Introduction
What constitutes a listed fund?
Regulatory requirements
Board of directors
Investment manager or adviser
Jersey service providers
Offer document
Authorisation process
Alternative Investment Fund Managers Directive
Taxation
Economic substance
The Jersey listed fund regime is available to listed closed-ended companies further to the Listed Fund Guide issued by the Jersey Financial Services Commission (JFSC). Modelled on the Jersey expert fund, the listed fund regime enables the fast-track establishment of corporate closed-ended funds that are listed on recognised stock exchanges or markets, including the London Stock Exchange or Specialist Fund Market, the Alternative Investment Market and The International Stock Exchange.
A listed fund is regulated pursuant to the Collective Investment Funds (Jersey) Law 1988 (CIF Law).
What constitutes a listed fund?
A listed fund needs to 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.
A listed fund is subject to a very 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 risk diversification strategy;
- a listed fund may be offered to professional or experienced investors, as well as retail investors, provided they have taken appropriate professional advice; and
- there is no required minimum subscription.
The parameters for a listed fund are set out in the guide and outlined below. If a listed fund does not comply in all respects with these requirements, it is possible to request derogations from the JFSC in respect of any areas of non-compliance.
At least two Jersey-resident directors with appropriate experience must be appointed to the board of the listed fund. A majority of the board must be independent of the promoter.
The investment manager or adviser must:
- have had no convictions or disciplinary sanctions imposed on it;
- be solvent;
- be established in an Organisation for Economic Co-operation and Development member state or another jurisdiction with which the JFSC has entered into a memorandum of understanding (or equivalent) on investment business and collective investment funds;
- be regulated in that jurisdiction in relation to managing or advising on funds;
- have relevant experience in 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 the investment manager or adviser is not regulated in its home jurisdiction in relation to managing or advising on funds, and provided the fund is a property fund or other type of fund not requiring it to be regulated, the investment manager or adviser must be either:
- a subsidiary of a company that is so regulated;
- a listed company with market capitalisation of at least $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 forming its span of control can demonstrate relevant business experience for this period or possess relevant professional qualifications; or
- otherwise approved by the JFSC to act.
If the distributor of the listed fund is independent of the investment manager or adviser and is either a driving force behind the fund or introduces the majority of investors to the fund, it must satisfy the same requirements as the investment manager or adviser (other than in relation to investment management experience).
A listed fund must appoint an administrator and/or manager that has two Jersey resident directors with appropriate experience, staff and a physical presence in Jersey. The administrator and/or manager must monitor the compliance of the investment manager or adviser with any investment or borrowing restrictions set out in the listed fund's offer document and must have access to appropriate records of the investment manager or adviser to enable it to carry out this monitoring function.
All Jersey fund service providers to a listed fund (including the administrator and/or manager) must be regulated in Jersey under the Financial Services (Jersey) Law 1998 (FS Law) and will be required to comply with applicable codes of practice published by the JFSC.
There is no requirement for a Jersey custodian, although a listed fund must have adequate custody arrangements in place, which must be disclosed in the fund's offer document. These must, if applicable, include prime brokerage arrangements. In the case of a hedge fund, unless agreed with the JFSC, any prime broker must be part of a group with minimum credit rating of A1/P1.
A listed fund must appoint an auditor.
The offer document of a listed fund must contain certain specified disclosures, including all information that investors would reasonably require to make an informed judgement about investing in the fund. Derogations may be sought in respect of specific content requirements where relevant.
The offer document must also prominently include a prescribed investment warning, which draws attention to the reduced regulatory requirements applicable to listed funds.
Listed funds can be marketed to investors in the United Kingdom and European Union or European Economic Area, subject to compliance with certain additional requirements set out under the Alternative Investment Fund Managers Directive (UK AIFMD), discussed below.
The authorisation process for a listed fund is simple and quick. An application form must be submitted to the JFSC setting out the key features of the fund, together with a confirmation (countersigned by the administrator) that the investment manager or adviser complies with the requirements set out above. The submission must be accompanied by a structure chart, the draft offer document (with any derogations from content requirements typically being requested at this stage) and the related application for the fund to be granted a certificate under the Collective Investment Funds (Jersey) Law 1988 (CIF Law). Directors and other principal persons must provide completed personal questionnaires to seek the JFSC's approval for them to fulfil those roles for the listed fund. An application fee is also payable at this stage.
The JFSC will check that the application form has been properly completed and may request further information on the fund and its functionaries but will not carry out a full regulatory review of the fund or its promoter. The requisite consents can be issued within as little as three working days.
Alternative Investment Fund Managers Directive
Jersey alternative investment fund managers (AIFMs) marketing funds to investors in the European Union, the European Economic Area or the United Kingdom via national private placement regimes (NPPRs) are required to comply with certain additional disclosure, transparency and reporting requirements under the Alternative Investment Fund Managers Directive (AIFMD) or the UK AIFMD regulations. However, as Jersey is a "third country" for AIFMD purposes, Jersey firms engaging in marketing under NPPRs are subject only to these limited aspects which apply to non-EU, EEA or UK AIFMs and not to full AIFMD compliance.
Since listed funds are regulated under the CIF Law and their Jersey service providers under the FS Law, no additional regulatory permissions are required in Jersey for the fund or to act as the fund's AIFM. However, the relevant provisions of the Alternative Investment Funds (Jersey) Regulations 2012, the JFSC's Code of Practice for Alternative Investment Funds and AIF Services Business will apply (namely in relation to disclosure, reporting and asset stripping, together with notification to the JFSC in advance of marketing into the United Kingdom, the European Union and European Economic Area).
These additional requirements apply only where there is to be active marketing of such funds in the into the United Kingdom, the European Union and European Economic Area under NPPRs.
Jersey has implemented a notification regime for small AIFMs that manage AIFs below certain specific thresholds. This regime mirrors the corresponding exemptions provided in the AIFMD.
Jersey offers a location for investment funds which does not impose its own tax burden on an investment fund or its investors.
Both the Taxation (Companies – Economic Substance) (Jersey) Law 2019 and the Taxation (Partnerships – Economic Substance) (Jersey) Law 2021 (together, the Substance Laws) are relevant in the context of Jersey investment funds.
A company or partnership will be caught within the scope of the Jersey economic substance regime if it is a "resident company" or a "resident partnership" that carries on one or more "relevant activities" from which it receives gross income.
The Substance Laws do not apply to investment funds directly, save in the case of self-managed corporate funds (ie, corporate funds which have not appointed an external manager). However, any Jersey fund manager appointed in respect of the fund will be conducting the relevant activity of "fund management business". Accordingly, consideration should be given to the application of the Substance Laws to general partners, managers, investment managers and managing trustees.
If within scope, the relevant company or partnership must satisfy the "economic substance test".
For further information on this topic please contact Emily Haithwaite, Niamh Lalor, Sophie Reguengo or Joanna Christensen 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.