Expert Funds In Jersey

INTRODUCTION

Jersey has always been a very attractive jurisdiction for the

establishment of collective investment funds for a variety of

reasons. The Expert Funds regulatory regime was established to make

Jersey more attractive to promoters wishing to establish funds

aimed at sophisticated, institutional and high net-worth

investors.

The Expert Fund classification benefits from significantly less

regulation, and enables Expert Funds to be established in a matter

of days. The Expert Fund regime establishes a streamlined

authorisation process, and permits the certification by a regulated

Jersey financial services provider ? typically the

administrator - of the fund's compliance with the

Commission's guidelines. This contrasts extremely favourably

with the often lengthy and involved four-stage in-principle

consent, document review and final approval process for collective

investment schemes otherwise carried out by the Commission.

QUALIFICATION AS AN EXPERT FUND

Generally, a collective investment fund will qualify as an

Expert Fund if each investor signs an acknowledgement of receipt of

a prescribed form of investment warning and falls within one of the

following categories:

they invest a minimum of US$100,000.00 (or equivalent); or

their ordinary business or professional activity includes the

buying or selling of investments or the provision of investment

advice; or

they have a net worth, or joint net worth with their spouse,

exceeding US$1,000,000.00 (excluding that person's principal

place of residence); or

it is a company, partnership, trust or other association which

has assets available for investment of not less than

US$1,000,000.00 or every member or partner of which falls within

the definition of expert investor; or

it is a functionary or an associate of a functionary to the

Expert Fund or an employer, director, partner or consultant of such

a person; or

it is a government, local authority, public authority or

supra-national body in Jersey or elsewhere.

An Expert Fund must be a collective investment fund for the

purposes of Jersey collective investment funds law. It can be

structured as a company, a limited partnership or a unit trust. It

may be either open or closed-ended.

Where the fund is established as a limited partnership, at least

two Jersey resident directors with appropriate experience must be

appointed to the board of directors of the general partner.

An Expert Fund must have an auditor appointed, and annual

audited accounts must be prepared.

Full details of the investment strategy must be set out in the

offering documentation.

There are no requirements as to investment or borrowing

restrictions applicable to Expert Funds, provided that the approach

to borrowing or gearing is clearly disclosed in the offering

documentation. However, if the Expert Fund is permitted to borrow

money in excess of 200% of the net asset value of the fund, full

details of the manner in which the risk posed by such borrowing

will be managed must be disclosed to the Commission and in the

offering documentation.

There are no limitations on marketing or, in particular, on the

number of persons to whom an Expert Fund can be marketed.

REGULATORY REQUIREMENTS AND KEY FEATURES

Investor protection

Investor protection is maintained through the requirements

that:

full disclosure be set out in any offering document issued by

the Expert Fund;

any Jersey entity that provides services to the Expert Fund

must be licensed to do so by the Commission; and

prospective investors sign an agreed form of investment warning

before their investment is accepted.

Investor requirements

All investors must qualify as expert investors and must sign an

investment warning prior to investing in the fund. There is no

limit on the number of investors.

In addition, the Commission believes that those involved in

establishing and providing services to an Expert Fund should be

able to invest in the fund, and will adopt a flexible approach in

relation to "carried interest" investments to be made by

or on behalf of those connected with the Expert Fund.

Structure

Expert Funds can take any form recognised under the laws of

Jersey. A key feature of such funds is...