Emily Haithwaite Niamh Lalor Sophie Reguengo Matt McManus August 2 2022 Quarterly funds update: Jersey Ogier | Banking & Financial Services - Jersey Emily Haithwaite, Niamh Lalor , Sophie Reguengo, Matt McManus Banking & Financial Services New States AssemblyEnhancements to Limited Partnerships Law approvedProceeds of Crime Law updatedGovernment consults on amendments to Powers of Attorney LawJFSC publishes feedback from supervisory risk examinationsRevisions to outsourcing policy proposedFirst national risk assessment focusing on virtual assetsDigital solutions to customer due diligence requirementsFee updates proposed for fund services businessesNew States AssemblyThis quarter's update is a little lighter on new legislation thanks to the pre-election purdah period imposed from mid-May.Election night on 22 June 2022 brought, as ever, a handful of surprise results, although it is also clear there will be a large degree of continuity in the make-up of the new States Assembly, continuing the island's long reputation of political stability. The increased diversity among States members is also welcome, including the island's first female chief minister.It is heartening to see that the vast majority of elected representatives reaffirmed in their manifestos the importance of the finance industry, and in many cases of sustainable finance, to the island.Enhancements to Limited Partnerships Law approvedThe States Assembly has approved a package of amendments to the Limited Partnerships (Jersey) Law 1994, the culmination of a cross-industry project to modernise and clarify aspects of the law.This significant overhaul will be well received for a number of reasons. The majority of changes are intended to provide additional flexibility in the drafting of partnership agreements, or to ensure Jersey's regime remains competitive as the "best in class" among leading fund jurisdictions.anIn brief, the main changes include, among others:the expansion of the (non-exhaustive) list of "safe harbour" activities which limited partners may undertake without risking their limited liability status. The extended list includes activities such as voting on a wider range of matters and calling and participating in meetings of partners, among other things. A limited partnership agreement will, however, be able to provide for specific circumstances in which a limited partner will be liable beyond its agreed contribution to the partnership;the ability for partnership agreements to modify the statutory six month "clawback" period during which limited partners must repay amounts received when the partnership proved to be insolvent;additional protection for investors (or their representatives) who sit on limited partner committees, who will benefit from an express statement that they owe no duty to the partnership, its partners, other committee members or third parties; andthe ability for a partnership agreement to limit or restrict limited partners' statutory right to inspect or take copies of partnership records. This will be beneficial where any such information is deemed commercially sensitive (as is often the case, particularly in carry partnerships).The amendments also cover various administrative matters. Chief among these is a streamlining of the process for the termination and dissolution of a limited partnership. Similar to the summary winding up of a solvent company, the general partner or other liquidator of a limited partnership will first wind up the partnership's affairs before filing a statement of dissolution as the final act.In addition, where the general partner is in continuing default of its duties under the law, the registrar may, after giving 30 days' notice, cancel the partnership's registration and require the partnership's affairs to be wound up (though this procedure will not alter the limited liability status of investors).The changes are expected to come into force in the third quarter of 2022, following Privy Council approval. For further details, see "Amendments to the Limited Partnerships (Jersey) Law 1994".Proceeds of Crime Law updatedFollowing a consultation (for further details, see "Channel Islands Funds Quarterly: Q4 2021"), the States Assembly approved a redraft of Schedule 2 to the Proceeds of Crime (Jersey) Law 1999.The revised Schedule 2 will be worded so as to reflect more clearly and completely the latest Financial Action Task Force (FATF) recommendations on activities which give rise to anti-money laundering/counter-terrorist financing (AML/CTF) obligations. It will also remove references to the various automatically exempt activities – linked to exemptions under the Financial Services (Jersey) Law 1998.These exemptions – such as the exemptions for functionaries of a "professional investor regulated scheme", which is commonly relied on in Jersey private fund structures – will continue to exempt persons from registration under the Financial Services Law, but will no longer exclude such activities from the scope of AML/CFT obligations.In practice, these obligations tend to be discharged by the structure's administrators, although once the amendments take effect in the coming months, action will be required to ensure such functionaries comply formally with the requirements. Further guidance is expected to follow in due course.Government consults on amendments to Powers of Attorney LawProposals have been published to amend the Powers of Attorney (Jersey) Law 1995. The government consultation takes into account feedback from industry on how this law applies in practice to international finance transactions and suggests a series of clarifying and otherwise beneficial amendments.In an investment funds context, the proposals of particular relevance include that:the law will confirm that an attorney may, in certain circumstances, sign a power of attorney on behalf of a donor; anda power of attorney will be capable of being granted for more than a year where it secures the performance of an obligation owed to the donee. This would be broader than the current provision which expressly relates to Jersey security interests or security interests under foreign law.The law, if amended, will also specifically outline the formalities for execution of powers of attorney by entities with separate legal personality but which are not bodies corporate.JFSC publishes feedback from supervisory risk examinationsRegulated persons should ensure they are aware of the findings of the Jersey Financial Services Commission's (JFSC's) latest supervisory risk examinations, conducted in 2021.Among the key findings are:instances where businesses had failed to establish and maintain adequate policies and procedures, or where these had not been reviewed and updated in light of changes to the regulatory framework;deficiencies in the money laundering compliance officer's reporting to the board; anddeficiencies in the area of business risk assessments, including not keeping these up to date.Regulated persons should review the findings against their own businesses and consider whether they need to take any actions.Businesses should also take into account the detailed findings in the report on the JFSC's 2021 financial crime examinations.Revisions to outsourcing policy proposedThe JFSC has published a draft revised outsourcing policy for consultation.First national risk assessment focusing on virtual assetsPrior to the election, the government of Jersey published the results of its review into the money laundering and terrorist financing risks associated with various facets of the virtual assets sector.The report acknowledges that the sector is rapidly evolving. It concludes that, although the risks are currently limited given the small size of the virtual assets sector in Jersey, the enhanced data that will be collected in respect of virtual asset service providers in future will be beneficial.This data (including data obtained as a result of the changes to the Proceeds of Crime Law covered above) will enable Jersey authorities to deepen their understanding and ensure Jersey's regulatory framework is comprehensive as the sector develops.Digital solutions to customer due diligence requirementsA joint consultation between the JFSC and the government of Jersey aims to take advantage of digital technologies to facilitate efficient customer due diligence while ensuring that the information obtained remains robust.The concept of digital identification is encouraged by the FATF, whose globally accepted standards for AML/CFT Jersey seeks to implement. In view of this, Jersey has considered what barriers exist to the wider adoption of digital identification systems, and is seeking to understand where solutions might lie to these.Fee updates proposed for fund services businessesThe JFSC is consulting on proposed increases in fees for fund services businesses. Existing fees would be subject to an increase of 5% over the retail price index, though this is linked to a reduction in the metrics used to calculate the fees.It is also proposed to introduce a fee for applications which concern the acquisition of a registered person (in its entirety, rather than smaller changes of ownership), which require regulatory input but are not currently subject to any charge.In addition, the JFSC has confirmed increases in fees connected with fund vehicles themselves.For further information on this topic please contact Emily Haithwaite, Niamh Lalor, Sophie Reguengo or Matt McManus at Ogier by telephone (+44 1534 514 000) or email ([email protected], [email protected], [email protected] or [email protected]). The Ogier website can be accessed at www.ogier.com.