Financial Services
(Investment Business (Qualifying Segregated Managed Accounts –
Exemption)) (Jersey) Order 2014
THE CHIEF MINISTER, in pursuance of Articles 4(1)(a)(i),
4(1)(a)(ii), 7(2)(a)(ii), 7(2)(b) and 42 of the Financial
Services (Jersey) Law 1998, and on the recommendation of the Jersey Financial Services Commission,
orders as follows –
Commencement [see endnotes]
1 Interpretation
In this Order –
“business day” means any day other than a Saturday,
Sunday, Christmas Day, Good Friday or a day appointed as a public holiday or
bank holiday under Article 2 of the Public Holidays and Bank Holidays (Jersey)
Law 1951;
“calendar quarter date” means each of 31st March, 30th
June, 30th September and 31st December in each calendar year;
“charging period” means the annual period (or part
thereof) specified in the QSMA fee notice, which may or may not correspond with
a calendar year, in respect of which a QSMA fee applies;
“client” in relation to an operator and for the purposes
of the condition contained in paragraph 5 of Schedule 2, means each
of the following –
(a) the
legal owner of a QSMA or, where a QSMA is jointly owned, its participants
jointly;
(b) a reference
fund; and
(c) the operator
when dealing in an investment on its own account;
“due date” means the date (or dates) specified in a QSMA
fee notice by which a QSMA fee in respect of a charging period is to be paid to
the Commission;
“eligible employee”
means –
(a) an
individual that is a senior employee, partner or director of an employer or of
a company in the same group as the employer; or
(b) a
trust, company, partnership or other scheme or arrangement established for the
sole benefit of an individual referred to in paragraph (a);
“employee vehicle” means an entity described in
paragraph (b) of the definition “eligible employee”;
“employer” means a person registered under the Law to
conduct any of the following –
(a) relevant
FSB services;
(b) fund
services business in relation to class Y, as referred to in Part 5 of the
Schedule to the Law Classes Order; or
(c) investment
business in relation to any one or more of classes B, C or D, as referred
to in Part 5 of the Schedule to the Law Classes Order;
“employment connection” means a connection that exists
between 2 participants in an SMA where one is an employer and the other is
an eligible employee;
“family connection” means –
(a) a
connection that exists between 2 participants in an SMA (respectively the
“first participant” and the “second participant”) by
reason that the first participant is –
(i) the wife, husband
or civil partner of the second participant,
(ii) a
relative of the second participant,
(iii) the
wife, husband or civil partner of a relative of the second participant, or
(iv) the
wife, husband or civil partner of the second participant’s wife, husband
or civil partner; or
(b) a
connection that exists between 2 participants in an SMA (either or both of
which is a family vehicle) by reason that at least one beneficiary of the family
vehicle has a family connection described in paragraph (a)
with –
(i) at least one
other natural person who is a participant in the SMA, or
(ii) at
least one beneficiary of another family vehicle that is a participant in the
SMA;
“family vehicle” means a trust, company, partnership or
other scheme or arrangement established for the benefit of –
(a) a
natural person; or
(b) 2 or
more natural persons, who are all connected to each other by virtue of a family
connection described in paragraph (a) of that defined expression,
and a reference to a beneficiary in this Order is to such a natural
person;
“fee exemption” means, in respect of a charging period,
such complete or partial exemption from the requirement to pay the QSMA fee
relating to that charging period, as may be specified in the QSMA fee notice,
and which shall be subject to such conditions, if any, relating to its
availability as are specified therein;
“Law” means the Financial Services (Jersey) Law 1998;
“Law Classes Order” means the Financial Services (Financial Service Business)
(Jersey) Order 2009;
“mandate document” means an investment management
agreement or other mandate in written form, such as a revocable power of
attorney, pursuant to which the operator is appointed to undertake relevant activity
in connection with an SMA;
“new participant date” in relation to a QSMA, means any
date falling after the qualification date on which a person becomes a participant
in the QSMA;
“operator” means in relation to an SMA, a person
appointed to undertake relevant activity in connection with it;
“participant” means the legal owner of an SMA or, where
an SMA is jointly owned, a joint legal owner of that SMA (and “participants”
shall mean all of the latter);
“person” includes a family vehicle, an employee vehicle
and any entity referred to in Article 2(2)(a)(ii);
“qualification date” in relation to a QSMA, means the
first date on which it qualified as a QSMA or, if it ceased (for any reason) to
qualify as such but then re-qualified as a QSMA, the subsequent date on which
it most recently qualified as such;
“qualifying segregated managed account” and “QSMA”
mean an SMA which qualifies as such in accordance with Article 2;
“qualifying strategies” in relation to an SMA, means one
or more hedge-fund strategies which replicate (or are comprised of material
elements from) one or more hedge-fund strategies currently employed by the operator
in respect of one or more reference funds (and which, for the avoidance of
doubt, may permit co-investment into the same investments and other assets as
those reference funds);
“QSMA fee” means, in respect of a charging period, a fee
(or fees) in such amount as is specified in a QSMA fee notice and which is to
be paid by the due date relating thereto;
“QSMA fee notice” means a notice published by the
Commission in accordance with Article 15(5) of the Financial Services Commission (Jersey)
Law 1998 which specifies the QSMA fee in respect of one or more charging periods,
the due dates relating thereto and which may specify one or more fee exemptions
in connection with such charging periods and the conditions to which the same
may be subject;
“QSMA warning” means the warning set out in Schedule 3
or, in respect of a particular SMA, a warning with words to the like effect
approved in advance by the Commission;
“reference fund” means a collective investment fund or
an unregulated fund in respect of which the operator is appointed to provide relevant
FSB services;
“relative” means brother, sister, uncle, aunt, nephew,
niece, lineal ancestor or lineal descendant, for which purpose –
(a) any
relationship of the half blood shall be treated as a relationship of the whole
blood and the stepchild or adopted child of a person as his or her child; and
(b) an
illegitimate child shall be treated as the legitimate child of his or her
mother and reputed father;
“relevant activity” means discretionary investment
management within the meaning given in Article 2(2)(b) of the Law
(referred to as class B within the Law Classes Order) undertaken by an operator
in connection with an SMA;
“relevant FSB services” means fund services business in
relation to any one or more of classes U, X, ZG and ZJ as referred to in Part 5
of the Schedule to the Law Classes Order;
“relevant period” means a charging period within which
the operator relies (or purports to rely) upon the exemption conferred by
Article 3(1);
“relevant time”, in relation to an SMA,
means –
(a) the qualification
date; and
(b) each
new participant date;
“reporting date”, in relation to a calendar quarter date,
means the date falling 15 business days after the calendar quarter date;
“required amount” means one million United States
dollars (or the equivalent of that amount in another currency);
“required commitment” in relation to an SMA, means any
one of the following –
(a) a
cash sum of not less than the required amount has been paid into the SMA by the
participant or by the participants jointly;
(b) investments
with a net asset value of not less than the required amount have been
contributed into the SMA by the participant or by the participants jointly;
(c) a sum
which in the aggregate is not less than the required amount is, through a
combination of (a) and (b), paid and contributed into the SMA by the participant
or by the participants jointly; or
(d) the participant
or the participants jointly are subject to a legal obligation in favour of the operator
to make a payment or contribution described in any of paragraphs (a) to
(c) upon the operator’s demand or notice requiring the same; and
“segregated managed account” and “SMA” mean
a portfolio of investments (or investments and other assets) in respect of
which the operator is, in relation to some or all of the investments comprised
within it, appointed to undertake relevant activity.
2 Qualifying
Segregated Managed Accounts
(1) An SMA in relation to
which the conditions set out in Schedule 1 are satisfied shall also be a
QSMA for so long as such conditions are satisfied.
(2) The condition set out
in paragraph 5 of Schedule 1 is not to be taken to not be satisfied
by reason only of –
(a) a
person, who lacks the requisite family connection, acquiring a legal interest
in a family vehicle or in an SMA in which a family vehicle is also a participant
if, at the time such interest was acquired, the person was –
(i) a senior
employee, partner or director of the family vehicle or of a company in the same
group as the family vehicle, or
(ii) a
trust, company, partnership or other scheme or arrangement established for the
sole benefit of an individual referred to in clause (i) of sub-paragraph (a);
(b) the
acquisition, by a person who lacks the requisite family connection, of a legal
interest in a family vehicle or in an SMA by succession on the death or
bankruptcy of a person who, immediately prior to death or bankruptcy, had such
interest or a greater interest from which the succession interest was derived;
or
(c) the
acquisition, by a person who lacks the requisite employment connection, of a
legal interest in an employee vehicle or in an SMA by succession on the death
or bankruptcy of a person who, immediately prior to death or bankruptcy, was a participant
and had such interest or a greater interest from which the succession interest
was derived.
(3) The requirement for an
acknowledgement by a participant within the condition set out in
paragraph 7 of Schedule 1 shall be deemed to be satisfied where the participant
has executed a mandate document within which the QSMA warning was contained in
a prominent position.
3 Exemption
(1) The Law shall not apply
to an operator that is in compliance with the conditions set out in Schedule 2
when, in relation to a QSMA, that operator carries on relevant activity.
(2) The exemption conferred
by paragraph (1) is amended so that it is limited to Article 7 of the
Law.
(3) Articles 12, 18,
23, 24, 25, 25A, 25B, 25C, 26, 28, 32, 33, 34, 35, 36, 37, 38, 39 and 41 of the
Law shall continue to apply to a person exempted from registration by virtue of
paragraph (1) as if, in respect of relevant activity to which that
exemption applies, the person were a registered person.
(4) A reference to
registered persons in the Articles of the Law referred to in paragraph (3)
and the reference to persons registered by the Commission in Article 5 of
the Law shall be construed accordingly.
(5) The condition set out
in paragraph 3 of Schedule 2 shall not be deemed to have been
complied with unless the Commission has confirmed in writing its receipt of the
notice submitted by the operator.
(6) The condition set out in
paragraph 6 of Schedule 2 is not to be taken to not be satisfied
where the Commission has, in respect of one or more calendar quarter dates,
confirmed to the operator that it is satisfied that –
(a) it
would be (or was) impractical for the operator to report some or all of the
information required in accordance with that paragraph; and
(b) such
impracticality is not (or was not) the result of, or materially caused by,
circumstances involving fault on the part of the operator or its staff.
4 Citation
This Order may be cited as the Financial Services (Investment
Business (Qualifying Segregated Managed Accounts – Exemption)) (Jersey)
Order 2014.
SCHEDULE 1
(Article 2(1))
QSMA
CONDITIONS
1. A
single operator is appointed in relation to the SMA.
2. The
SMA is not in the name of the operator.
3. The
operator does not have ownership or custody of any of the investments comprised
within the SMA.
4. If
there is more than one participant in relation to the SMA, neither the legal
nor beneficial interests of the participants in –
(a) the investments comprised in the SMA; or
(b) any
returns generated thereon (whether of an income or capital nature),
are represented by any
formal division or unitisation.
5. If
there is more than one participant in relation to the SMA, at each relevant time
the participants at such time are either –
(a) all
connected to each other by way of a family connection; or
(b) with
the exception of one participant that is an employer, all connected to that employer
by way of an employment connection.
6. Upon
(or immediately prior to) the qualification date the required commitment has
been made by the participant or, where there is more than one participant in
relation to the SMA upon (or immediately prior to) such date, by the participants
jointly.
7. Upon
(or immediately prior to) –
(a) the qualification
date, each participant; and
(b) each new
participant date, each person becoming thereon a participant,
has been given the QSMA warning
in writing and has acknowledged it to the operator in writing.
8. Only
one or more qualifying strategies are employed by the operator in relation to
the SMA and no other strategies.
SCHEDULE 2
(Article 3(1))
OPERATOR
CONDITIONS
1. The
operator is a person registered under the Law in respect of relevant FSB services.
2. The
operator is a person appointed to undertake the investment management of one or
more hedge-funds and either holds itself out as being a hedge-fund manager or
is generally perceived as such.
3. Unless
it has previously submitted such a notice, the operator has given notice to the
Commission (in such form and containing such particulars as the Commission may
from time to time publish) that it has been appointed as the operator of a QSMA
and intends to rely upon the exemption conferred by Article 3(1).
4. Unless
(or subject to the extent that) a fee exemption applies, the QSMA fee in
respect of the relevant period has been paid by or on behalf of the operator by
the due date relating thereto.
5. When
conducting relevant activity to which the exemption in Article 3(1)
applies, the operator ensures that all clients are, as between each other,
dealt with fairly and that no client is given unfair advantage.
6. For
so long as it conducts relevant activity to which the exemption in Article 3(1)
applies, the operator, no later than the reporting date corresponding to a calendar
quarter date, informs the Commission (in such form as the Commission may from
time to time publish) of –
(a) the number of QSMAs at the calendar quarter date
in respect of which the operator had placed reliance upon the exemption
conferred by Article 3(1); and
(b) the
value of the investments under management in connection with those QSMAs, the
same being reported as a single aggregated figure only.
SCHEDULE 3
(Article 1)
QSMA
WARNING
[insert
Operator’s name] (the “Operator”)
intends to provide discretionary investment management services (the “Services”) to you, its client(s), in connection
with a segregated managed account which it is intended will be a Qualifying
Segregated Managed Account (a “QSMA”)
pursuant to the provisions of the Financial Services (Investment Business
(Qualifying Segregated Managed Accounts – Exemption)) (Jersey)
Order 2014 (the “QSMA Order”).
In respect of its provision of the Services in connection with your QSMA, the
Operator, when in compliance with the conditions specified in the QSMA Order,
will be subject to only some, and importantly therefore not all, of the
provisions of the Financial
Services (Jersey) Law 1998, as amended (the “Law”). The Operator would not, in such
circumstances, be registered by the Commission in respect of its provision of
the Services even though the Operator may be registered pursuant to the Law to
conduct investment business. Additionally,
whilst the Operator is required by the QSMA Order to be registered pursuant to
the Law to conduct fund services business in
at least one relevant class of such activity, such licensing will not apply to
the Operator’s activities and provision of the Services in connection
with your QSMA.
Participation
in a QSMA in respect of which the Operator is placing reliance on the QSMA
Order (such QSMA, a “Relevant QSMA”) is only suitable for
professional or highly sophisticated and experienced investors. In addition,
participation in a Relevant QSMA is intended only for those making the
prescribed minimum financial contribution or commitment of US$1 million
(or currency equivalent). (If you intend to become a joint owner of a Relevant
QSMA but your own financial contribution would be less than such amount, you
should take particular care to ensure that participation in such QSMA is
suitable for you). Investment in a Relevant QSMA may involve special risks that
could lead to the loss of all or a substantial portion of your investment as
well as the possibility of incurring financial liabilities in excess of your
investment. You are wholly responsible for ensuring that all aspects of your
proposed participation in a Relevant QSMA and the risks involved are acceptable
to you.
It must be distinctly understood
that the Jersey Financial Services Commission: (i) has not evaluated or
approved your QSMA; and (ii) does not take any responsibility for the financial
soundness of a party’s participation in a Relevant QSMA or for the
correctness of any statements made, or opinions expressed, with regard to the
same by any party. The Commission is protected by the Law against liability
arising from the discharge of its functions thereunder.