An exemption which will enable Jersey-regulated fund managers to be appointed in relation to managed accounts has now been introduced. This will enable hedge fund managers that are already regulated under the Financial Services (Jersey) Law (FS Law) in Jersey to carry out fund services business (FSB) to also service qualifying segregated managed accounts (QSMAs) without the need to seek additional regulation for the conduct of investment business under the FS Law.
This responds to a continuing growth in the number of Jersey-based hedge fund managers. As well as simplifying the regulatory position this will also allow managers of QSMAs to continue to be able to benefit from a 0% corporate tax rate.
Under the new regime, an exemption from the requirement to be regulated for investment business has been introduced for QSMAs. The proposed exemption recognises that those who utilise managed accounts in the hedge-fund space are typically at the apex in terms of investor sophistication. The QSMA regime will be open to managed accounts meeting the following criteria:
- minimum initial subscription of US$1million
- the manager must be licensed for the conduct of fund services business as a manager, investment manager, trustee or general partner and must be appointed as manager to hedge funds
- the QSMA must only pursue hedge-fund strategies that replicate, or be comprised of elements from, the hedge-fund strategies currently employed by one or more funds to which the manager is appointed to provide FSB services and the manager must ensure fair treatment of investors as between each other
- the manager must file a notice with the JFSC confirming reliance on the exemption together with an annual fee, and must report on an ongoing basis the number of QSMAs and the aggregate value of investments managed in such QSMAs
- there must be a single investor (although this may include employees of the manager jointly or members of the same family jointly) who has received and signed a prescribed investment warning
- the Jersey manager must be the only manager of the QSMA and cannot hold or otherwise have custody of the assets under management