Collective
Investment Funds (Recognized Funds) (Compensation for Investors) (Jersey) Regulations 1988
PART 1
Introductory
1 Interpretation
In these Regulations,
unless the context otherwise requires–
“compensation costs”
has the meaning given in Regulation 13;
“compensation levy”
has the meaning given in Regulation 12;
“compensation sum”
has the meaning given in Regulation 8;
“compensator”
has the meaning given in Regulation 12;
“custodian”,
“manager” and “trustee” have the same meanings as in
the Recognized Funds Order;
“default”
shall be construed in accordance with Regulation 2;
“eligible liability”
has the meaning given in Regulation 3;
“functionary”
means a person who is, or has been, any of the following –
(a) in
the case of a unit trust, the trustee or the manager; and
(b) in
the case of an open-ended investment company, the custodian or the manager;
“holding company”
and “subsidiary” have the meanings given in Article 2 of the Recognized
Funds Order;
“investor”, in
relation to a fund which takes the form of an open-ended investment company,
does not include the company itself;
“professional
investor” in relation to any services provided by a functionary, means a person
who carries on investment business and for whom these services are provided in
the course of the person’s carrying on that investment business;
“recognized fund”
has the same meaning as in the Recognized Funds Order.
“Recognized Funds
Order” means the Collective Investment Funds (Recognized Funds) (General
Provisions) (Jersey) Order 1988.
2 Meaning of “default”
For the purposes of these
Regulations, a functionary is to be regarded as being in default if the
Viscount determines that it should be so regarded on the basis
that –
(a) it
has become bankrupt; and
(b) it
is unable, or is likely to be unable, to satisfy claims in respect of any description
of civil liability incurred in connection with a recognized fund.
3 Meaning of “eligible liability”
(1) An
“eligible liability” is a civil liability owed by a functionary in
its capacity as a functionary of a recognized fund to an investor at the date
of the functionary’s default which was incurred by the functionary in
connection with its business as such a functionary done with the investor or as
agent on the investor’s behalf and, for this purpose, any liability of
the manager or trustee or custodian of a recognized fund to holders of units in
that fund is to be taken to have been incurred by the manager or trustee or
custodian in connection with business done with the unit holder or as agent on the
unit holder’s behalf.
(2) A
liability incurred by a functionary in its capacity and in connection with its
business as a functionary of a recognized fund, being a liability to account
for property of any description, is to be taken as having been incurred in
connection with its business as such a functionary if, at the date of the
default, the functionary held the property in connection with its business as
such a functionary.
4 Supplementary provisions relating to eligible liabilities[1]
(1) Where
a liability is owed to a person in different capacities, these Regulations
apply as if the liabilities in each different capacity were owed to different
persons, but subject to paragraph (2), the compensation sum payable to a person,
regardless of the number of liabilities owed to the person is limited to the
amount specified in Regulation 10(1)(a), (b) or (c).
(2) Notwithstanding
paragraph (1), the compensation sum payable to a person in respect of 2 or
more liabilities owed to the person where one or more of those liabilities is a
liability owed to a person in the person’s capacity as personal
representative of an investor is –
(a) in
respect of each liability owed to the person as a personal representative,
limited to the amount specified in Regulation 10(1)(a), (b) or (c); and
(b) in
respect of all other liabilities owed to that person, limited to an amount
which does not exceed in total the amount specified in Regulation 10(1)(a), (b)
or (c).
(3) Where
a liability is owed to 2 or more persons jointly, then, if they are carrying on
business together in partnership, the liability is treated as a liability to
the partnership, and otherwise each of those persons is taken to be owed a
liability for the person’s share, and, in the absence of satisfactory
evidence as to their respective shares, is taken to be entitled to an equal
share.
(4) Where
an agent is owed a liability for one or more principals, the principal or
principals are to be treated as being owed the liability to the exclusion of
the agent.
(5) Where
any group of persons is owed a liability as trustees, they are to be treated as
a single and continuing person distinct from the persons who may from time to
time be the trustees, and where the same person is owed a liability as trustee
for different trusts, these Regulations apply as if the liabilities owed to
each of the trusts were liabilities owed to different persons.
(6) Where
a trustee is owed a liability for one or more other persons, then, where the
trustee is a bare trustee, the beneficiaries are taken to be owed the
liability, to the exclusion of the trustee, and otherwise the trustee is taken
to be owed the liability to the exclusion of the beneficiaries.
PART 2
CLAIMS FOR COMPENSATION
5 Presentation of claims
Where a functionary of a
recognized fund is in default, the Viscount shall, as soon as is reasonably
practicable, cause to be published in the Jersey Gazette, the London Gazette
and in a national daily newspaper circulating in the United Kingdom a notice
requiring every investor who has a claim against the functionary arising out of
its business as a functionary of a recognized fund to submit a statement of the
claim in such form and within such period (not being less than 3 months after
the date of publication of the notice) as may be specified in the notice.
6 Determination and payment of claims
(1) On
the expiration of the time fixed for the submission of claims, the Viscount
shall examine the claims and, if satisfied that the functionary –
(a) has
an eligible liability to the investor; and
(b) is
unable, or likely to be unable to meet that liability, in whole or in part,
the Viscount shall,
subject to paragraph (3) and the following Regulations, determine to pay
to the investor a compensation sum in respect of that liability.
(2) Subject
to paragraph (3), when the Viscount has determined the compensation sum
payable to an investor the Viscount shall make payment thereof within such time
as may seem to the Viscount to be fair and reasonable, and interest shall be
payable thereon in accordance with Regulation 9.
(3) The
Viscount shall not be required to pay a compensation sum to an investor, nor
the amount of any interest accruing thereon, until the Viscount has received
the amount of the compensation levy, or any interim compensation levy, in
accordance with Regulation 12.
7 Refusal of claims
The Viscount shall refuse
to admit an investor’s claim for compensation if it appears to the
Viscount that –
(a) it
is submitted after the expiry of the period specified in the notice referred to
in Regulation 5, unless the Viscount determines that, by reason of exceptional
circumstances, it ought to be allowed;
(b) if
it was made in respect of a default occurring before the date of the coming
into force of these Regulations;
(c) if
the application is made by an investor who has any responsibility for, or has
directly or indirectly profited from, the circumstances giving rise to the
functionary’s financial difficulties; or
(d) it
is made by a professional investor, so far as the liabilities of the
functionary were for the investor’s own account.
8 Assessment of compensation
(1) Subject
to these Regulations, the amount of the sum (referred to in these Regulations
as the “compensation sum”) payable to an investor in respect of an
eligible liability shall be such amount (not exceeding the amount of the
liability which the Viscount is satisfied that the functionary is unable or
likely to be unable to meet) as is determined by the Viscount to be appropriate
having regard to –
(a) the
investor’s rights in respect of the liability;
(b) any
compromise of the liability;
(c) any
security or right of set-off available to the investor in respect of the
liability;
(d) the
investor’s ability, if any, to recover in respect of the liability from
any third party also liable in respect of it; and
(e) any
other means whereby the investor has, or has had, or might have, an opportunity
of recovering in respect of the liability, including any means of so recovering
from the functionary.
(2) The
Viscount may reduce the amount of the compensation sum to the extent that
payment of the full amount would provide benefits to the investor which are
disproportionate to the benefits which might reasonably have been payable.
(3) Notwithstanding
Regulation 6, the Viscount may, where the Viscount is satisfied as there
mentioned, but considers that immediate payment in full would not be prudent,
determine to make to the investor a payment on account of the compensation sum
there mentioned, which shall, for the purposes of these Regulations, be treated
in all respects as the payment of a compensation sum, but without prejudice to
the Viscount's powers to make a determination in respect of the balance of the investor’s
claim.
9 Interest
(1) The
rate of interest on a compensation sum shall be 2% below the London Inter Bank
Offered Rate (LIBOR).
(2) Subject
to paragraph (4), interest shall be payable for a period beginning on such
date as may seem to the Viscount to be fair and reasonable (not being earlier
than 3 months from the expiry of the period specified in the notice published
in accordance with Regulation 5) and ending on the date when the compensation
sum is remitted to the investor.
(3) In
any case where the Viscount makes an interim payment or interim payments to the
investor on account of the compensation sum, interest shall cease to be payable
on the amount of such payment or payments to the investor on the dates on which
they are so paid.
(4) Interest
payable under this Regulation shall not be taken into account for the purposes
of the limits prescribed in Regulation 10(1).
10 Limits of compensation
(1) The
compensation sum payable to an investor under these Regulations is limited as
follows –
(a) if the
total amount of the functionary’s liability to the investor does not
exceed £30,000, no limit applies;
(b) if
the total amount of the functionary’s liability to the investor exceeds
£30,000 but does not exceed £50,000, the maximum payable is
£30,000 plus 90% of so much of that amount as exceeds £30,000;
(c) if
the total amount of the functionary’s liability to the investor exceeds
£50,000 the maximum payable is £48,000,
but so that the maximum
overall amount which the Viscount may determine to pay by way of compensation
costs in respect of defaults occurring in any calendar year shall be £5,000,000.[2]
(2) If
it appears to the Viscount that the total amount of compensation costs is
otherwise likely to exceed £5,000,000 in respect of defaults occurring in
any calendar year, the Viscount shall not pay the full amount in respect of any
claim but shall ensure, as far as the Viscount reasonably can, that all
payments the Viscount then determines to make, taking into consideration any
payment on account, are abated rateably one with another.[3]
PART 3
SUBROGATION
11 Subrogation
(1) Where a functionary of
a recognized fund is in default, this Regulation has effect for the subrogation
of the Viscount to the rights of investors who submit claims for compensation
under these Regulations.
(2) Notwithstanding any
other provision of these Regulations, the Viscount shall not pay or determine
to pay a compensation sum in respect of a liability unless the investor has
agreed that –
(a) the
investor’s existing rights in respect of that liability, or in respect of
any part of that liability required by the Viscount, shall vest in the
Viscount;
(b) the
investor will execute any document (including any declaration of trust), do any
act or provide any assistance to the Viscount to enable the Viscount to
exercise those rights;
(c) the
investor will pay to the Viscount any amount which the investor receives in
respect of those rights, after deduction of any amount which, under paragraph (3),
the Viscount would have been required to pay to the investor; and
(d) where
relevant, any prospect of the investor’s recovering in excess of the
compensation sum payable under these Regulations (and interest on it) will be
in the hands of the Viscount who may compromise the claim.
(3) Any amount recovered by
the Viscount from the functionary by virtue of this Regulation, shall be
retained by the Viscount up to the amount of the compensation sum paid to the
investor, interest on it at 2% below LIBOR, and the costs of recovery; and any
balance shall be paid to the investor.
PART 4
CONTRIBUTIONS
12 Levy of contributions
(1) If the Viscount has
determined that a functionary is in default, the Viscount shall be entitled to
levy on any person (other than the functionary which is in default) who was a
functionary of a recognized fund at the time when the default occurred (each
such person being referred to in these Regulations as “a
compensator”) contributions (the aggregate of which is referred to in
these Regulations as the “compensation levy”) of such amount as
appears to the Viscount to be necessary to pay the compensation costs arising
out of the default.
(2) The amount of the
contribution payable by each compensator shall be in accordance with the
following formula –
CLC = CC x IC
AIC
where –
CLC is the contribution to be levied on the compensator;
CC are the compensation costs;
IC is the declared income of the compensator; and
AIC is the aggregate of the declared incomes of all compensators.
(3) For the purpose of paragraph (2)
a compensator’s declared income shall in the case of –
(a) a
manager be its adjusted annual management fees;
(b) a
custodian or trustee be its adjusted annual custodian or trustee fees,
for recognized funds for the 365 days immediately preceding the day
on which the default was determined.
(4) Following the
determination of a default, the Viscount may by notice require each compensator
to furnish to the Viscount, in respect of each recognized fund of which it is a
functionary, a statement in writing of its annual management, custodian or
trustee fee income for the 365 days immediately preceding the day on which the
default occurred and, if such fee income has been payable for less than that
period, the period for which such income was payable.
(5) The statement shall be
accompanied by a report by the functionary’s auditors as to whether in
their opinion the figures given in the statement are accurately and fairly presented.
(6) A compensator’s
declared income for the purposes of paragraph (3) is the amount derived
from annual management, custodian or trustee fees, as the case may be, in
respect of recognized funds during the 365 day period there stated adjusted so that,
if the proportion of that period for which fee income has been payable to the
compensator in respect of any recognized fund is less than 365 days, that
amount is the amount of those fees for the period during which such fee income
has been payable divided by the number of days in the latter period and
multiplied by 365.
(7) A functionary shall
keep such accounting records as are necessary to enable it to demonstrate its
ability to comply with this Regulation.
(8) Where a compensator
fails to make a statement as required by this Regulation, or the Viscount
believes that the statement of income is inaccurate, the Viscount may, taking
into account any information available as to the compensator’s income in
that or any other 365 day period, make an estimate of the amount which is to be
regarded as the functionary’s fee income for the relevant 365 day period,
which amount shall have effect as the amount of the compensator's declared
income.
(9) The Viscount may make
interim compensation levies at any time including prior to incurring
compensation costs, which may be based on estimates of such costs.
(10) When the Viscount proposes to
make a compensation levy or an interim compensation levy the Viscount shall do
so by notice in writing given to each compensator stating the amount of the
compensator' contribution and the date or dates (not being earlier than 4 weeks
from the date of the notice) on which payment of the contribution is to be
made; and the compensator shall pay the contribution to the Viscount as required
by the notice.
(11) If any contribution levied
under this Regulation remains unpaid after the date by which it should have
been paid, the compensator shall be liable to pay interest on the amount at 2% above
LIBOR in respect of the period between that date and the date on which it was
paid.
(12) Contributions levied under
this Regulation and any interest payable under paragraph (11) shall be
recoverable by the Viscount from the compensator as a civil debt.
(13) In the event of a failure by
a compensator to pay any contribution due under these Regulations, the Viscount
may levy a further contribution from the remaining compensators in proportion
to their original contributions; and each of those compensators shall be
entitled to recover from the compensator who failed to pay the contribution the
amount of the further contribution.
(14) A contribution paid by a
compensator to the Viscount, which is not immediately applied by the Viscount
to the payment of compensation costs, shall be invested by the Viscount in such
manner as the Viscount thinks fit until such time as it is required for the
payment of those costs.
(15) Any balance of the
compensation levy which may remain after the compensation costs have been paid
in full, together with any interest which may have accrued by virtue of paragraph (11)
or (14) shall be paid by the Viscount to the compensators in proportion to
their contributions.
13 Compensation costs
(1) Subject to paragraph (2)
of this Regulation, compensation costs are –
(a) compensation
sums payable by the Viscount to investors in accordance with these Regulations;
(b) interest
on compensation sums payable by the Viscount to investors in accordance with
these Regulations; and
(c) costs
incurred by the Viscount in establishing the amounts referred to in sub-paragraphs (a)
and (b), including the cost of legal and accountancy services, and any similar
costs.
(2) Any amounts retained by
the Viscount in accordance with Regulation 11(3) shall be applied in the
reduction of compensation costs.
PART 5
GENERAL
14 Co-operation with Viscount
(1) All functionaries of a
recognized fund, and in a case where the fund takes the form of an open-ended
investment company, that company shall co-operate with the Viscount, or any person
authorized in writing by the Viscount, in making available all information,
books and documents, and shall otherwise render all such assistance, as is
necessary to assist the Viscount to perform its functions under these Regulations.
(2) If a functionary of a
recognized fund, and in a case where the fund takes the form of an open-ended
investment company, that company has been dissolved, the requirement imposed by
paragraph (1) applies to the liquidator, and if a functionary or a
company, as the case may be, has made any voluntary arrangements with its
creditors, it applies also to the supervisor of those arrangements.
15 Citation
These Regulations may be cited as the Collective Investment Funds
(Recognized Funds) (Compensation for Investors) (Jersey) Regulations 1988.