DRAFT COLLECTIVE INVESTMENT FUNDS (RECOGNIZED FUNDS) (ACTIONS FOR DAMAGES) (JERSEY) REGULATIONS 200-
(“THE REGULATIONS”)
1 THE ISSUE AND RECOMMENDATION
1.1 It is recommended that the Minister for Economic Development (“the Minister”) should approve the draft Regulations and the attached report, sign the Decision Summary and that the documents should be lodged au Greffe for debate at the earliest possible opportunity.
2 SUMMARY
2.1 The Collective Investment Funds (Recognized Funds) (Actions for Damages) (Jersey) Regulations 1988 (“the 1988 Regulations) give effect to Article 35 of the Collective Investment Funds Law 1988 (“the Law”) in relation to Recognized Funds. The 1988 Regulations are now out of date because they refer to the Collective Investment Funds (Recognized Funds) (General Provisions) (Jersey) Order 1988 (“The 1988 Order”), which was superseded and replaced in 2003.
2.2 The Regulations form part of the subordinate legislation that relates to Recognized Funds class and which collectively is the basis for Jersey's Designated Territory status under Section 270 of the FSMA. Failure to keep the Regulations up to date could therefore threaten Jersey’s Designated Territory status.
3 BACKGROUND
3.1 Article 35 of the “Law, provides that, to the extent specified by the States in Regulations, a failure to comply with any statutory requirement under that law shall be actionable at the suit of a person who suffers loss as a result of that failure, subject to the defences and other incidents applying to actions for breach of statutory duty.
3.2 The 1988 Regulations had the effect of making Article 35 applicable to any failure by certain operators of funds of the Recognized Funds class to comply with the Law or either of two Orders made under it that related to funds of that class.
3.3 The 1988 Order was recently superseded and replaced by the Collective Investment Funds (Recognized Funds) (Rules) (Jersey) Order 2003. It is therefore necessary to update the Regulations to ensure that the applicability of Article 35 continues to be relevant.
3.4 Owing to differences between the terminology employed in the new Order and that of the original Order, it was simpler to re-draft the Regulations in their entirety, rather than amend them.
3.5 The Regulations form part of a suite of legislation made under the Law that together defines the Recognized Funds class of collective investment funds and sets the regulatory requirements applicable to funds of that class. One of the objectives of the legislation is to ensure that the investor protection arrangements are equivalent to those available to participants in authorised collective investment funds in the UK.
3.6 On the basis of such equivalence having been demonstrated, the Secretary of State for the Treasury made an Order designating Jersey for the purposes of Section 270 of the Financial Services and Markets Act 2000. As a result of this Designated Territory status, Recognized Funds in Jersey are permitted to market directly to members of the public in the UK. As at 30 June 2008, there were 9 Recognized Funds in Jersey that were permitted to market directly into the UK. They had an aggregate sterling equivalent value of approximately £2.5 billion.
3.7 It is important to ensure the continued applicability of Article 35 of the Law to Recognized Funds in order to maintain Jersey’s Designated Territory status.
- RECOMMENDATION
4.1 It is recommended that the Minister for Economic Development should approve the draft Regulations and the attached report, sign the Decision Summary and that the documents should be lodged au Greffe for debate at the earliest possible opportunity.
JAMES MEWS
Finance Industry Development Executive
3 October 2008