Collective Investment Funds (Unregulated Funds) (Amendment No. 2) (Jersey) Order 200-.

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A decision made (16/02/2009) regarding: Collective Investment Funds (Unregulated Funds) (Amendment No. 2) (Jersey) Order 200-.

Decision Reference: MD-E-2009-0025
Decision Summary Title :	Collective Investment Funds (Unregulated Funds) (Amendment No. 2) (Jersey) Order 200-		Date of Decision Summary:	13 February 2009
Decision Summary Author:	Finance Industry Development Executive		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	n/a
Written Report Title :	Collective Investment Funds (Unregulated Funds) (Amendment No. 2) (Jersey) Order 200-		Date of Written Report:	February 2009
Written Report Author:	Finance Industry Development Executive		Written Report : Public or Exempt?	Public
Subject: Collective Investment Funds (Unregulated Funds) (Amendment No. 2) (Jersey) Order 200-
Decision(s): The Minister made the Collective Investment Funds (Unregulated Funds) (Amendment No. 2) (Jersey) Order 2009 (“the Order”)
Reason(s) for Decision: The Order amends the Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008 (“the 2008 Order”), which permits funds to be established as Unregulated Exchange-Traded Funds if they comply with the requirements for listing on certain specified exchanges. The Order adds the Specialist Fund Market (“SFM”) of the London Stock Exchange (“LSE”) to the list of permitted exchanges specified in Schedule 4 of the 2008 Order.
Resource Implications: There are no measurable financial or manpower costs for the States.
Action required: The Minister to sign, date and seal the Order and the Order to be returned to the States Greffe without delay.
Signature: Senator A.J.H.Maclean		Position: Minister for Economic Development
Date Signed:		Date of Decision (If different from Date Signed):

Collective Investment Funds (Unregulated Funds) (Amendment No. 2) (Jersey) Order 200-.

Collective Investment Funds (Unregulated Funds) (Amendment No. 2) (Jersey) Order 200- (“the draft Order”)

1. ISSUE AND RECOMMENDATION

1.1. The draft Order amends the Collective Investment Funds (Unregulated Funds) (Jersey) Order 2008 (“the 2008 Order”), which permits funds to be established as Unregulated Exchange-Traded Funds if they comply with the requirements for listing on certain specified exchanges.

1.2. The draft Order adds the Specialist Fund Market of the London Stock Exchange to the list of permitted exchanges specified in Schedule 4 of the 2008 Order.

1.3. It is recommended that the Minister signs, dates and seals the draft Order and that it be returned to the States Greffe without delay.

2. BACKGROUND

2.1. The 2008 Order introduced two classes of unregulated funds that are exempt from the requirements of the Collective Investment Funds (Jersey) Law 1988 (“the CIF Law”), under which the Commission regulates collective investment funds. These are firstly, Unregulated Eligible Investor Funds (“UEIFs”) comprising only investors who are investing at least $1 million (or who meet certain other requirements), and secondly, Unregulated Exchange-Traded Funds (“UETFs”) comprising funds that are listed on certain stock exchanges and comply with the rules of those stock exchanges.

2.2. Funds which meet these criteria are not required to comply with the requirements of the CIF Law and are not regulated by the Jersey Financial Services Commission (“the Commission”) in Jersey.

2.3. Schedule 2 of the 2008 Order sets out the criteria for a fund to be an UETF. These include (in Paragraph 1) that the structure must be either: i) a Jersey company; or ii) a Jersey Limited Partnership or unit trust with a Jersey incorporated company as part of its structure. In addition, the fund must be a closed fund (paragraph 1(2)).

2.4. Paragraph 4 requires that the units in a UETF must be listed on one or more of the exchanges listed in Schedule 4. Since it is unlikely that an exchange will allow the fund to be listed before it is established, a period of 90 days is allowed to gain a listing. This period may be extended by the Commission.

2.5. Schedule 4 of the 2008 Order currently cites, inter alia, the London Stock Exchange and the Alternative investment Market as permitted exchanges. However, the London Stock Exchange proper actually comprises four markets – the Main Market, the Alternative Investment Market (“AIM”), the Professional Securities Market (“PSM”), and, since its launch in November 2007, the Specialist Fund Market (“SFM”).

2.6. The draft Order will amend Schedule 4 of the 2008 Order to expressly include the SFM, as well as the Main Market and the AIM.

2.7 Opened in November 2007 as a peer group market for alternative investment funds and their associated investors, the SFM appeals to hedge funds, private equity funds, emerging country and specialist property funds. The market is also capable of accepting more complex structures, governance models and security types. Limited partnerships, non-voting shares, and funds with concentrated investment policies and bespoke governance arrangements can be accommodated.

2.8. As with the Main Market, the SFM is regulated by the FSA, and has EU Regulated Market status. From a regulatory perspective, the SFM sits between the AIM and the Main Market, both of which are currently specified exchanges under Schedule 4 of the 2008 Order.

2.9. The PSM enables companies to raise capital through the issue of specialist securities, such as debt, convertibles and depositary receipts, to professional or institutional investors. The draft Order will expressly exclude the PSM from being a permitted exchange under Schedule 4 of the 2008 Order.

2.10. The Commission has considered the amendment and has recommended that the Order is made based on the statement that it has no objections to the making of the Order. Industry has also been consulted through Jersey Finance and Jersey Finance are supportive of the making of the Order.

3. RECOMMENDATION

3.1. It is recommended that the Minister signs, dates and seals the draft Order and that it be returned to the States Greffe without delay.

FINANCE INDUSTRY DEVELOPMENT EXECUTIVE