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Orders associated with Collective Investment Funds.

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A decision made (02/04/2008) regarding: Orders associated with Collective Investment Funds.

Decision Reference:   MD-E-2008-0068 

Decision Summary Title :

Orders associated with the Collective Investment Funds (Amendment No 4) (Jersey) Law 2008

Date of Decision Summary:

31 March 2008

Decision Summary Author:

James Mews

Finance Industry Development Executive

Decision Summary:

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

 

Written Report

Title :

Orders associated with the Collective Investment Funds (Amendment No 4) (Jersey) Law 2008

Date of Written Report:

31 March 2008

Written Report Author:

James Mews

Finance Industry Development Executive

Written Report :

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Subject:    

The making of the following orders (“the Orders”): 

Control of Borrowing (Amendment No 13) (Jersey) Order 2008

Financial Services (Amendment of Schedule 2 to Law) (Jersey) Order 2008

Financial Services (Trust Company Business (Exemptions)) (Amendment No 3) (Jersey) Order 2008

Collective Investment Funds (Unclassified Funds) (Prospectuses) (Amendment No 5) (Jersey) Order 2008

Companies (General Provisions) (Amendment No 3) (Jersey) Order 2008

Collective Investment Funds (Permits) (Exemptions) (Amendment No 3) (Jersey) Order 2008

Financial Services (Trust Company Business (Exemptions No 2)) (Amendment) (Jersey) Order 2008

Decision(s):  

The Minister for Economic Development made the above-mentioned 7 Orders.

Reason(s) for Decision: 

The Orders are part of a series of changes in order to transfer the regulation of functionaries of funds from the Collective Investment Funds (Jersey) Law 1988 to the Financial Services (Jersey) Law 1998.  These changes are part of a larger set of amendments all with the purpose of regulating all financial services businesses operating in Jersey under a single law.  This will increase efficiencies in both the finance industry and the Commission in accordance with the latest international standards and good practice. 

The Collective Investment Funds (Amendment No 4) (Jersey) Law 2008 (“the CIF Amendment”) has been approved by the Privy Council and will come into force on 4 April 2008.  The proposed Orders, together with the CIF Amendment, form “Phase II” of the transfer of regulation.  In order for Phase II to come fully and smoothly into effect, the Orders should be made so as to come into force on the same date.

 

These particular changes include:

  • An exemption for regulated funds from the requirement to obtain consents under the Control of Borrowing (Jersey) Order 1958, which will avoid duplicated regulation.
  • Consequential changes to various orders reflecting the change from permits to certificates in the CIF Amendment.
  • The revocation of a transitional exemption which is no longer needed.

 

Resource Implications: 

No measurable cost or manpower implications arise for the Commission, the States or industry.

Action required: 

The Minister to make the Orders and the Finance Industry Development Executive to deliver the signed Orders to the Publications Editor, States Greffe and to liaise with the Greffier of the States for the Orders to be notified to the States.

Signature:  Senator P.F.C.Ozouf 

Position:  Minister

Date Signed: 

Date of Decision (If different from Date Signed): 

Orders associated with Collective Investment Funds.

MINISTER FOR ECONOMIC DEVELOPMENT

 

Orders associated with the Collective Investment Funds (Amendment No 4) (Jersey) Law 2008  

Control of Borrowing (Amendment No 13) (Jersey) Order 2008

Financial Services (Amendment of Schedule 2 to Law) (Jersey) Order 2008

Financial Services (Trust Company Business (Exemptions)) (Amendment No 3) (Jersey) Order 2008

Collective Investment Funds (Unclassified Funds) (Prospectuses) (Amendment No 5) (Jersey) Order 2008

Companies (General Provisions) (Amendment No 3) (Jersey) Order 2008

Collective Investment Funds (Permits) (Exemptions) (Amendment No 3) (Jersey) Order 2008

Financial Services (Trust Company Business (Exemptions No 2)) (Amendment) (Jersey) Order 2008  

TOGETHER “THE ORDERS”   
 
 

  1. THE ISSUE AND RECOMMENDATION

 

  1. The Collective Investment Funds (Amendment No 4) (Jersey) Law 2008 (“the CIF Amendment”) has received Privy Council approval and will come into force on 4 April 2008.
  2. As was envisaged at the time the CIF Amendment was recommended by the Minister, a number of associated Orders are now needed to add further details to the regime for regulating Collective Investment Funds (“CIFs”).
  3. It is recommended that the Minister make the Orders.

 

  1. BACKGROUND

 

  1. As the Minister will recall, the CIF Amendment was part of a series of legislative measures reforming the regulation of funds and their functionaries in Jersey.
  2. The overall effect of this series of measures is to transfer the licensing of fund functionaries (i.e. service providers) from the Collective Investment Funds (Jersey) Law 1988 (“the CIF Law”) to the Financial Services (Jersey) Law 1998 (“the FSJL”), by the creation of a new category of financial service business within the FSJL, known as “fund services business”.  Conceptually the scheme can be understood thus:  fund functionaries are now regulated under the FSJL while funds themselves continue to be regulated under the CIF Law.
  3. It is the stated long-term aim of the Commission to bring regulation of all financial services businesses operating in Jersey within one law (the FSJL) in order to increase efficiency for both the finance industry and the Commission.  This will have the benefits of simplifying the Commission’s administrative and communication roles and making it easier for the finance industry to understand and comply with the legal framework.
  4. The regulation of funds and functionaries will continue to be consistent with the latest international standards and good practice and the Commission is satisfied that the changes proposed satisfy IOSCO’s Objectives and Principles which the Island is committed to matching and in relation to which we will be assessed by the IMF in October.
  5. The new “one licence” regime removes the requirement for functionaries to hold multiple permits under the CIF Law, in respect of each fund for which they act.  Instead, functionaries will be required to be register just once under the FSJL to carry on fund services business from within Jersey.  The “one licence” regime will save time and resources for both industry and the Commission.
  6. There are however two cases in which fund functionaries will continue to be regulated under the CIF Law rather than licences under the FSJL.  The first exceptional case is where the fund takes the form of a company issuing units (“CIU”).  In this case the CIU itself will be regulated under the CIF Law, because the CIU is the fund.  The second exceptional case relates to functionaries of Recognized Funds.  So that the Island’s ‘Designated Territory’ status with the UK is not jeopardised, these also will continue to require permits under the CIF Law.
  7. With regulation of functionaries (other than those acting in respect of Recognized Funds) being transferred to the FSJL, an alternative mechanism is required for the regulation of the fund itself.  Accordingly, the CIF Amendment introduces a requirement for a fund certificate to be held before the business of a fund established in Jersey can be conducted.  This certificate will be held by the trustee, general partner or CIU, as the case may be.
  8. The changes to the FSJL permit the introduction of Codes of Practice for fund functionaries in a form that is consistent with other areas of financial regulation in the Island such as trust company business and insurance business.  The introduction of such codes for funds is an outstanding IMF requirement from its last inspection.
  9. In order for this regime to take effect in good time before the next IMF assessment in October, it was agreed to implement the changes in two phases.
  10. Phase one consisted of the Financial Services (Amendment of Law) (No 2) (Jersey) Regulations 2007, which were made by the States on 7 November 2007, together with five associated orders which the Minister made on 13 November 2007, all of which came into force on 14 November 2007.  On the same date, the Commission published Codes of Practice for fund services business.  Collectively, these measures brought the new regime into full effect save in respect of the power of the Commission to issue fund certificates under the CIF Law.
  11. Phase two of the legislation consists of the CIF Amendment and the Orders.  As the Minister will recall, the CIF Amendment:
  • provides a mechanism (by the issuing of certificates) for the regulation of CIFs now that fund functionaries are regulated under the FSJL rather than under the CIF Law;
  • implements international standards in the regulation of CIFs in Jersey in preparation for the IMF assessment in 2008;
  • improves compatibility with the European Convention on Human Rights; and
  • makes other minor changes.
  1. It was previously envisaged that there would be six associated orders.  However, it has become apparent that a seventh order is necessary.

 

  1. Proposals

 

  1. The Control of Borrowing (Amendment No 13) (Jersey) Order 2008 will exempt holders of permits or certificates under the amended CIF Law from the need to obtain consents under the Control of Borrowing (Jersey) Order 1958.  This is intended to make the authorisation process more efficient for both industry and the Commission, by avoiding duplicated regulation.
  2. The Financial Services (Amendment of Schedule 2 to Law) (Jersey) Order 2008 exempts fund certificate holders from having to register under the FSJL in order to conduct investment business.  Under the previous regime permit holders were exempt in the same manner and this Order simply modifies the exemption to reflect the change from permits to certificates.
  3. The Financial Services (Trust Company Business (Exemptions)) (Amendment No 3) (Jersey) Order 2008 exempts fund certificate holders from having to register under the FSJL in order to conduct trust company business and is the same consequential modification as that for investment business described above.
  4. The Collective Investment Funds (Unclassified Funds) (Prospectuses) (Amendment No 5) (Jersey) Order 2008 similarly amends the Unclassified Funds Prospectus Order to take account of the change from permits to certificates and also of the change to registration of functionaries under the FSJL.
  5. The Companies (General Provisions) (Amendment No 3) (Jersey) Order 2008 similarly extends the non-application of Part 3 of the Companies (General Provisions) Order (which regulates prospectuses) to those open-ended investment companies that hold a fund certificate (rather than a permit).
  6. The Collective Investment Funds (Permits) (Exemptions) (Amendment No 3) (Jersey) Order 2008 repeals an exemption from the requirement to hold a permit under the old CIF Law which was introduced as a transitional measure during phase one of this legislation and is no longer needed.
  7. The Financial Services (Trust Company Business (Exemptions No 2)) (Amendment) (Jersey) Order 2008 amends the Financial Services (Trust Company Business (Exemptions) ) (Jersey) Order 2000 so that it exempts unit holding nominee companies in relation to holders of certificates from registration under the FSJL as trust company businesses, again mirroring the existing provision in relation to permits.
  8. It is intended that each of the Orders described above should become effective at the same time as the amendment to the Collective Investment Funds (Jersey) Law 1988.  Indeed, each of the above Orders is described as coming into force on the same day that the Collective Investment Funds (Amendment No 4) (Jersey) Law 2008 comes into force.

 

  1. RECOMMENDATION

 

  1. It is recommended that the Minister for Economic Development approves and signs the Orders so that they may come into force on 4 April 2008.

  
 

JAMES MEWS

Finance Industry Development Executive

1 April 2008

http://sojedmdav/livelinkdav/nodes/24739496/WR_Orders associated with the Collective Investment Funds (Amendment No 4) (Jersey) Law 2008.doc


 

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