Jersey Private Placement Funds

Mike Lombardi – OgierBen Robins – Mourant Ozannes

Roy Geddes - JFSC

JFSC Promoter Policy Test for Public Funds

1. Prior relevant experience in operating equivalent funds in equivalently regulated jurisdictions

2. International (or National) reputation

3. Significant Capital resources

4. Wide spread of ownership

Regulatory Trade-off

1. Institutional / professional investors health warning

2. Investment commitment £250k (or professional)

3. Investor headcount cap of 50

4. Closed-ended

5. PPM content requirements

AIFMD

• All EU funds to distribute by Passporting

• Depository Custodian

• Independent valuation function

• Leverage constraints / concentration limits

• Enhanced reporting requirements (portfolio composition / manager remuneration)

Ben RobinsPartner,

Mourants Ozannes

Eligible Structures

Whatever the legal form, must be closed ended

Must not be CIF

• corporate: can be a company (including a protected cell company, an incorporated cell company or any cell thereof) or

• partnerships: one or more partnerships (including limited partnerships, limited liability partnerships, separate limited partnerships or incorporated limited partnerships) or

• unit trust

NB includes Jersey structures and non-Jersey ("non-dom") structures where incorporated/constituted in equivalent form in their home country

Management Requirements

Jersey company: must appoint not less than 2 Jersey resident directors with appropriate experience

Non-Jersey company: either (a) not less than 2 Jersey resident directors with appropriate experience on its own board or (b) a Jersey company, with not less than 2 Jersey resident directors with appropriate experience, is appointed as its manager

Partnership(s) (whether Jersey or non-Jersey): at least one GP which is either (a) a Jersey company with not less than 2 Jersey resident directors with appropriate experience; or (b) itself a limited partnership, at least one of the GP's of which is a Jersey company with not less than 2 Jersey resident directors with appropriate experience

Unit trusts (whether Jersey or non-Jersey): each of the trustee and manager (or single managing trustee, if applicable) must be a Jersey company with not less than 2 Jersey resident directors with appropriate experience

These Jersey management entities are held specifically responsible for the management and control of the fund

Administration Requirements

Fund must be administered by an administrator which is a"Designated Service Provider", meaning:

• must be registered by JFSC to carry on Fund Services Business as an administrator under FS(J)L and cannot be a "managed entity" as defined under the FSB Codes of Practice

• NB: Trust Company Business licence alone is NOT sufficient

Role of administrator/DSP:

• must provide R/O to the relevant company, limited partnership or unit trust trustee/manager (or to the relevant local management entities of a non-Jersey structure)

• carrying out promoter due diligence and making required certifications in JFSC application re promoter and PPM content requirements

• support the Fund with its anti-money laundering obligations (MLRO/MLCO)• submit stats to JFSC on behalf of the Fund

Professional/Sophisticated Investors (1)

Only "Professional Investors", "Sophisticated Investors" and/or investment managers acquiring an interest for or on behalf of non-professional or non-sophisticated investors, each of whom have received and acknowledged an investment warning (substantially in the form set out in the JPPF Guide) may invest in the Fund

Sophisticated Investor definition: an investor who makes a minimum initial investment or investment commitment of £250,000 (or currency equivalent) in the Fund, whether through the initial offering or subsequent acquisition

Professional Investor definition: many categories but includes: persons who habitually invest (as principal or agent) by way of business; HNW structures (with assets >USD10M); certain "Eligible Employees" of the Fund's investment manager/advisor who themselves carry on investment business in relation to the fund; and senior employees, directors, partners, shareholders or consultants in the Fund or its management/advisory team receiving interests by way of remuneration/carry. Read the definitions carefully!

Professional/Sophisticated Investors (2)

Remember: investment warning required by the JPPF Guide must be in the PPM and must be acknowledged in writing (by counter-signature) by each investor (or their investment manager, where applicable), most probably in the subscription document which can repeat the warning.

Caution: inter-action with "Professional Investor Regulated Scheme" exemption under FS(J)L, where a service provider (eg local GP/manager/trustee) is relying on an investment business and/or trust company business exemption:

Remember: the Professional Investor definition in PIRS exemption is narrower, although £250k minimum investment limit is the same as the "Sophisticated Investor" limit in the JPPF Guide.

PPM content requirements

PPM to contain "all such material information which investors would reasonably require" including (without limitation):

• key subscription terms• investment strategy (and associated risks) and, if relevant, use of leverage• valuation methodology• capital structure of the Fund• voting arrangements• fees and expenses• material contracts• conflicts of interest• registered office/location of register• management structure (director and adviser details)• custody arrangements• term of fund• regulatory matters: responsibility statement (by Fund directors or

management entity); JFSC exculpation language and investor warning

Application procedure

COBO consent to issue of units issued by the JFSC on a fast-track, self-certification procedure relying upon receipt of:

• a written statement from the promoter to the JFSC: confirming that it satisfies the promoter requirements set out in the JPPF Guide, counter-signed by the administrator/DSP certifying that it has carried out its own general due diligence in relation to the promoter and has no reason to believe that the promoter's statement is incorrect;

• a written certificate of the Fund's administrator/DSP certifying that in the opinion of such person having completed appropriate enquiries that the Fund's PPM complies with the content requirements;

• a draft copy of the PPM (note requirements in relation to translation of non-English language PPMs); and

• details (full name, date of birth and residential address) of all of the promoter's Principal Persons, including those named in the PPM.

The JFSC issue the requisite COBO consent within 3 working days from receipt of correctly completed application.

On-going Requirements

• Fund must be audited and must deliver to JFSC of a copy of Fund's accounts if qualified (and details of such qualification to be brought to JFSC' attention immediately)

• material changes to the Fund which would not meet the criteria in the JPPF Guide will require prior JFSC written approval

• other material changes to the information submitted to the JFSC to be notified to the JFSC a.s.a.p. and in any event within 28 days

• appointment of MLRO/MLCO (via administrator/DSP)

Roy GeddesDeputy Director, Securities,

Jersey Financial Services Commission

Private Placement Fund

• Designated Service Provider (DSP) – an FSB Administrator – for AML / CFT purposes

• Promoter policy not applied instead promoter declaration certified by DSP that promoter is of good standing

Private Placement Fund

• DSP must have CDD in place and we may ask for CDD to be submitted after PPF application

• Regulatory checks completed after the issue of the COBO – new approach

• Fast track issue (72 hours) issue of COBO consent based on meeting PPF Guide requirements

• PPF Fund accounts to be audited but submitted only on an exceptional basis

• Fees Consultation

Private Placement Fund

• Consultation Paper on charging for PPF COBO consent to follow – JFA / JFL body has agreed in principle to a charge to cover additional costs

• Existing COBO regime still available if needed

• PPF Application form and PPF Guide are on website http://www.jerseyfsc.org