Collective Investment Funds (Amendment No. 4) (Jersey) Law 200-.

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A decision made (21/09/2007) regarding: Collective Investment Funds (Amendment No. 4) (Jersey) Law 200-.

Decision Reference: MD-E-2007-0184
Decision Summary Title:	Collective Investment Funds (Amendment No. 4) (Jersey) Law 200-		Date of Decision Summary:	20 September 2007
Decision Summary Author:	James Mews, 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 (Amendment No. 4) (Jersey) Law 200-		Date of Written Report:	20 September 2007
Written Report Author:	James Mews, Finance Industry Development Executive		Written Report: Public or Exempt?	Public
Subject: Approval of the Collective Investment Funds (Amendment No. 4) (Jersey) Law 200- (the “Amendment”)
Decision(s): The Minister approved the Amendment, sign the Statement of Compatibility with the ECHR, approved the Report to be included in the Amendment, and requested Officers to take such steps as were necessary to lodge the Amendment for debate by the States on 6 November 2007.
Reason(s) for Decision: The changes proposed are reasonable to introduce standard regulatory provisions: To provide a mechanism for the regulation of collective investment funds; To implement international standards in the regulation of collective investment funds in Jersey – in preparation for the IMF assessment in 2008; To improve compatibility with the European Convention on Human Rights; To enhance the ability of the Commission to co-operate with supervising authorities in countries and territories outside Jersey; and To make other minor drafting changes. The proposals have been subject to shortened consultation but no objections have been received from industry or Jersey Finance Limited.
Resource Implications: No measurable cost or manpower implications arise for the Commission, the States or industry.
Action required: The Finance Industry Development Executive to undertake the necessary arrangements for the lodging of the Amendment and accompanying Report au Greffe by 24th September 2007 in order for the draft Law to be debated on 6th November 2007.
Signature:		Position: Minster for Economic Development
Date Signed:		Date of Decision:

Collective Investment Funds (Amendment No. 4) (Jersey) Law 200-.

MD-E-2007-0184

MINISTER FOR ECONOMIC DEVELOPMENT

COLLECTIVE INVESTMENT FUNDS (AMENDMENT NO. 4) (JERSEY) LAW 200- (“THE AMENDMENT”)

JERSEY FINANCIAL SERVICES COMMISSION (“THE COMMISSION”)

1 THE ISSUE

The Commission requests amending the Collective Investment Funds (Jersey) Law 1988 (“the Law”) in order to –

provide a mechanism for the regulation of collective investment funds once fund functionaries are regulated under the Financial Services (Jersey) Law 1998 (“FSJL”) rather than under the Law;

implement international standards in the regulation of collective investment funds in Jersey in preparation for the IMF assessment in 2008;
to improve compatibility with the European Convention on Human Rights (“ECHR”);
make other minor changes

If this Amendment becomes Law there will be a number of subsequent Orders that will be necessary in order to add further detail to the proposals to regulate collective investment funds.

It is recommended that the Minister for Economic Development approves the Amendment, the Report to be inserted in front of the Amendment by the Publications Officer, signs the certificate of compatibility with the European Convention on Human Rights, and that the Finance Industry Development Executive takes the necessary steps for this to be lodged au Greffe by 24th September 2007, in order that it is debated by the States on 6th November 2007.

2 BACKGROUND

The proposed changes described above that provide a mechanism for the regulation of collective investment funds have been through the normal consultation process. The proposals were comprehensively discussed with industry through two consultation papers published in February 2006. A further Consultation Paper was issued in March 2007, with draft legislation attached. Industry has commented and is in favour of the amendments.
However, by the time the consultation process had been concluded and draft legislation was ready for lodging, the need for further changes in preparation for the IMF Assessment in 2008 had begun to be identified. As some of these changes would affect amendments already proposed it was decided to combine all changes into a single amending law.
The remaining proposals concern matters that were identified during a self-assessment exercise, undertaken by the Commission, against international regulatory standards, including those issued by IOSCO 1 and the IAIS2. These are the standards that will be used during the IMF assessment in 2008. These changes have also been the subject of a consultation process.
However, as a result of there being limited time available to draft the law and then consult, this consultation was not conducted on the draft legislation for the usual length of time, and the consultation had to be carried out during the holiday season of August. In order to ameliorate the limitations of the consultation, a Position Paper was published in June 2007, which described in some detail the nature of the proposed changes and the reasons for them. A series of seminars was then held for the finance industry at which the proposals were again described and discussion and comment was invited.
Neither the Position Paper nor the discussions elicited any adverse comment on the proposals. Only three submissions were received as a result of the consultation paper, all of them from banks: in general, the comments on the draft legislation were supportive, and none was adverse.

Proposals

While it is proposed that most of the regulation of functionaries will transfer and take place under the FSJL, it is also proposed that unclassified collective investment funds will be appropriately regulated under the Law. Various provisions have been introduced or amended to ensure that a collective investment fund that takes the form of a company is subject to regulation equivalent to that of other entities regulated under the FSJL. Further, care has been taken to ensure that none of the changes impacts on the Recognized Funds class so that the Island’s ‘Designated Territory’ status with the UK is not jeopardized.
Certain changes proposed by the Amendment incorporate standard regulatory provisions currently absent from the Law or bring the Law into line with current international standards ahead of the forthcoming IMF assessment.

These include, in summary:
1. Establishing a power for the Commission to appoint an independent manager to manage part or all of the affairs of a registered person in prescribed circumstances;
2. Expanding the circumstances in which the Commission can issue directions;
3. Expanding the criteria for refusing an application for registration, or revoking a registration, to include offences by the registered person, or by an employee or associate, under any of a range of legislation, whether the offences occur in Jersey or elsewhere.
4. Extending the provisions that currently apply to directors, shareholder controllers to other Key Persons such as Compliance Officers whereas currently, such persons have been subject to limited regulation on a voluntary basis.
5. Requiring a registered person to publicise not merely the fact that it is registered but also such conditions attaching to a registration as the Commission may specify (typically any that limit the scope of its activities).
6. Introduce a right of appeal against decisions of the Commission to issue public statements. This requires provisions such as a requirement for persons to be named in a public statement to be given notice of it, although the Commission will have the authority to decide to issue without prior notice where there is an over-riding need to protect the public or the Island’s reputation.
7. Make other minor changes including updating provisions associated with appeals, and revising the definition of “relevant supervisory authority” to ensure consistency across all laws in enabling the Commission to co-operate with such bodies in other countries and territories.
No measurable cost or manpower implications arise for the Commission, the States or industry.

The Law Officer’s Department have advised that the Minister may provide the required statement under Article 16(1) of the Human Rights (Jersey) Law 2000.

RECOMMENDATION

It is recommended that the Minister for Economic Development approves the Amendment, the Report to be inserted in front of the Amendment by the Publications Officer, signs the certificate of compatibility with the European Convention on Human Rights, and that the Finance Industry Development Executive takes the necessary steps for this to be lodged au Greffe by 24th September 2007, in order that it is debated by the States on 6th November 2007.

JAMES MEWS

Finance Industry Development Executive

1 International Organisation of Securities Commissions

2 International Association of Insurance Supervisors