Under Jersey’s current investment funds framework there are a number of non-retail investor definitions; including professional, sophisticated, expert, and institutional.
In a bid to remove any uncertainty, Jersey has proposed streamlining the definitions into a single category across private, public and unregulated fund regimes: professional investor.
The term ‘professional’ investor was favoured over ‘expert’ as it appears to be the more universally adopted term in other jurisdictions, particularly Europe.
Unregulated ETFs
At present, unregulated exchange traded funds (ETFs) can be established by simply notifying the Jersey Companies Registry.
Provided the fund is listed on one or more of the required exchanges or markets, unregulated ETFs can be set up with no reference to the JFSC’s policy statement and guidance note on promoters of public and private collective investment funds.
As a result, the JFSC has seen a misuse of the funds leading to formal enforcement action being taken.
For this reason, and the decline in the number of unregulated ETFs notified to the registry, the JFSC and Jersey government have proposed that they be closed to new notifications and gradually phased out.
Any existing funds covered by the scope of the proposal would continue to operate as normal.
Very private fund
Very private funds (VPFs) provide a flexible solution for small groups of professional or sophisticated co-investors and where a formal offering is not required.
They can be set up quickly, at reasonable cost and fall outside the scope of the Collective Investment Funds Law. VPFs are instead regulated by the JFSC under the Control of Borrowing (Jersey) Order, which is more flexible.
Setting up a VPF is only suitable where the total number of investors does not exceed 15 and are organised on a private placement or private subscription basis, meaning that there can be no general marketing or public offering of the fund.
The minimum subscription per investor is typically set at £250,000 ($330,335, €295,739) and they can be formed within five to 10 working days.
Very private placement fund
Jersey has proposed rebranding VPFs as VPPFs and plans to introduce a new guide to provide greater clarity on the authorisation process.
Only professional or eligible investors may invest in a VPPF, with the consultation document stating that, for the avoidance of doubt, eligible investors are not retail investors.
However, it has been proposed that professional investors may be able to acquire an interest in a VPPF directly for, and on behalf, of one or more retail investors. In this scenario, retail investors would not be counted among the 15 investor maximum.
The guide sets out how a VPPF can obtain relevant consent from the JFSC on a fast-track basis, which is intended to simplify and expedite the process of setting up such a fund.
The fast-track process could see VPPFs authorised by the JFSC within 48 hours of application through the use of a new VPPF Form. The new form would also mean that VPPFs would no longer need to notify the registry where the fund is a Jersey unit trust or a non-domiciled structure.
The proposed VPPF application fee has been suggested as £1,070.
The consultation runs until the 12 September. To read the full document, click here.
