references. CVs will normally be required.
4. Financial resources of the promoting group
The promoter would be expected to be a member of a group which has significant substance in the form of shareholders' funds. It is considered important that the promoter is associated with an organisation that has the resources to safeguard its reputation if necessary. The Commission will wish to know what financial resources the promoter has.
5. The spread of ultimate ownership of the promoting group
Promoters in the ownership of or under the control of a single or a small number of persons are not likely to be acceptable as promoters of such funds. The Commission is unlikely to look favourably upon a promoter that is in the sole ownership or control of one individual.

Note 1 Top

There is no particular significance in the sequence in which the above aspects are listed. The Commission will take into account the appropriate balance of all aspects. If there is a deficiency against any one, it may be that this could be compensated for by strengths in relation to another. In general, it will be for the applicant to show why the promoter should be regarded as acceptable and to furnish documentary evidence in support. The Commission may also seek such evidence independently.

Note 2

With regard to 1 above (type of investor) some of the ways in which the type of investor may be identified include:-

(a) the level of minimum investment required (although it is recognized that other factors, such as stock exchange listing requirements, may demand that this is kept lower than would otherwise be the case);

(b) the ability of the promoter to provide the Commission with a list of likely investors;

(c) the manner of any restrictions as to qualifications for investors (eg. US Accredited Investors);

(d) a clear statement in the prospectus that the fund is only being offered to professional and institutional investors;

(e) investment being by placement only and suitably appropriate selection criteria being a contractual obligation on the agent.

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