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The Codes of Practice for Certified Funds (the
"Codes") were introduced on 2nd April
2012. The Codes have been issued by the Jersey Financial Services
Commission ("JFSC"), under powers given
to it under the Collective Investment Funds (Jersey) Law 1988 (the
"Law"), for the purpose of establishing
sound principles and providing practical guidance in respect of
unclassified collective investment funds holding a certificate
issued by the JFSC pursuant to the Law ("Certificate
Holders"). The Codes should also satisfy certain
IOSCO objectives and principles.
The following funds are not subject to the Codes:
Very private funds;
COBO only funds;
Private placement funds;
Unregulated funds;
Non-Jersey domiciled funds; and
Recognized funds
The Codes are similar to the Codes of Practice for fund services
businesses which were introduced in 2007 and apply to registered
persons carrying on the business of the provision of fund services
to funds ("FSB Codes").
The Codes are arranged under eight fundamental principles:
a fund must conduct its business with integrity;
a fund must act in the best interests of the unitholders;
a fund must organise and control its affairs effectively for
the proper performance of its business activities and be able to
demonstrate the existence of adequate risk management systems;
a fund must be transparent in its business arrangements with
unitholders;
a fund must maintain, and be able to demonstrate the existence
of, both adequate financial resources and adequate insurance;
a fund must deal with the JFSC and other authorities in Jersey
in an open and cooperative manner;
a fund must not make statements that are misleading, false or
deceptive; and
a fund must at all times comply and be operated in accordance
with any applicable Guide (as defined in the Codes).
It is the responsibility of the governing body (ie. the board of
directors of a company, the general partner of a limited
partnership and the trustees of a unit trust) to comply with the
Codes and to implement such additional practices as it deems
necessary to ensure the proper management and control of the
business of the fund. The Certificate Holder may appoint one or
more persons to carry out the actions necessary for the Certificate
Holder to comply with the Codes.
The Certificate Holder should continue to ensure there is
adherence with the conditions of the certificate issued to it but
there will now be fewer conditions attached.
Failure by a fund to follow the Codes represents grounds for the
JFSC to take enforcement action. In such circumstances, the JFSC
may use its regulatory powers which, in serious cases, could result
in the revocation of the certificate and winding-up of the
fund.
The Codes came on 2nd April into immediate effect and the
Commission have provided that where a Certificate Holder is not
able to demonstrate full compliance, it will look favourably on
circumstances showing compliance with the relevant fundamental
principle of the Codes and active measures being taken to ensure
compliance. In exceptional circumstances, where strict adherence to
the Codes would produce an anomalous result, a fund may apply to
the JFSC for variance from the Codes.
To the extent the Codes overlap with the FSB Codes, the JFSC
have indicated that where one set of policies and procedures is
fully compliant with the requirements of both the Codes and the FSB
Codes, that set can be used to satisfy such requirements and avoid
duplication.
As a consequence of the introduction of the Codes, Certificate
Holders should review their policies and procedures for funds and
either prepare new policy and procedure manuals or amend existing
FSB Codes manuals to incorporate the requirements of the Codes.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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