Introduction

The Jersey listed fund regime was introduced for listed closed-ended companies further to the Listed Fund Guide issued by the Jersey Financial Services Commission (JFSC). The structure, which is modelled on the Jersey expert fund, provides for a fast-track process for the establishment of corporate closed-ended funds that are:

  • listed on recognised stock exchanges or markets, including the London Stock Exchange, the Specialist Fund Market, the AIM and the International Stock Exchange; and
  • regulated pursuant to the Collective Investment Funds (Jersey) Law 1988 (the CIF Law).(1)

What constitutes a listed fund?

A listed fund must be:

  • a company incorporated in Jersey;
  • a 'collective investment fund' within the meaning of Article 3 of the CIF Law;
  • listed on a recognised stock exchange or market; and
  • closed ended.

Regulatory requirements

Listed funds are subject to a light degree of regulation. In particular:

  • the promoter of a listed fund will not be subject to any regulatory review or approval;
  • there are no requirements to adopt any prescribed investment restrictions or a risk diversification strategy;
  • a listed fund may be offered to professional or experienced investors, as well as retail investors – provided that they have taken appropriate professional advice; and
  • there is no required minimum subscription.

The regulatory requirements which apply to listed funds are as follows:

  • At least two Jersey-resident directors with appropriate experience must be appointed to the board of the fund company, a majority of which must be independent of the promoter.
  • The investment manager or adviser (the investment adviser) must:
    • have had no convictions or disciplinary sanctions imposed on it;
    • be solvent;
    • be regulated in relation to managing or advising on investment funds in an Organisation for Economic Cooperation and Development state or jurisdiction or any other state or jurisdiction with which the JFSC has entered into a memorandum of understanding (or equivalent) on investment business and collective investment funds;
    • have relevant experience managing or advising on investors' funds using similar investment strategies to those to be adopted by the listed fund; and
    • satisfy the JFSC's general principles of corporate governance by maintaining an adequate span of control over its business.
  • If neither the investment adviser nor its activities are regulated in its home state, the investment adviser must be:
    • a subsidiary of a company that is so regulated;
    • a listed company with a minimum market capitalisation of US$500 million (or other currency equivalent) or a subsidiary of such a company;
    • a company or partnership with a trading record of at least five years or whose principal persons can demonstrate relevant business experience for this period and possess relevant professional qualifications; or
    • otherwise granted approval by the JFSC.
  • If the distributor of the fund is independent of the investment adviser and is a driving force behind the fund or the majority of investors going into the listed fund are put in by the distributor or its agents, it must satisfy the same requirements as the investment adviser (other than in relation to investment management experience).
  • Every listed fund must appoint an administrator and/or manager which has at least two Jersey-resident directors with appropriate experience (the administrator) and is regulated and has staff and a physical presence in Jersey. The administrator must monitor the investment adviser's compliance with any investment or borrowing restrictions set out in the fund's offer document and must have access to appropriate records of the investment adviser to enable it to carry out such monitoring function. The fund's board of directors must also regularly review the investment strategy and risk profile of the fund, together with the investment adviser's performance.
  • All Jersey fund service providers of a listed fund (including the administrator) must be regulated in Jersey under the Financial Services (Jersey) Law 1998 (the FSJ Law) and comply with applicable codes of practice.
  • There is no requirement to have a Jersey custodian; however, a listed fund must have adequate custody arrangements in place, including, if applicable, prime brokerage arrangements, which must be disclosed in the fund's offer document. In the case of a hedge fund, unless previously agreed with the JFSC, any prime broker appointed must have a minimum credit rating of A1/P1.
  • A listed fund must appoint an auditor.

If a listed fund does not comply in all respects with the above requirements, it can obtain derogations from the JFSC in relation to such non-compliance. No other structural or documentary requirements apply to listed funds.

Listed funds can be marketed to investors in the European Union or the European Economic Area subject to compliance with certain additional requirements, as set out below.

Authorisation process

The application process is simple and quick. An application form setting out the key features of a listed fund, including a confirmation from the investment adviser that it satisfies the requirements set out above, must be submitted with supporting documentary evidence – namely:

  • the latest draft of the offer document;
  • a fund structure chart;
  • the required investment adviser's confirmation; and
  • completed personal questionnaires of directors or any principal persons.

The administrator must countersign such confirmation after carrying out its own general due diligence against the investment adviser, stating that it has no reason to believe that the investment adviser's confirmation is incorrect. These must be submitted to the JFSC with an application fee. The JFSC will check that the application form has been appropriately completed, but will not carry out any regulatory review of the listed fund. In addition, an application to register the listed fund under the CIF Law must be submitted to the JFSC. The requisite consents to the establishment of the fund will be issued within days.

AIFMD

Since July 2013, Jersey alternative investment fund managers 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 (AIFMD).

Since listed funds were already required to be regulated under the CIF Law and their service providers were required to be regulated under the FSJ Law, the only additional regulatory requirements pursuant to the AIFMD are compliance with applicable sections of the JFSC's AIF codes of practice (relating to disclosure, reporting and asset stripping, together with notification to the JFSC in advance of marketing). These additional requirements apply only when there is to be active marketing of such funds in the European Union or the European Economic Area.

Endnotes

(1) For further details please see:

Tatiana Collins, managing associate, Sophie Reguengo, partner, and Catrin Le Rendu, associate, contributed to the preparation of this article.