Channel Islands

Author: | Published: 3 Oct 1999
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From an estimated £4 billion ($6.4 billion) in 1988 the collective investment fund industry in Jersey has seen a remarkable growth and an increased diversification in the type of funds being established in the island. The latest published figures show that the number of public funds in Jersey for which permits have been issued under the Collective Investment Funds (Jersey) Law 1988 stands at 323 with a total value in excess of £57 billion. Over 75% of this sum is invested through unclassified umbrella investment structures. Over the years the investor market targeted has gradually moved from the expatriate and retail UK markets to a more sophisticated international investor base. In addition, many investment funds are being established for special purpose transactions.

As a dependent territory of the English Crown, Jersey has no direct link with the UK parliament and enjoys complete autonomy in domestic and fiscal matters. This has allowed Jersey to create and maintain an attractive environment for the establishment of its investment fund industry. In addition to its well-regulated offshore status and its sound infrastructure, Jersey can now offer an indigenous listing exchange in the form of the Channel Islands Stock Exchange, based in Guernsey, which commenced business in 1998.

Channel Islands Stock Exchange

Subject to satisfying the listing requirements, any investment fund may apply for listing on the Channel Island Stock Exchange. Advantages of being listed include enhanced marketability and prestige which will increase investor interest. Methods of listing investment funds include an initial listing by means of an introduction, an offer for subscription, an offer for sale or a placing. At present the processing of applications for Channel Islands investment funds is linked to the funds approval procedures of the Guernsey Financial Services Commission. It is intended that in addition Jersey fund approval procedures will shortly be mirrored.


The authorization and supervision of investment funds in Jersey is regulated by the Jersey Financial Services Commission. The Commission's recommended timescale for the fund approval process is two weeks to complete an initial review of the fund structure, when "in principle" consent will be granted, or denied, and another four weeks when a documentary review is carried out and final approval is granted. These timescales can vary depending on whether the fund is a public or private scheme and the complexities of each particular investment structure.

Public funds are governed by the Collective Investment Funds (Jersey) Law 1998 and by the Control of Borrowing (Jersey) Order 1958. Private funds are, broadly, those funds which are offered to a restricted circle of persons numbering 50 or less and whose units are not listed on a recognized stock exchange within one year of the initial offer. Private funds are regulated solely by the Order which controls, among other things, the creation and issue of shares, securities, units in a unit trust scheme and limited partnership interests.

The range of vehicles available to promoters of investment funds include the open-ended or closed-ended investment company or unit trust, or the limited partnership. Funds can be structured either as single class investment funds or as umbrella funds. Public funds are further categorized into recognized funds and unclassified funds. The choice of funds for which approval can be sought includes feeder funds, funds of funds, money market funds, securities funds and government and other public securities funds. These categories are referred to in the subordinate legislation governing recognized funds but apply equally to unclassified funds. While both types are regulated under the Law, recognized funds as a class of funds have also been specified as a class by Order of the UK Secretary of State for the purposes of s87 of the UK Financial Services Act 1986 pursuant to which Jersey has obtained designated territory status. As a result of this recognized status a fund may qualify to be marketed freely in the UK and also in other specified jurisdictions including Ireland, the Netherlands, Japan and Hong Kong. Recognized funds must be open-ended vehicles and must comply with detailed legislative requirements.

Unclassified funds are regulated on a fund by fund basis. They can, however, subject to the satisfaction of the recognized fund requirements, obtain recognized status. The Commission applies policy guidelines to achieve consistency in the authorization of unclassified funds. Significant variables include whether the fund is open-ended or closed-ended, the nature of the investor and the nature of investments. For both recognized and unclassified funds the Commission requires promoters to be persons of stature with a good track record and a high international reputation. The adoption of this policy enables the Commission to achieve a good level of investor protection and to avoid implementing an "over-regulation" policy once the funds in question are up and running.

Investment restrictions imposed by the Commission will depend firstly on whether the proposed fund is a recognized fund in which case there are specific investment and borrowing limits which must be adhered to. Unclassified funds may adopt more liberal investment guidelines particularly where investors are financially sophisticated and minimum investment limits are high.

Regulation of public funds in Jersey is achieved by requiring persons carrying on a specified function for the fund to obtain a permit. It is important to note that even if the function is being carried out in Jersey for a non-Jersey authorized fund the functionary may still be required to obtain a permit, unless it can avail of a specific exemption. Where a fund is publicly offered and is set up as a limited partnership the general partner (if based in Jersey) will be required to obtain a permit to act as a functionary under the Law. For open-ended public and private funds, management and custodial functions are required to be carried out in Jersey. Investment advisory or management functions may be carried on outside Jersey. Closed-end funds must have a Jersey-based manager and administrator although there is no requirement, as there exists for open-ended funds, for the custodian to be based in the island. The Commission also requires Jersey based managers to have a minimum paid up share capital of £25,000 and to have at least two Jersey resident directors. A custodian must have a minimum paid up share capital of £250,000 and must also have two Jersey resident directors.

The coming into force of the Investment Business (Jersey) Law 1998 (IBJL) in March 1999 has played a significant role in highlighting Jersey's continuing policy to aim to provide high investor protection. First, functionaries of public investment funds who carry on investment business (as defined in the IBJL) are exempt from the requirement to register in respect of any investment business activities which they are authorized to carry on by means of a functionary's permit. Any activities not authorized by permit may require additional authorization under the IBJL. Secondly, functionaries of professional investor regulated schemes must ensure that investors receive and acknowledge appropriate investment warnings in respect of any risks inherent in making an investment. Professional investor regulated schemes are private schemes which have received relevant consents in connection with the schemes under the Order and whose investors have made a minimum subscription of £250,000 or are professional investors (as defined in the IBJL) who have received and signed an investment warning.


Open/closed-ended investment companies are generally set up as tax exempt companies for which status an annual fee of £600 is payable. The favourable tax treatment which exempt status confers means that only Jersey source income, with the exception of bank interest which is exempt by concession, (and usually there is none) is chargeable to income tax at the standard rate of 20%. Dividends paid by a fund may be paid without deduction of Jersey income tax to non-Jersey resident shareholders. Unit trusts and limited partnerships are subject to similar tax treatment whereby neither a fund's assets nor a trustee, or in the case of a limited partnership, a non-resident partner or the limited partnership itself, will be liable to Jersey income tax in respect of non-Jersey source income or Jersey bank deposit interest. Interest payments in respect of loans made by a partner to the partnership are also allowed to be paid free of withholding tax. Where the general partner of a partnership is a Jersey incorporated company the most preferable tax status is the Jersey exempt company. The tax transparency of the Jersey limited partnership means that investors are able to take advantage of double tax agreements between their own country and the country of investment and enables the offsetting of profits and losses from the limited partnership against income arising in the investors' own jurisdiction. This makes the Jersey limited partnership an ideal investment vehicle for collective investment schemes.

Other favourable tax features present in the island are the absence of stamp duty on the transfer of shares and the absence of any capital gains, estate transfer or inheritance taxes.


The Commission and the professional finance sector in Jersey are committed to the development and growth of the investment fund industry in Jersey. The recent enactment of the IBJL and the Proceeds of Crime (Jersey) Law 1999 (Jersey's all crimes anti-money laundering law) highlight the Commission's determination to maintain Jersey as a quality offshore jurisdiction with investor protection a priority while still offering promoters a flexible regulatory environment in which to set up funds.

Contact Details:

Crills Advocates

PO Box 72

44 Esplanade

St Helier



Channel Islands

Tel: +44 1534 700 700

Fax: +44 1534 700 800