A revised version of the Jersey Private Fund Guide, published this week by the Jersey Financial Services Commission in consultation with the Jersey funds industry, should widen further the regime’s appeal, according to Ogier funds partner Matt McManus.
The Jersey Private Fund (JPF) regime has proven an immense success since its inception in April 2017, with well over 700 funds benefitting from the swift authorisation, flexibility and light-touch regulation the regime offers.
The changes include enhancements as well as useful clarifications and certain updates to reflect recent regulatory developments, with key amendments including:
- Combined carry and co-investment vehicles: the revised Guide provides managers with greater flexibility to structure carried interest and/or co investment schemes, which will be deemed as ‘professional investors’ and able to invest in a JPF without counting against the 50 offer / investor limit. This is on the basis that a carry / co-invest arrangement aligns interests and/or incentivises the fund’s management and advisory team.
- Wider professional investor definitions: the definition of professional investors (who are eligible to invest in a JPF) has been widened to include all employees of investment businesses or other service providers, not just senior employees. Helpfully, the revised Guide clarifies that investor eligibility is determined at the outset (ie. if, for instance, an individual ceases to qualify as a professional investor upon resigning or retiring from an employment role, this will not impact their entitlement to continue as an investor, subject to the terms of the scheme).
- More flexibility for family office and employee incentive arrangements: the existing carve-outs for arrangements between investors with a family or employment connection have been improved. These arrangements fall outside the scope of the regime as set out in Annex B to the JPF Guide but had required one or the other to apply – the carve-outs could not be combined. It is now possible for a vehicle to rely on an Annex B carve-out where its participants are linked under either a family connection or a related employment connection, as part of the same scheme.
- JPFs established outside Jersey: the revised guide clarifies that the JFSC expects a fund established under the JPF Guide to be established in Jersey or, if established elsewhere, managed and controlled in Jersey or to have its governing body on the island.
- AMLSP regime: for clarity, the JPF Guide expressly states that a JPF established in Jersey or with its governing body and management and control in Jersey will be subject to Jersey’s anti-money laundering, counter-terrorist financing and counter-proliferation (AML/CFT/CPF) regime.
- Designated service providers: the revised guide removes the ability for investment businesses registered with the JFSC (not also registered to conduct fund services business or trust company business) to act as DSP. In practice this is not expected to have an input as we understand all DSPs possess a fund services business and/or trust company business registration of the appropriate kind.
Commenting on the changes, Matt (pictured) said: “The consultative and collaborative approach taken by the JFSC in developing the revised JPF Guide, and the many helpful changes within it, have been welcomed by industry. Funds and fund managers will also welcome the increased flexibility, and we expect the JPF regime will continue on its successful trajectory as a leading structuring option for private alternative investment funds.”
