Jersey Launches Unregulated Funds Regime

by Jason Gorringe, Tax-News.com, London

08 October 2007

Jersey Finance has announced the the widening of its capabilities as a funds jurisdiction through the introduction of an Unregulated Funds Regime which is designed to provide promoters and other fund introducers with the simplicity, certainty and speed they seek when setting up certain types of specialist fund.

A key feature is that there will be no need to seek regulatory approval when establishing the fund. Geoff Cook, Chief Executive of Jersey Finance Limited, commented:

“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.”

Set for introduction in early 2008, the new Unregulated Funds Regime includes an Unregulated Eligible Investor Category (UEIC) and an Unregulated Exchange Traded Category (UETC). Funds in these categories will not be approved or authorised by the Island’s financial regulator, the Jersey Financial Services Commission (JFSC).

Professionals in Jersey welcoming the new categories believe that they will appeal to promoters, such as hedge fund managers and other financial institutions, who look to set up certain of their funds in jurisdictions in which they can establish an unregulated product, often because the speed in bringing the product to market is essential.

Richard Thomas, Chairman of the Jersey Funds Association, who announced details of the new initiative at Jersey’s 3rd Annual Funds Debate organised by Jersey Finance in London yesterday (3rd October) commented:

“We have been taking note of the regulatory changes that have been introduced in other jurisdictions and following extensive consultation with the JFSC are now ready with a new element which has been missing from the Jersey product range in the form of Unregulated Funds.”

Consultations continue with the JFSC to fine tune the proposals ready for the launch. The key features of the Unregulated Eligible Investor Fund are:

• A minimum investment criteria of $US 1 million; or a need to be a sophisticated investor;
• Applies to both open and closed ended funds and can be structured using companies, unit trusts and limited partnerships;
• No requirement for Jersey domiciled administrator, directors or custodian;
• No audit requirement;
• Open ended vehicles are permitted to list but only on certain exchanges that allow transfer restrictions.

Key features of the Unregulated Exchange Traded Fund Category include:

• Choice of structures using companies, unit trusts and limited partnerships;
• No requirement for Jersey domiciled administrator, directors or custodian;
• No audit requirement;
• Applies to closed funds only;
• Choice of Exchanges on which a listing may be made.

Jersey’s existing regulated funds including the Expert Fund Regime, introduced by the JFSC in 2004 and the Listed Fund Guide, launched this year, successfully streamlined the authorisation process for regulated alternative investment funds and led to a surge of new business in the Alternative Funds Sector.

The value of the Funds Industry in Jersey recently reached a new record high of GBP210 billion and Funds in the Alternative Investment Fund Sector accounted for more than half of that total. It is anticipated that the new Unregulated Funds Regime will provide a further significant boost to the Island’s funds capabilities in the Alternative Investment Market.

Unregulated Funds will be only suitable for professional and expert investors or those who have taken appropriate professional advice. Investment warnings will be prominent to indicate that such Funds are unregulated, and existing funds will not be able to transfer to the new regime.

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