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Fund Management A Jersey Asset

Jersey is not alone in competing against major EU fund management centres such as Ireland and Luxembourg, but has done just as well as its competitors, and better than most of them. Collective Investment Funds are supervised by the Financial Services Commission (FSC) under the Collective Investment Funds (Jersey) Law 1988, and if 'recognised' are allowed to be marketed in the UK.

The total value of collective investment funds administered on the island has grown rapidly, rising by almost GBP150bn over the nine years to 2008. Not surprisingly, the total dropped sharply in 2009, but has recovered well in 2010. The Net Asset Value of funds under administration increased by GBP14.4bn (8.6%) from GBP166.2bn to GBP180.5bn during the first three months of the year, and the total number of funds increased by 26 from 1,294 to 1,320. The value of funds under investment management increased by GBP1.3bn (6.8%) compared to the previous quarter from GBP19.7bn to GBP21bn.

The island has seen a series of enhancements to its funds regime during the last six years:

  • In February, 2004, Jersey introduced 'expert' investor fund legislation. This gives qualifying fund managers freedom to offer funds to licensed investors without previously clearing them with the FSC, provided they stick to the guidelines. The new regime has proved popular, and by the end of 2008, more than 400 expert funds had been approved.
  • In June 2004 the island also launched a Non-Domiciled Fund Guide, introducing a streamlined authorisation process for persons wishing to become functionaries (for example, an administrator, custodian, distributor) of Non-Domiciled Funds that are: materially equivalent to Jersey Expert Funds; equivalent to Jersey Recognized Funds; or compliant with the latest EU UCITS Directive.
  • In October 2006, the FSC announced plans to extend the Expert Fund regime to closed-ended investment funds listed on European and other leading stock exchanges including the Channel Islands Stock Exchange.
  • In 2008, Jersey introduced an Unregulated Funds Regime 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 is no need to seek regulatory approval when establishing the fund. The Unregulated Funds Regime includes an Unregulated Eligible Investor Category (UEIC) and an Unregulated Exchange Traded Category (UETC). Funds in these categories do not need to be approved or authorised by the Island’s financial regulator, the Jersey Financial Services Commission (JFSC).
  • In September 2009, Jersey’s Economic Development Department asked members of Jersey’s business community for their views on draft legislation which would introduce to the Island limited partnerships with legal personality. Since the introduction to Jersey of limited partnerships in 1994, they have proved increasingly popular, particularly as investment vehicles.

Jersey's swift adoption of International Financial Reporting Standards (IFRS) makes it better placed to meet the changing needs of the European investment fund industry, according to a survey by Ernst and Young. Senior Manager at the firm's Asset Management Group, Richard Le Tissier, observes that there is little evidence that IFRS is being adopted by European nations, putting the Channel Islands in a leading position to meet the future needs of the industry.

The G20 has called for the setting up of one single set of high-quality global accounting standards to aid global financial stability, but the survey found that just a fifth of fund managers and administrators who currently have the option to apply IFRS do so exclusively. Of those that have converted to IFRS, 48% reported that it had significantly improved the quality of their financial reporting.

Jersey investment funds pay a zero rate of income tax on their profits; there are no capital gains, capital transfer, gift, wealth or inheritance taxes or any death or estate duties. Stamp duties do not apply to share or unit trust transactions. Fund management companies however are subject to 10% taxation on their profits if they trade through a 'permanent establishment' in Jersey. Dividends are paid out of taxed income, but the 10% tax is available as a credit against Jersey income tax. Shareholders in a Jersey company who are not resident on the island will not be subject to taxation in respect of income or gains resulting from their shareholdings.

Many funds are organized through limited partnerships, which are tax transparent, with income accruing directly to the partners. Resident partners will be subject to income tax on their receipts (20%) but non-resident partners will not have a tax liability.

Jersey Industry Insight

E-Commerce, Opportunities in the Island of Jersey
by by Grant Twine, Director, Basel eBusiness Limited

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