Jersey's new Private Placement Fund regime

Jersey has relaxed its famously tough stance on promoters of funds somewhat, as part of  the introduction of a new streamlined regulatory regime for authorisation of Private Placement Funds - closed-ended funds which are privately offered to up to 50 potential professional or sophisticated investors who are each investing at least £250,000 in the structure (“PPFs”). 

The new regulations are likely to be attractive to private equity and real estate funds, and particularly those with relatively new or less established promoters, as they represent a relaxation of JFSC’s traditional “promoter test” (which sets out detailed criteria against which the JFSC vets new promoters of funds).  Under the new regime, the promoter of a private placement fund must be of good standing and, among other things, be established in an OECD member state or another jurisdiction with which the JFSC has entered into a Memorandum of Understanding on investment business and investment funds and either (a) be regulated in that jurisdiction; or (b) have amongst its principal persons relevant experience in relation to promoting, managing or advising on institutional, professional or sophisticated investors' investments using similar strategies to those to be adopted by the fund.  This is expected to make it easier for promoters comprising small teams of individuals who have left larger financial institutions to set up new businesses in the Island.  Traditionally, such promoters have sometimes found it difficult to obtain authorisation to establish in Jersey, but the new regulations should not only make it simpler for them to do so, but will also provide a fast-track 72-hour authorisation process for the approval of funds which meet the criteria of a PPF. 

The Alternative Investment Fund Managers Directive, which must be implemented by EU Member States in 2013, should allow PPFs to be marketed to professional investors in the EU pursuant to national private placement regimes until at least 2018.  

The new regulations have been designed to balance Jersey's need to maintain its reputation as a strong and responsible regulator, with the need to remain internationally competitive by allowing a lighter regulatory touch for structures aimed at sophisticated investors.  The new rules have been widely welcomed by Jersey's fund industry, which has shown resilience in the face of the international economic downturn.  Latest figures show a 10.5% year-on-year growth in the net asset value of funds being administered in Jersey.

Jersey will continue to operate its COBO regime also for those specialist private funds which do not fall within the scope of the new Private Placement rules.