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JERSEY
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The Law Of Offshore

Jersey Table of Statutes

This is a non-exhaustive list of the main Jersey statutes affecting offshore and non-resident business. The statutes are listed in alphabetical order – click on the statute for a fuller description of the statute, the legal regime it forms part of, or in some cases the text of the law.

Banking Business (Jersey) Law 1991
Banking Business (General Provisions) (Jersey) Order 1991
Collective Investment Funds Law 1988
Companies (Jersey) Law 1991
Companies (Amendment No.6) (Jersey) Law 2000
Companies (Amendment No.8) (Jersey) Law 2006
The Financial Services (Extension) (Jersey) Law 2000
Foundations (Jersey) Law 2009
Income Tax (Jersey) Law 1961
Income Tax (Amendment No. 28)(Jersey) Law 2007
Income Tax (Amendment No. 29)(Jersey) Law 2007

Insurance Business (Jersey) Law 1996

Insurance Business Law (General Provisions) (Jersey) Order 1996
Limited Partnerships (Jersey) Law 1994
Money Laundering (Jersey) Order 1999
Proceeds of Crime (Amendment) (Jersey) Law 2008
Trusts (Jersey) Law 1984
Trusts (Jersey) Amendment No. 4 Law 2006
Terrorist Financing Order 2001
Gambling (Remote Gambling Disaster Recovery) Regulations 2008

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In June, 2004, the Jersey Financial Services Commission unveiled a restructuring programme that has seen the island’s regulator organised more along industry lines.

Under the changes, the previous divisions, Compliance, Authorisation and Insurance, were replaced by four new divisions: Banking; Securities (including Funds and Investment Business); Trust Companies; and Insurance.

Each of the Divisions is headed by an Executive Director who is responsible for regulatory and supervisory oversight of their respective industry sectors. The Directors are responsible for delivering regulatory and supervisory policies for those sectors and they are assisted in this by a Research and Development Unit.

The four Directors report to the Deputy Director General who has overall responsibility for co-ordinating their activities, including policy development.

Other Divisions of the Commission, including Enforcement and the Registry report directly to the Director General. This includes a new Risk Unit which is be responsible for risk management, quality assurance and internal audit.

The new structure created two new Director posts. But this has been offset by the deletion of the current Director, Authorisation post and of other vacant posts. The changes have been self-financing and have not resulted in an increase in headcount with the exception of a junior post in the Registry.

Commenting at the time that the changes were announced, David Carse, then Director General of the Commission noted: "The new structure will provide a greater industry focus to the Commission's work, promote greater industry expertise within the Commission and lead to greater cohesiveness in its policy-making."

In July 2008, the Jersey Financial Services Commission issued an updated version of the Licensing Policy in respect of activities that require registration under the Financial Services (Jersey) Law 1998 (the FS(J)L).

The document commonly referred to as the “Licensing Policy” published on the Commission website is dated May 2002. Consequently the policy document was prepared and approved at a time when the only types of financial service business falling to be registered under the FS(J)L were Trust Company Business and Investment Business. Subsequent to May 2002, the FS(J)L has been amended such that it is now the primary legislation for the regulation and supervision of five financial sectors, including:

  • Fund Services Business;
  • General Insurance Mediation Business;
  • Investment Business;
  • Money Service Business; and
  • Trust Company Business.

In November 2007 a number of key changes to Jersey's Companies Law were proposed by then Minister for Economic Development, Senator Philip Ozouf, with the aim of both updating and introducing more flexibility to the Companies Law. These came into effect in January 2008.

One of the most significant changes benefits the funds sector by allowing a company to hold treasury shares. This change means that a company can purchase its own shares and hold them for a period of time, rather than cancel them. This means that a company would be able to purchase its own shares from one investor and then transfer them to a new investor.

Another change, which was intended to benefit the trust industry, allows a regulated financial services business to act as a corporate director of a Jersey company. It is common practice for directors of companies to be employees provided by a regulated business. This change benefits the trust industry by reducing the administration burden on companies when an employee leaves.

A further change relaxed previously complicated, time consuming and often expensive procedures when certain types of companies wish to reduce capital or distribute money to shareholders. The key to these changes is the adoption of a simplified procedure requiring directors to make a statement in relation to the company’s solvency. This boosts the ability of a company to make payments to its shareholders while maintaining protection for creditors.

Some rules were removed under the changes, including a rule preventing a person acquiring a company using a loan, and at the same time using the shares in the company as security for that loan. This rule was technically known as the prohibition against a company giving financial assistance for the purchase of its own shares. As with many of the changes to the Companies Law, the new rules permitting financial assistance act to safeguard the interests of creditors by concentrating on the solvency of the company.

Additional changes which simplify procedures when certain types of companies wish to reduce capital or make distributions to shareholders came into effect in Jersey in the second quarter of 2008. These amendments also included new provisions designed to make Jersey a more attractive jurisdiction for public limited companies, including the ability for public companies to use the suffix ‘plc’ as an alternative to ‘limited’. These changes aimed to bring further flexibility and a far wider range of options for legal and finance professionals setting up companies in the Island. The measures are particularly advantageous for those establishing special purpose companies, group holding companies or joint venture vehicles.

In June 2009, Jersey's Privy Council approved an order allowing Foundations to be set up in Jersey.

Foundations have a long history in continental Europe. In medieval times they were used for charitable or religious purposes. They are now commonly used for wealth management, and residents of jurisdictions like the Middle and Far East are more familiar with foundations than with trusts, which do not exist in their legal systems. Jersey is the first of the Crown Dependencies to bring in a genuine foundation product.

The regulations will permit foundations to migrate in and out of Jersey. They also provide for existing Jersey companies to convert to foundations.

The approval of the Jersey Foundations Law by Jersey’s Privy Council was welcomed by Jersey Finance as a hugely positive step in affirming the island as a centre of excellence for private wealth management business.

Foundations sit alongside existing vehicles such as companies, trusts and limited partnerships for use in financial planning and private wealth management strategies.

A consultation on two new draft limited partnership laws was published by Jersey’s Economic Development Department in September 2009.

The two laws are the draft Separate Limited Partnerships (Jersey) Law 200- and the draft Incorporated Limited Partnerships (Jersey) Law 200-. These provide respectively for the establishment of Separate Limited Partnerships (SLPs) and Incorporated Limited Partnerships (ILPs).

The SLP will have legal personality but without being a body corporate (as is already the case for a Scottish limited partnership), whereas the ILP will be a body corporate.

The Department believes that a wider range of uses of Jersey limited partnerships would be made by consumers if they had the option of creating a limited partnership with legal personality.

In February 2010, the Jersey government requested views on whether the Companies law should be amended to allow for the merger of Jersey companies with foreign entities.

At present, it is only possible to merge a Jersey company with another Jersey company, however, in an increasingly globalized world, more and more business is conducted across national borders and there is a growing demand for Jersey companies to be able to merge with foreign companies.

A consultation paper has been prepared to give all interested parties an opportunity to contribute their views on the proposed changes. Issues include which foreign entities should be allowed to merge with Jersey companies, the requirements for consent from the Jersey Financial Services Commission and measures for the protection of company shareholders and creditors.

Welcoming the consultation, Minister for Economic Development, Senator Alan Maclean, said: “I’m pleased that we’re working on this excellent initiative which will ensure that Jersey’s company law remains competitive. Some other jurisdictions have already successfully introduced this added flexibility into their company law and I’m confident that Jersey will benefit from taking a similar approach.”

The consultation closed on April 2, 2010.

IMF Review 2008

The Financial Services Commission was notified that the International Monetary Fund would carry out a second review of Jersey’s regulatory and supervisory framework in 2008. This review was to examine in detail the extent of observance of Codes of Practice. The Commission has undertaken a comprehensive self-assessment exercise - reviewing the Island’s regulatory framework, including practical application of the framework, against the standards set by the international regulatory bodies.

The resulting IMF report, released in September 2009, praised Jersey for the regulation and supervision of its financial sector and for its money laundering and terrorist financing defences. The report concluded that financial sector regulation and supervision are of a "high standard" and "comply well" with international standards.

The Financial System Stability Assessment (FSSA) Update said that Jersey has put in place a "comprehensive and robust" framework for countering money laundering and terrorist financing and has achieved a "high level of compliance" with almost all aspects of the Financial Action Task Force’s 40+9 Recommendations.

The report also said that financial soundness indicators for banks are satisfactory and that Jersey’s banking system is resilient to a range of shocks.

The detailed assessment reports that form the basis for most of the FSSA show compliance ratings for each of the international standards against which the island has been assessed.

The reports show that Jersey complies or largely complies with:

  • All of the Basel Committee’s Core Principles for Effective Banking Supervision;
  • 24 of the 27 Insurance Core Principles that it has been assessed against;
  • 44 of the 49 FATF Recommendations, and 15 of the 16 "core" and "key" FATF Recommendations (Singapore and the United States comply, or largely comply, with 43 of the FATF Recommendations, and Belgium with 42).

These ratings place Jersey in the "top division" of international finance centers, including those in the G20 and European Union.

While compliance with the International Organization of Securities Commissions’ Objectives and Principles of Securities Regulation was not assessed, the FSSA says it is evident that the regulation of investment business, particularly funds business, has been "significantly strengthened" since the last IMF report in 2003. The FSSA also says the trust and company services business sector enjoy a "comprehensive" regulatory and supervisory framework.

The FSSA highlighted two particular areas that are specific to Jersey’s business model and where further enhancements could be considered.

  • Reference is made to the common business practice of “up-streaming”, where Jersey banks take deposits from customers (in Jersey and elsewhere) and then place these funds with group entities (mostly in the United Kingdom and other Member States of the European Union) – providing liquidity to the group. The report says that, in the event that the health of the group deteriorates, the exposure of Jersey banks would require careful management;
  • Mention is made of the reliance that may be placed by Jersey businesses on third parties (in Jersey and elsewhere) to have carried out customer due diligence measures for anti-money laundering and combating the financing of terrorism (AML/CFT) purposes. The IMF encourages the insular authorities to review the use of this concession, which is described as “overly generous."

Despite the very positive assessment, the Jersey authorities accept there is no room for complacency. In particular, the FSSA says the Jersey Financial Services Commission will be "challenged" to react to changes in supervisory standards coming out of the global financial turmoil and implement them "proportionately to the risks on the island."

In a joint statement, the Chief Minister, Senator Terry Le Sueur, and Commission Chairman, Colin Powell said of the report:

“This is an excellent outcome and we attach tremendous importance to the IMF’s assessment. We are delighted that it has yet again demonstrated Jersey’s high degree of compliance with international standards. The FSSA and other reports will provide a strong base from which to continue discussions with our European neighbours about recognizing the equivalence of what we have in place in Jersey.”

“Jersey remains committed to maintaining and enhancing its adherence to international standards and welcomes the recommendations made within the FSSA. These recommendations will assist Jersey in further strengthening its regulatory, supervisory and AML/CFT arrangements and in developing its capacity to deal with financial sector shocks.”

“The assessment reinforces Jersey’s position as a member of the community of nations that adhere to international standards in prudential, tax and AML/CFT areas.”

On September 7, 2009, just prior to the publication of the IMF's report, the Jersey Financial Services Commission published a consultation paper disclosing proposed amendments to the Money Laundering (Jersey) Order 2008.

The Order requires businesses within its scope to apply customer due diligence measures, to keep records, and to have policies and procedures in place to prevent and detect money laundering and terrorist financing.

Businesses that are covered by the Order include banks, investment businesses, trust companies, lawyers, accountants, and estate agents.

The main purpose of the draft Money Laundering (Amendment No. 4) (Jersey) Order is to deal with some of the technical points that were raised in IMF report.

Among the proposed amendments, the paper also considers the possibility of extending power to the Minister for Treasury & Resources to apply countermeasures, where this may address a particular risk of money laundering or terrorist financing.

The main effects of Amendment No. 4 would be to:

  • Clarify the application of customer due diligence measures to trusts and other legal arrangements;
  • Clearly set out the records that a Money Laundering Compliance Officer and Money Laundering Reporting Officer must have access to in order to carry out their statutory functions;
  • Require particular attention to be paid to implementing policies and procedures that are sufficient to prevent and detect money laundering and terrorist financing in subsidiaries and branches that are situated in countries and territories that do not, or insufficiently apply, the Financial Action Task Force Recommendations;
  • Restate the requirement that customer information must always be collected before a relationship is established - where a customer is introduced by one business to another; and
  • Amend the scope of some of the concessions that may be used when applying due diligence measures to a customer who is considered to present a low risk of money laundering or terrorist financing.

The proposed amendments have been discussed with the Commission’s Steering Group for the Prevention and Detection of Money Laundering and Terrorist Financing.

The consultation received seven responses, including from Deutsche Bank International, Dominion Corporate Services, Kedge Capital Fund Management, Lloyds TSB Offshore, Ogier, Royal Bank of Scotland International, and S G Hambros Trust Company (Channel Islands).

Another endorsement of Jersey's supervisory regime was made in September 2009 when Jersey was invited to take on the role of Vice Chair for a new Peer Review Group (PRG) set up by the OECD at its recent Global Forum on Tax Transparency and Exchange of Information.

Almost 90 jurisdictions and a large number of international organizations met in Mexico, and agreed that the PRG should develop terms of reference for a robust, transparent process to assess how effectively the international standards of transparency and exchange of information for tax purposes are being implemented by individual jurisdictions.

The OECD Global Forum elected France (Francois d’Aubert) to Chair the PRG, with India, Japan, Singapore, and Jersey as Vice Chairs.

The States of Jersey’s Advisor for International Affairs, Colin Powell, who took on the role, said: “It is a great honor to be invited to sit on the Peer Review Group as one of the Vice Chairs. This position is further confirmation that Jersey is seen by the international community as a cooperative jurisdiction and as a member of the community of nations committed to the international principles of transparency and information exchange. I am looking forward very much to playing my part in this important exercise.”

Jersey Trust Law

Jersey trusts are governed by The Trust (Jersey) Law 1984, which codified trust law largely along the lines of English-based common law, and the Trusts (Amendment) (Jersey) Law 1989. 'Purpose' trusts were recognized in 1996.

The Trusts (Jersey) Amendment No. 4 Law 2006 introduced settlor-reserved powers to provide greater statutory certainty regarding the level of control and influence a settlor may exercise over the ongoing administration of assets placed into trust. Appeal against judgements of the Royal Court of Jersey lie to the Jersey Court of Appeal and finally to the English Privy Council.

There is no registration requirement for trusts and no fees are payable. The trustees of a non-resident trust (ie one whose beneficiaries are non-resident) are not required to submit returns or provide accounts of the trust to the Comptroller of income tax. Trust accounts must be maintained but audit is not required. Trust documents are normally in English.

Jersey has ratified the Hague Convention on the Law Applicable to Trusts. Jersey permits migration of trusts: trusts may be 'imported' or 'exported' by the simple replacement of trustees and by changing the proper law of the trust.

Jersey has not implemented legislation for Asset Protection Trusts. However, Jersey trust law specifically excludes foreign inheritance laws and provides for non-recognition of foreign judgements.

In November 2000 The Financial Services (Extension) (Jersey) Law came into effect. It is designed to protect consumers by imposing strict new rules on companies specialising in setting up trusts and offshore companies.

The law extends the remit of the Financial Services Commission (FSC) under the Investment Business (Jersey) Law 1998 over banking, investment funds and insurance activities into trust and company management, if the underlying activity is connected with financial services.

Under the law trust companies need to be licensed to continue in business. The Codes of Practice reinforce the existing requirements for a business to know its customers, to establish the source of their wealth and to report any suspicions. They must also adhere to high standards of integrity, solvency and competence including strong protections for customer money with additional requirements for high levels of qualifications and experience. Furthermore, the FSC will be able to visit businesses to check that they abide by the regulations.

In 2008, the Economic Development Department issued a consultation paper reviewing Jersey’s trusts law. This consultation will help ensure that Jersey’s trusts law remains up to date, reflects recent international developments, and continues to provide a framework that confirms Jersey’s position as a market leader.

Senator Philip Ozouf, the Minister for Economic Development, commented: “The Trusts Law has been to a great extent the engine for the growth of our financial services industry in the last 20 years. Our Law was the first in the market place and others have followed our lead. Subsequently, trusts laws in other places have evolved and in some cases moved ahead of our own product. This consultation is designed to see how we should develop our Trusts Law so as to hone our competitiveness.”

The consultation paper covers ten 'discrete' areas of possible reform, with proposals and questions for respondents to consider in each case. Responses were invited by September 19, 2008.

The Jersey Financial Services Commission launched a consultation in March 2010 on proposed changes to trust company business exemptions with regard to persons undertaking the activity of a director under the Financial Services (Jersey) Law (FS(J)L) 1998.

The Commission said that the proposed changes would affect in particular:

  • Individuals that act as directors, on a professional basis, of companies that they do not beneficially own; and
  • Individuals that are currently relying on ‘the connected persons exemption’.

The Consultation Paper proposes the following two changes in respect of Trust Company Business exemptions:-

  • To present a new exemption that introduces “de minimis” provisions which will allow an individual to hold a maximum of six directorships (in addition to any that would otherwise be exempt) before the need to register under the FS(J)L is triggered.
  • To restrict the scope of the ‘Connected Persons’ exemption contained in the note to paragraph 1 of the Schedule to the Financial Services (Trust Company Business (Exemptions No 4)) (Jersey) Order 2000.

The Financial Services (Trust Company Business) (Exemptions Amendment No. 2) (Jersey) Order 2010 came into force partly on November 24, 2010, when the "de minimis" provision was introduced. The remainder of the Order, dealing with the 'Connected Persons' exemption came into force on February 17, 2011.

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Jersey Banking Law

Banks are registered in Jersey under the Banking Business (Jersey) Law, 1991 and the associated Banking Business (General Provisions) (Jersey) Order, 1991 which is administered by the Jersey Financial Services Commission. Applications for new banks or branches (more usual) are carefully vetted both from a prudential point of view and commercially.

The Banking Law has three main objectives:

  • To protect depositors
  • To protect the reputation of Jersey as an International banking centre
  • To protect the best economic interests of Jersey.

It contains capital adequacy rules which are stiffer than the Basle requirements. The Commission's information requirements are contained in Article 25 of the 1991 Law and include submission of annual audited accounts.

Under Article 31 of the Law all registered banks are required to keep copies of their current audited accounts available for inspection by any person. In the case of branches, this means the Group's published accounts and for Jersey incorporated subsidiaries, it means their own audited accounts.

In November 2009, Jersey’s States Assembly approved legislation to establish a Depositors Compensation Scheme (DCS) in the island with immediate effect.

The key features of the DCS are that:

  • It provides protection of up to GBP50,000 per person, per Jersey banking group, for local and international depositors in line with international standards;
  • An interim payment of up to GBP5,000 will be made within seven working days and the balance of compensation within three months;
  • The GBP50,000 limit will apply per person, so a GBP100,000 deposit held in a joint account by two people would be completely covered;
  • The DCS will be operated by an independent Board that will be appointed by the States as soon as possible;
  • The maximum liability of the DCS will be capped at GBP100m in any five-year period, in line with the Guernsey scheme; and
  • The majority of the cost of the compensation will be borne by the banking industry, with the States making up any shortfall. In most cases, the DCS would be funded solely by levies on the banking industry with any States contribution being fully repaid from the liquidation proceeds.

The DCS was designed according to the findings of expert economic analysis of the Jersey banking sector by Oxera, and, according to Jersey's government, the scheme is "robust, competitive and credible."

Welcoming the introduction of the DCS, the Minister for Economic Development, Senator Alan Maclean, said:

“We have always believed that the best protection for depositors lies in the strength of Jersey's banks, all of which are in the top 500 banking groups in the world; and in our sound regulatory position, which is designed to prevent the bank failure occurring in the first place.”

“However, it is important to be able to provide depositors with the additional reassurance that this statutory Depositors Compensation Scheme will give. This scheme provides an appropriate level of protection for depositors and meets the latest international standards.”

In February 2010, the Jersey Financial Services Commission released a consultation paper in respect of an Order – the Banking Business (Reporting and Disclosure) (Jersey) Order 201-. Among several regulatory changes to reporting requirements on Jersey banks, depositors will benefit from greater access to information on the financial standing of bank, and relevant information in respect of Depositor Compensation Schemes.

According to the consultation paper, the proposed order will bring together in one Order the existing requirements for Jersey registered banks in respect of:

  • reporting certain financial information to the Commission; and
  • the publication of financial accounts.

The proposed Order will also establish new requirements of banks in respect of disclosures to the public, depositors and potential depositors.

Certain changes to the Banking Business (General Provisions) (Jersey) Order 2002 (the GPO) and the Codes of Practice for Deposit-taking Business (the Banking Codes) are proposed that would require disclosures regarding Depositor Compensation Schemes (DCSs), following the recent introduction of a DCS in Jersey. Changes are also proposed to the GPO and Banking Codes to reflect the requirements in the Proposed Order.

The Commission said it would consult with Industry during early 2010 with a view to amending the Banking Law, and other regulatory Laws, to enable the Minister for Economic Development to make Orders (such as the Proposed Order) that will establish:

  • requirements in respect of the publication of financial information; and
  • powers to object to the appointment of an auditor.

According to the consultation paper, the Proposed Order will bring together existing regulatory requirements in respect of the provision of financial accounts and prudential returns to the Commission. The Order will better establish these as requirements under the Law, set out required timescales for the provision of reports and establish public disclosure requirements.

In accordance with the Deposit-taking Business Fees Notice, first issued in January 2008 and last updated in February 2010, a fee of GBP100 per month will be payable in respect of late filing of reports against the deadlines set out in the proposed Order.

Existing banks will not be significantly affected by most of these proposals as the requirements in respect of reporting to the Commission already exist. The Commission intends mirroring as far as possible the provisions established by the Financial Services (Trust Company and Investment Business (Accounts, Audits and Reports)) (Jersey) Order 2007. Approximately 70% of banks are already subject to the TCB/IB Order, due to their being multi-licensed, which should reduce the impact on industry.

According to the Commission, the proposals are intended to establish a basis for introducing financial reporting provisions that are consistent with those for other sectors of industry, and their coming into force will be dependent upon the amending Law being adopted by the States and receiving the sanction of Privy Council, the timescale for which is likely to be in the first half of 2011.

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Jersey Investment Funds

Collective Investment Funds are supervised by the Financial Services Commission under the Collective Investment Funds (Jersey) Law 1988, and if 'recognised' are allowed to be marketed in the UK. This has been a stimulus for the growth of a substantial managed funds sector on the island. Other types of fund, both public and private, are also licensed and supervised by the Financial Services Commission, and are usually directed at professional investors since public marketing would not be allowed in most countries, particularly not in the EU. Indeed the ability of Ireland and Luxembourg as EU members to host funds for public distribution in the member states of the EU has created strong competition for Jersey.

In February, 2004, the Jersey Financial Services Commission launched the ‘Expert Funds’ regime in the jurisdiction, which aims to streamline the authorization process for new funds whilst maintaining rigorous compliance criteria.

"Expert Funds are a significant new business opportunity for Jersey,” commented David Carse, then Director General of the Commission. "To protect less experienced investors, we have laid down strict criteria so that these funds will only be offered to investors with the expertise and resources to accept any extra degree of risk involved as a result of the nature of the investment."

Expert Funds are designed as flexible investment vehicles that can take any form recognised under the laws of Jersey. They may be open-ended or closed-ended, there are no investment or gearing restrictions, and for the majority of Expert Funds there are flexible requirements in respect of custody or prime brokerage arrangements.

The JFSC noted that the new funds regime is particularly suited to hedge funds and other more sophisticated investment products aimed at the more experienced investor.

Investors in the funds must certify that they qualify as 'expert' - meeting strict criteria laid down by the Commission - and sign their agreement to an investment warning before investing, explains the Commission.

According to the JFSC, it is possible to establish Expert Funds in a matter of days. The Commission's proposals enable 'authorised functionaries' on the Island - for example, administrators, fund managers and trustees- to self-certify Expert Funds which meet criteria set down by the Commission in its Expert Fund Guide.

Every Expert Fund must appoint a functionary, who must be part of a Jersey regulated entity, and whose duties include taking steps to satisfy themselves that the actions of the Expert Fund's investment manager are in accordance with the investment and borrowing restrictions set out in the prospectus.

In addition, such functionaries are also required to maintain adequate records in the Island should they be needed for regulatory purposes. Licensed functionaries are also subject to visits by the Compliance Division of the Financial Services Commission.

The first fund authorised under the Expert Fund regime was launched in March 2004 and there were more than 400 such funds by the end of 2008.

In June 2004, the JFSC unveiled the Non-Domiciled Fund Guide, which streamlines the approval process for Jersey functionaries acting for non-Jersey funds.

According to the Financial Services Commission, the streamlined approval process for non-domiciled funds can be applied to funds materially equivalent to Jersey Expert Funds, Jersey Recognised Funds or those compliant with the latest EU UCITS Directive.

In 2007, ministerial approval was given to new proposals involving the regulation of collective investment funds. These proposals:

  • provide a mechanism for the regulation of collective investment funds;
  • implement international standards in the regulation of collective investment funds in Jersey – in preparation for the IMF assessment in 2008;
  • improve compatibility with the European Convention on Human Rights;
  • enhance the ability of the Commission to co-operate with supervising authorities in countries and territories outside Jersey; and
  • make other minor drafting changes

The proposals were embodied in the Collective Investment Funds (Amendment No. 4) (Jersey) Law 2008.

In 2008, Jersey launched two new classes of investment fund which can be established without regulatory approval under Jersey’s funds legislation. There are two types of unregulated fund:

  • Unregulated Eligible Investor Funds, which may be open or closed ended and are restricted to sophisticated investors (including those who make a minimum initial investment or commitment of USD1 million or equivalent).
  • Unregulated Exchange Traded Funds, which must be listed on one of 50 pre-approved stock exchanges including London, New York, the Channel Islands Stock Exchange, AIM, Nasdaq and Euronext.

Within the new regime, there is no audit requirement, no limit on the number of investors, no investment or borrowing restrictions and no requirement for Jersey service providers. Promoters are offered a choice of fund vehicle including company, protected cell or incorporated cell company, unit trust or limited partnership.

Details of the new fund regime were first announced in late 2007. Commenting at the time, Geoff Cook, Chief Executive of Jersey Finance Limited, said that: “This is a significant step forwards for the Funds Industry in Jersey and is seen as a natural progression in our goal to become the European jurisdiction of choice for the Alternative Funds sector. Fund promoters of high net worth, sophisticated investors and institutions will have greater flexibility when choosing Jersey and will be able to structure their funds to suit both commercial and tax requirements.”

Robert Kirkby, Technical Director, Jersey Finance, commented upon the launch of the new fund classes: “Jersey is now a much more attractive prospect for the typical hedge fund or private equity manager who invariably wants a fund set up and ready to trade in short timescales with no local minimum regulatory input. When combined with Jersey’s convenient time zone and its existing reputation for funds business, we believe the new regime is a welcome addition to our capabilities as a funds jurisdiction and will be particularly attractive to European managers and promoters.”

The Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008 came into force on February 19, 2008.

In June 2009, the Jersey Financial Services Commission published a consultation paper in respect of prospectuses for collective investment funds issued with a certificate in accordance with the Collective Investment Funds (Jersey) Law 1988.

Currently regulations relating to the contents of prospectuses are split between the Collective Investment Funds (Unclassified Funds) (Prospectuses) (Jersey) Order 1995 and the Companies (General Provisions) (Jersey) Order 2002 depending on whether the fund is constituted as a company or a unit trust, and whether it is open-ended or closed-ended.

There are no formal regulations covering certified funds constituted as limited partnerships, limited liability partnerships or closed-ended unit trusts. Hitherto, the Commission has imposed requirements on those funds based upon the two existing Orders, although there is no formal basis for doing so. The intention is to remedy that situation by having just the one Order covering all types of certified fund no matter how the fund is constituted and irrespective whether it is open-ended or closed-ended.

The Commission has therefore proposed the Collective Investment Funds (Certificated Funds – Prospectuses) (Jersey) Order 200- as an amalgam of the two existing Orders together with some new prospectus requirements. For example:

  • The prospectus must make clear what happens to any funds raised if the launch of the fund does not proceed.
  • The prospectus must state any limitations on the custodian’s duty to safeguard fund assets.

According to a statement from the Commission, many of the new provisions have been required for some time as a matter of best practice. The Certified Funds Prospectuses Order puts these requirements on a formal footing for the first time. Following the change, the Companies (General Provisions) (Jersey) Order 2002 will apply only to public companies that are not collective investment funds, and the Collective Investment Funds (Unclassified Funds) (Prospectuses) (Jersey) Order 1995 will be revoked.

The consultation closed on August 31, 2009.

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Jersey Money Laundering Legislation

Jersey's first major piece of money laundering legislation was the Money Laundering (Jersey) Order 1999. It has been amended several times since.

Jersey moved quickly after the September 11, 2001, terrorist attacks in the United States to implement new legislation to counter terrorist funding threats, including the implementation of a Terrorist Financing Order and the UN Convention for the Suppression of Terrorist Financing. This means that Jersey is able to try an individual for terrorist crimes, in particular for terrorist financing crimes, committed outside Jersey.

The Terrorist Financing Order came into force on October 10 and is virtually identical to the legislation introduced in the City of London in late September 2001. The Order enables Jersey to freeze any assets held by suspects named by the President of the United States in Executive Orders.

Important changes to the Island's money laundering regime were made in 2006:

  • A risk-based approach to customer due diligence was set out, that permits reduced or simplified measures in the case of lower risk relationships, and requires enhanced customer due diligence in the case of higher risk relationships.
  • Much more emphasis was placed on customer due diligence measures other than identification and verification of identity, and, in particular, on ongoing monitoring of unusual, complex, and higher risk activity and transactions.
  • More customer friendly ways of verifying the identity of applicants for business or customers were introduced, including scope for greater reliance on a single document to verify identity in lower risk circumstances, for example, a passport.
  • Measures to guard against the financial exclusion of Jersey residents were clarified. In particular, in the case of a lower risk minor, whose parent or guardian is unable to provide standard documentation to verify the minor’s identity, identity may be verified through use of the minor’s birth certificate.
  • The responsibilities of senior management in preventing and detecting money laundering were emphasised as part of a section addressing corporate governance.

A number of amendments to the Proceeds of Crime (Jersey) Law 1999 were introduced in 2008 under the Proceeds of Crime (Amendment) (Jersey) Law 2008 in preparation for an IMF visit.

This law now provides the necessary legal framework to oversee those employed in any business or profession where money laundering or financing of terrorism could take place – including finance companies, lawyers, accountants and insolvency practitioners. Also included are other groups such as estate agents, casino operators and sellers of high value goods.

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