Niamh Lalor Sophie Reguengo Matt McManus Brooke Lewis October 26 2022 Quarterly funds update: Jersey Ogier | Corporate Finance/M&A - Jersey Niamh Lalor , Sophie Reguengo, Matt McManus, Brooke Lewis Corporate Finance/M&A Feedback and further consultation on "arranging" in investment businessEnhancements to Jersey's limited partnership framework now in forceFollow-up consultation on AML/CFT scope exemptionsUpdate on proposed revisions to JFSC outsourcing policyClosed consultationsKey documents published in Jersey's fight against financial crimeFeedback and further consultation on "arranging" in investment businessThe Jersey Financial Services Commission (JFSC) has published feedback on its recent consultation regarding proposals to bring the activity of "arranging" into the scope of "investment business" under the Financial Services (Jersey) Law 1998.Under the proposals, making arrangements for another person (whether as principal or agent) to buy, sell, subscribe for or underwrite investments will be a regulated activity (unless an exemption applies). The aim is to enhance regulatory protection for investment activity brought about by an arranger in respect of retail investors. The "professional investor regulated scheme" exemptions on which many functionaries rely in a private funds context will also apply to the new activity of "arranging" investments.The revised proposals attempt to address industry comments, ensuring the scope reflects the policy intention without any unintended consequences. As a result, the regime will be more aligned with the United Kingdom's regime and the scope of the "arranging" activity will be more clearly limited by exemptions.It will also be clearer that:only retail investors will be in scope;the "arranger" must be remunerated;in order to be in scope, any deal brought about must not have been possible without the involvement of the arranger;"arranging" will not include "introducing only" activity; anda person will not be within scope if investment advice is provided by a JFSC-regulated investment business in relation to an arranged deal.Further feedback on these proposals is sought by 21 October 2022.Enhancements to Jersey's limited partnership framework now in forceAmendments to the Limited Partnerships (Jersey) Law 1994 came into force on 12 August 2022.The amendments provide welcome enhancement, modernisation and clarification to the law. Existing limited partnership agreements do not need to be revised to take account of the changes, although general partners may wish to consider whether amendments may be beneficial to take advantage of additional flexibility in the regime.For further details, see "Amendments to the Limited Partnerships (Jersey) Law 1994".Follow-up consultation on AML/CFT scope exemptionsSchedule 2 to the Proceeds of Crime (Jersey) Law 1999 has been "recast" to better align the businesses in scope for anti-money laundering (AML)/counter-terrorist financing (CTF) obligations with standards set by the Financial Action Task Force (FATF).In brief, the activities are now framed using the FATF's own definitions of "financial institutions", "virtual asset service providers" and "designated non-financial businesses and professions", which will enable clearer parallels to be drawn with international standards. In addition, exemptions are only sustainable where there is a proven low AML risk, meaning that various "blanket" exemptions that had previously applied will no longer do so (though there is potential for exemptions to be reintroduced in specific circumstances, if supported by data on the risks posed).For instance, general partners, trustees and other functionaries of private fund or non-fund structures will no longer be able to rely on the common "professional investor regulated scheme" exemption in respect of AML/CFT obligations (though this exemption will continue to apply in respect of regulatory requirements under the Financial Services (Jersey) Law 1998).As a result, a large number of additional businesses (referred to as "previously exempt supervised persons" (PESPs)) will now have direct AML/CFT obligations.In the context of these PESPs, AML/CFT obligations have generally been conducted by the regulated Jersey administrator. Given this fact, industry and the JFSC are discussing how the role of the administrator can be formalised in order to support PESPs with their new AML/CFT obligations. In broad terms, it is likely that businesses will be able to engage administrators – referred to as "designated service providers" – to perform the AML/CFT function.The follow-on consultation paper issued on 14 September 2022, seeks feedback on the proposals and other matters concerning implementation of the revised regime.Businesses should, at this stage, identify whether they are PESPs and, if so, be ready to take action once the proposals are implemented. Regulated administrators of PESPs should also ensure they will be in a position to support their clients with the finalised requirements.Update on proposed revisions to JFSC outsourcing policyThe JFSC has consulted industry on its proposals for a revised outsourcing policy. Among other changes, the revised policy will set parameters for PESPs looking to outsource their new formal AML/CFT obligations.Closed consultationsVarious JFSC and government consultations have closed since last quarter. These include:the JFSC's consultation on who should be regarded as "senior managers" of financial institutions and other businesses subject to its extended civil financial penalties regime;the government consultation relating to the Powers of Attorney (Jersey) Law 1995 (which sought feedback from industry on how this law applies in practice to international finance transactions and suggested a series of clarifying and otherwise beneficial amendments); anda joint consultation between the JFSC and government concerning how digital technologies might be used to facilitate efficient but robust customer due diligence.Feedback on the above consultations is expected shortly.Lastly, following consultation in June 2022 and effective from 1 July 2022, the fees for alternative investment funds, collective investment funds, Jersey private funds and qualifying segregated managed accounts, and fees under the Control of Borrowing (Jersey) Order 1958, have all been increased by 11%. Additionally, the fees for fund services business were increased by 11.1%.Key documents published in Jersey's fight against financial crimeThe government of Jersey has published two important documents further advancing the island's efforts to fight financial crime.The first is a national strategy, covering the next five years, to identify and deliver on key actions to combat financial crime. The document builds on the government's national risk assessment, published in 2020, and draws on recommendations from the FATF to ensure that international standards continue to underpin Jersey's efforts and priorities.The national strategy comprises seven strategic priorities, with detailed actions contributing to each:understanding the threat and performance metrics;better information sharing and co-ordination;powers, procedures, preventative measures and tools;enhanced capabilities of law enforcement, the justice system and private sector;risk-based supervision and risk management;transparency and ownership; andinternational strategy.Businesses should consider the strategy when preparing or updating business risk assessments.Linked to the strategy is a statement on Jersey's approach to risk within the finance sector. This will be a developing document, to be revised annually and updated to reflect any changes in circumstances. It details the risks main risks to which Jersey's financial services industry is subject and articulates both Jersey's tolerance for, and framework for managing, that risk. Again, businesses should be aware of and play close attention to this statement.For further information on this topic please contact Niamh Lalor, Sophie Reguengo, Matt McManus or Brooke Lewis 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.