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06 November 2014
FCA guidance on transparency reporting
JFSC confirmation re LLP licensing
Civil liability for breaches of codes
Abusive tax schemes - proposed guidance notes
JFSC guidance on PII
Review of regulatory regime
There have been a growing number of applications to the Jersey Financial Services Commission (JFSC) by AIFMs seeking to use private placement regimes under the EU Alternative Investment Fund Managers (AIFM) Directive. Many of these structures will be marketed to the United Kingdom; thus, the Financial Conduct Authority (FCA) has recently issued guidance on reporting under the UK national private placement regime, which will assist in reaching compliance with Article 42 transparency and reporting requirements.
There were a number of areas of concern in the previous managed account model, including:
The JFSC has sought feedback on an alternative approach to regulating managed accounts. The alternative solution exempts regulated fund managers from the requirement that their investment business in connection with services provided to qualifying segregated managed accounts be regulated. It is good news for the hedge fund industry that such managers need not comply with both the Fund Services Business Codes of Practice and the Investment Business Codes of Practice; nor will they need to establish a full presence in Jersey simply as a result of advising managed accounts.
The JFSC has confirmed that it will consider applications to license limited liability partnerships (LLPs) in order to conduct certain classes of fund service business. LLPs will not be restricted to acting only for Jersey expert funds, related expert funds or materially equivalent funds, and may be general partners, managers, investment managers and investment advisers of 'collective investment funds', as defined in the Collective Investment Funds (Jersey) Law 1988.
The JFSC may take longer processing an LLP's application to act for a fund that is not expert or materially equivalent and additional conditions may be included in the licence. The JFSC's 'four-eyes/six-eyes' approach to the span of control of fund service business will apply.
Partners that participate in the management of an LLP may be either a natural person or a Jersey company with two Jersey resident directors.
The UK Partnerships (Accounts) Regulations 2008 have been amended so that (for example) a UK limited partnership with a Jersey corporate general partner will be a qualifying partnership. Qualifying partnerships must prepare and make certain financial information public (unless they are included within consolidated financial statements prepared as part of group accounts).
Any such restructuring must be completed before December 31 2014 in order to preserve a partnership's status as a non-qualifying partnership.
The Financial Services Ombudsman (Jersey) Law 2014 has come into force and has established the Office of the Financial Services Ombudsman. The law gives the minister of economic development power by order to exempt certain financial services from the ombudsman's scope. A consultation on an order that will exclude from the scheme all funds other than recognised funds recently closed, so it is hoped that the introduction of the scheme will not negatively affect the funds industry.
The JFSC can take regulatory action (including revocation of an entity's registration) where a registered person breaches any codes of practice applicable to it. However, the JFSC cannot impose financial penalties for breaches of the codes or the Anti-money Laundering and Countering Terrorist Financing Handbook.
On June 6 2014 draft primary legislation to provide the JFSC with the power to impose civil financial penalties for material contraventions of the codes of practice (including the funds and fund services business codes) and the handbook was published.
Administrators should be aware of the introduction of this penalty and the scale of penalties that the JFSC may impose (for further details, please see "Civil liability for breaches of codes of practice").
On July 31 2014 the chief minister issued a statement confirming that Jersey has no wish or need to engage with those that seek to involve Jersey in abusive tax schemes in order to avoid UK tax. In support of the government's efforts, Jersey Finance is proposing to establish guidance notes to help the industry align with the principles advocated by the government.
The JFSC has issued a guidance note in respect of professional indemnity insurance (PII) on persons registered under the Financial Services (Jersey) Law 1998 to continue regulated business. This guidance brings some welcome clarity to fund managers and administrators regarding policy limitations, characteristics of an excess and changes to PII requirements, including reliance on self-insurance. A copy of the guidance note is available on the JFSC's website.
Representatives of industry, government and the regulator have been meeting in anticipation of a new set of reforms to streamline the regulatory treatment of Jersey funds. It is anticipated that this will lead to a consultation process towards the end of 2014.
For further information on this topic please contact Niamh Lalor at Ogier by telephone (+44 1534 504 000), fax (+44 1534 504 444) or email (firstname.lastname@example.org). The Ogier website can be accessed at www.ogier.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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