1 Jersey Developments

1.1 Value of regulated funds in Jersey hits record high

Figures released by the Jersey Financial Services Commission (JFSC) for Q3/2018 and reported by Jersey Finance, showed that the net asset value of regulated funds under administration in Jersey grew 14% year-on-year to stand at £301.7bn. Ogier's commentary on this very encouraging news can be accessed here.

1.2 Civil Financial Penalties – Principal Persons

The JFSC's powers to impose civil financial penalties have been extended to encompass principal persons (which includes directors and controlling shareholders of registered persons). From 26 October 2018, financial penalties of £10,000 to £400,000 may be imposed on a principal person if a registered person (that is, a person registered for financial service business under the Financial Services (Jersey) Law 1998) materially or significantly breaches a Code of Practice and such contravention was committed with the consent or connivance of, or is attributable to neglect on the part of a principal person, or if the registered person was aided, abetted, counselled or procured by a principal person.

This extension is not retrospective and a penalty under this new regime can only be imposed if the relevant contravention occurred after 26 October 2018, or occurred before and continued after that date.

1.3 Changes to Codes of Practice

In November 2018, the JFSC published Consultation Paper No. 10 2018: Amendments to Codes of Practice. The Consultation proposes amendments to the Codes of Practice (including those applicable to funds and their service providers) to address regulatory concerns and to ensure compliance with international regulatory standards. The consultation closed on 7 January 2019.

Although certain of the amendments are routine in nature, funds and their managers should be aware of the following proposals:

  • It is proposed that where the JFSC imposes a financial penalty under the civil penalties regime, the person on whom the penalty is imposed must pay the penalty and insurers are prevented from paying the penalty on the person's behalf. This only applies to the financial penalty and not to the costs of defending the enforcement action or the JFSC's costs, but will nonetheless be of concern to NEDs and other principal persons and registered persons.
  • It is proposed to require registered persons which hold assets belonging to a fund which are money (fund money), to implement an annual independent review of the controls over fund money to verify the effectiveness of the relevant controls that prevent the loss, misuse or misappropriation of fund money. The person carrying out the independent review may be an internal or external party. However, in the case of a review by an internal party, that party must be operationally independent from the individuals or functions within the registered person which are responsible for the operation of the controls under review.
  • The JFSC expects fund managers, as part of their general risk management duty, to specifically consider the risk of a cyber-security incident, and have in place a documented policy to identify and respond to such risks.
  • Where a registered person is ceasing to carry out regulated activities, it is expected to have in place appropriate run off PII cover. Under the proposed changes to the Codes, the JFSC expressly provides that it will expect such cover to be in place for a period of between three and six years, which appears to be an extension to previous expectations regarding run off cover.

Ogier submitted a written response to the consultation and we will provide an update in our next briefing.

1.4 Royal Court's power to direct on a dissolution in the absence of a GP

In October 2018, the Royal Court of Jersey exercised its powers to direct how and by whom a limited partnership was to be wound up following its dissolution in the absence of a general partner under Article 24(1)(b)(ii) of the Limited Partnerships (Jersey) Law 1994 (the Limited Partnerships Law).

In the Representation of Private Equity Fund Finance Limited the general partner of the limited partnership in question (the Partnership) was struck off following a failure to file its annual return and, as a result, the Partnership was dissolved pursuant to Article 24(1) of the Limited Partnerships Law. The assets of the Partnership were, as per Article 11(2) of the Limited Partnerships Law, in the name of the general partner and upon its dissolution those assets arguably passed to the Crown.

As the partnership agreement was silent on the winding up of the Partnership, the Court deemed it appropriate to give directions to the limited partner seeking direction (the Representor) under Article 24(1)(b)(ii) of the Limited Partnerships Law. The court ordered that the assets of the Partnership be transferred from Her Majesty's Receiver General to the Representor, and authorised the Representor to collect in and realise the assets in the absence of the general partner to settle any creditor claims. The Receiver General was to be paid a fee out of the assets of the Partnership, and any surplus would be distributed in accordance with Article 27 of the Limited Partnerships Law. In the event there were insufficient assets to pay the creditors of Partnership in full, the Representor was to return to the Court for further direction and, notably, on completion of the winding up of the Partnership, a statement of dissolution was to be delivered to the Registrar pursuant to Article 24(3) of the Limited Partnerships Law.

1.5 Brexit and Jersey

On 15 November 2018 Senator Ian Gorst welcomed the UK Prime Minister's statement on the Brexit Withdrawal Agreement, in particular "the fact that the UK will be seeking specific arrangements for Jersey and the other Crown Dependencies' that take into consideration Jersey's existing relationship with the EU. Jersey's Brexit objectives remain to continue the existing relationships with the UK and with the EU and to ensure Jersey has appropriate agreements in place to benefit from global opportunities arising from Brexit.". On 19 November 2018, the UK government issued a letter reaffirming its commitment to the constitutional relationship between Jersey and the UK, confirming that one of Jersey's key Brexit objectives has been secured.

The Minister for External Relations also stated that Jersey's Brexit readiness planning (which includes preparations for a 'no-deal' Brexit) will continue until a deal is agreed.

2 Guernsey Developments

2.1 Handbook on Countering Financial Crime and Terrorist Financing

On 12 November 2018, the Guernsey Financial Services Commission (the GFSC) published in draft final form the revised Handbook on Countering Financial Crime and Terrorist Financing (the Handbook).

This follows publication of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) (Amendment) Ordinance, 2018, which, once approved by the States of Guernsey, will replace and update the provisions of the two sets of Criminal Justice (Proceeds of Crimes) Regulations for financial services business and prescribed business.

The revised draft legislation is due to take effect on 31 March 2019 and the GFSC will formally make the rules in the Handbook during the first quarter of 2019 to allow for the addressing of any technical issues in the rules which could hinder or prevent compliance with the revised regulatory framework.

The revisions to the Handbook, together with the revised legislation, will bring the Bailiwick of Guernsey's anti-money launder/countering terrorist financing framework into line with international standards issued in 2012 by the Financial Action Task force, as well as addressing recommendations made by MONEYVAL following its mutual evaluation of Guernsey.

2.2 Code of Market Conduct

On 5 November 2018, following a period of consultation, the GFSC published the Code of Market Conduct (the Code).

The aim of the Code is to provide guidance on whether or not behaviour amounts to market abuse, in the opinion of the GFSC, and provides the GFSC with a clearer basis for pursuing enforcement actions for market abuse. This has been anticipated for a number of years and those undertaking on-market transactions should review their current practices in the light of the guidance provided by the new Code.

2.3 Fit and Proper Guidance

In October 2018, the GFSC released guidance to assist individuals, and the entities who may employ them, on how to meet the "fit and proper" standards set out in the relevant minimum criteria for licensing.

The GFSC will consider each individual application in the whole but will focus on a number of points such as:

  • the individual's competence and their skills, knowledge, capability and expertise;
  • probity, an individual's integrity, honesty and reputation; and
  • solvency in the form of the individual's financial soundness.

It is expected that a licensee (current or proposed) handling an individual's appointment will assess him/her against the fit and proper standards and will have the necessary processes in order to identify where they do not meet the same. Notification of issues affecting a prescribed persons' fitness and propriety must be made to the GFSC on a timely basis.

2.4 GFSC announces freeze in licence fees

The GFSC has announced that, after careful consideration, it is not seeking to increase the current level of its fees for the next two years

Recent changes to the accounting treatment of the GFSC's former pension liabilities, together with past operational surpluses, have ensured that the GFSC does not currently need to set fees with a view to accumulating reserves to cope with contingencies.

2.5 Third quarter investment statistics 2018

The net asset value of total funds increased by £4 billion to £280 billion. For the year since 30 September 2017, total net asset values increased by £11 billion.

Guernsey-domiciled closed-ended funds experienced a quarterly increase of £3.9 billion, which represents an increase of £6.1 billion over the year since 30 September 2017. Open-ended funds also increased by £0.4 billion over the quarter to £43.6 billion.

Since 30 September 2017, the net asset value of non-Guernsey schemes grew by 9.1% (£5.4 billion).

2.6 Policy Framework to support growth of Guernsey's finance sector

On 7 December 2018, the Committee for Economic Development and Guernsey Finance published a policy framework to support the growth of Guernsey's finance sector.

The framework sets out an approach to positioning Guernsey as a financial services jurisdiction, and to supporting the finance sector in creating growth and development in a sustainable long-term for the sector. It forms part of the development strategy set out by the Committee for Economic Development and approved by the States of Guernsey in June 2018 and its priorities remain:

  • green and sustainable finance;
  • family office and private wealth services;
  • fintech: electronic AML and distribute ledger technology;
  • funds: global distribution and product development; and
  • wealth management, investment and brokerage services.

3 Developments in the Channel Islands

3.1 Substance requirements in Jersey and Guernsey

Further to the report in our last update, new requirements for an economic substance test have now been introduced in Jersey and in Guernsey. Jersey's Taxation (Companies – Economic Substance) (Jersey) Law 2018 and Guernsey's Income Tax (Substance Requirements) (Implementation) Regulations, 2018 came into effect on 1 January 2019. The legislation requires in scope Jersey and Guernsey tax resident companies to show that they have sufficient substance by demonstrating that they are being directed and managed in the relevant jurisdiction, that they are conducting Core Income Generating Activities and have adequate people, premises and expenditure in that jurisdiction.

Links to our briefings on the substance requirements are available here:


Companies perspective; Fund managers' perspective; and Banking and Finance perspective.


Company perspective; Fund managers' perspective and Banking and Finance perspective.

Similar requirements with effect from 1 January 2019 have also now been implemented in the Cayman Islands (The International Tax Co-operation (Economic Substance) Law, 2018) and the BVI (Economic Substance (Companies and Limited Partnerships) Act 2018). We have put together a team of experts in each jurisdiction to provide a coordinated response to the substance requirements and to advise on common pitfalls and necessary action points. Attached here is a link to our cross-jurisdictional team briefing and do contact any of the team for further information.

3.2 Changes to UK's Non-Resident CGT Tax Regime

In November 2017, the UK government budget announcement proposed certain changes to the treatment of direct and indirect disposals of UK commercial property by non-UK residents. Further to the consultation process throughout 2018 (in which Ogier was involved), the UK Finance (No.3) Bill was published in November 2018 setting out the final position. The positive news is in respect of the provisions relating to non-resident collective investment vehicles (including transparent vehicles such as JPUTs) - two new elective regimes are being created, being a transparency election and an exemption election. Addressing various industry concerns, these regimes will provide a means of preventing CGT being imposed at multiple levels within investment structures or indirectly imposed on tax-exempt investors (such as pension funds) who hold UK property through such vehicles.

Our real estate experts will be reaching out to clients and intermediaries in the coming weeks with further details on next steps, but this is an encouraging outcome for both Jersey and Guernsey.

3.3 TISE updates Listing Rules

In October The International Stock Exchange (TISE) published its revised Listing Rules. The changes have been made to reflect current market practices and enhance the TISE's product offering and took effect from 1 January 2019. As well as general updates to the Listing Rules to improve their format in terms of brevity, clarity and consistency, changes in relation to the treatment of trading companies, in particular to appeal to Small and Medium Enterprises will be of particular interest.


Some of the key elements of the new rules for trading companies are:

  • the expected market capitalisation of securities to be listed must be at least £1 million, unless otherwise agreed by TISE;
  • at least 25% of the shares of the class to be listed must be in the hands of the public in such proportions so that there will be an adequate market in the securities, unless otherwise agreed by TISE;
  • the company must provide three years' audited annual accounts, unless it has been operating for a shorter period and other exceptions may also apply; and
  • directors must provide a statement certifying that the company has sufficient working capital for 12 months or otherwise, how they propose to provide such capital to ensure its continued ability to trade.

Changes have also been made to the Listing Rules for Special Purpose Acquisition Companies and to the rules for listing Equity Securities to facilitate the listing of REITS.

3.4 TISE Green Segment

On 21 November 2018 TISE launched a new green market segment, TISE GREEN, to enhance the visibility of those investments which make a positive impact on the environment.

TISE GREEN is open to all types of green investments, including bonds, funds and trading companies, from any jurisdiction.

An appropriate third-party needs to provide verification that the investment meets an internationally recognised standard of green finance.

The investment must first be admitted to TISE’s Official List but there is no additional charge for the subsequent entry to, and presence on, TISE GREEN.

Key features of TISE GREEN:

  • open to any type of green investment, including bonds, funds and trading companies;
  • open to investments from any jurisdiction;
  • the investment’s green credentials need to be verified by an appropriate third party against a globally recognised standard, such as the Green Bond Principles published by the International Capital Markets Association (ICMA) or the Common Principles for Climate Mitigation Tracking published by the Multilateral Development Bank (MDB) and the International Development Finance Club (IDFC);
  • the investment must first be admitted to TISE’s Official List before being eligible for entry to TISE GREEN; and
  • beyond the usual fees for listing on TISE’s Official List, there is no additional charge for entry to, or an ongoing presence on, TISE GREEN.

Funds which have a Guernsey Green Fund route 1 designation and which are listed on TISE will meet the criteria for a presence on TISE GREEN.

Successful applicants will be added to the TISE GREEN section of TISE’s website and receive TISE GREEN logos for their own use in promoting their presence on the segment.