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24 September 2020
What constitutes an expert fund?
Stock exchange listings and transfers of interests
Economic substance requirements
EU Alternative Investment Fund Managers Directive
Jersey expert funds were introduced to enhance Jersey's attractiveness as a jurisdiction for the establishment of funds aimed at institutional and high-net-worth investors. Expert funds can be established within a matter of days on the basis of a self-certification approach without any formal regulatory review of the fund or its promoter. There are currently more than 400 authorised expert funds.(1)
An investment fund constitutes an expert fund if each investor signs an investment warning and falls within one of the following categories:
An expert fund is subject to a light degree of regulation. In particular:
The regulatory requirements applicable to an expert fund are as follows:
Expert funds can be marketed to investors in the European Union or the European Economic Area subject to compliance with certain additional requirements (see "EU Alternative Investment Fund Managers Directive" below).
An expert fund may be listed on a stock exchange which permits restrictions on transfers of interests. This is to ensure that no one other than an expert investor can participate in the fund. Reasonable steps must be taken to ensure that non-expert investors do not become the registered holders of interests in the fund.
The application process for an expert fund is simple and quick. An application form setting out the key features of an expert fund, including a confirmation from the investment manager or adviser that it complies with the above regulatory requirements, must be countersigned by the administrator and submitted along with documentary evidence as to the investment manager's or adviser's regulation to the JFSC, together with an application fee, structure chart and the draft offer document. The JFSC will check that the application form has been appropriately completed, but will not carry out any regulatory review of an expert fund. In addition, an application form to register the expert fund under the Collective Investment Funds (Jersey) Law 1988 (the CIF Law) must be submitted to the JFSC. The requisite consents to the establishment of the fund will typically be issued within as little as three days from the formal filing of the application.
The Taxation (Companies – Economic Substance) (Jersey) Law 2019 (the Substance Law) came into force on 1 January 2019. It requires Jersey tax-resident companies that carry on certain specified geographically mobile activities, including fund management business, to ensure that they are governed and operated in a way which complies with the law – namely:
The applicable requirements are often met by the relevant company appointing a Jersey corporate services provider to act as the company's administrator. Jersey tax-resident corporate managers of expert funds are in scope of the Substance Law where they have gross income in relation to their fund management activities.
Since July 2013, Jersey alternative investment fund managers (AIFMs) which market Jersey or other funds that are not domiciled in the European Union or the European Economic Area to investors in the European Union or the European Economic Area have had to comply with additional disclosure, transparency and reporting requirements pursuant to the EU Alternative Investment Fund Managers Directive.
Expert funds are already regulated under the CIF Law and their service providers are regulated under the FSJ Law. Accordingly, the only additional regulatory requirement pertaining to such funds and their service providers pursuant to Jersey's Alternative Investment Funds (Jersey) Regulations is compliance with applicable sections of the JFSC's Code of Practice for Alternative Investment Funds and AIF Services Business (in relation to disclosure, reporting and asset stripping, together with notification to the JFSC in advance of marketing into the European Union or the European Economic Area). These additional requirements apply only when such funds will be actively marketed in the European Union or the European Economic Area.
For further information on this topic please contact Emily Haithwaite, Niamh Lalor, Sophie Reguengo or Joanna Christensen at Ogier by telephone (+44 1534 514 000) or email (firstname.lastname@example.org, email@example.com, firstname.lastname@example.org or email@example.com). The Ogier website can be accessed at www.ogier.com.
Tatiana Collins, managing associate, Alexandra O'Grady, managing associate, Catrin Le Rendu, associate, and Brooke Lewis, associate, contributed to the preparation of this article.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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