“Arranging” deals in investments is now a regulated activity under the Financial Services (Jersey) Law 1998

Arranging deals

The Financial Services (Amendment of Law) (No.6) (Jersey) Regulations (Regulations) came into force on 31 October 2023 to bring “arranging” the acquisition, sale, subscription or underwriting of investments on behalf of another person into scope as a regulated activity pursuant to the Law.

As a result, any Jersey incorporated company or limited liability company and any person carrying on business in or from within Jersey must not undertake the activity of arranging such transactions unless registered with the Jersey Financial Services Commission (JFSC) and acting in accordance with the terms of such registration, unless an exemption from registration applies.

Exemptions

Consequential amendments introduced by the Regulations and by the Financial Services (Amendment of Schedules to Law) (No. 3) (Jersey) Order 2023 (Order) have ensured that exemptions to regulation under the Law are available in respect of investments being arranged for non-retail investors.

These exemptions are available to persons who make arrangements:

• for professional investors falling within the scope prescribed by the Law;
• for sophisticated and high net worth investors falling within the scope prescribed by the Law;
• when not remunerated for doing so;
• when the activity is limited to making introductions;
• when the arranger is acting in relation to a professional investor regulated scheme or special purpose regulated scheme as each is defined in specified statutory instruments; or
• where advice is provided by a person regulated in Jersey to carry on investment business.

Corresponding amendments have been made to the exemptions available to service providers under certain special purpose regulated schemes and professional investor regulated schemes.

Only (i) professional investors, being persons whose ordinary activities involve (or it is reasonable to expect that their business involves) acquiring, holding, managing or disposing of investments for the purposes of their business; or (ii) (in the case of professional investor regulated schemes only) persons who have made a minimum subscription of £250,000, can qualify to participate in these investment schemes and all investors in such schemes must have received and signed an investment warning in a form approved by the Jersey Financial Services Commission.

The Regulations also contemplate bringing the operation of investment exchanges (i.e. the provision of facilities for the trading or listing of investments by members of the investment exchange) into scope as a regulated activity under the Law, however such amendments are not yet in force.

Transition provisions

The Regulations allow a transition period for persons who have undertaken the business of arranging deals within the 6 months ending on the 31 October 2023 commencement date for such person to carry on that activity for (i) up to six months after that date or (ii) if the person has applied for registration with the JFSC within six months of the commencement date, until the application is finally determined.

Investments falling in scope of the Law amended

The Order has also made amendments to Schedule 1 of the Law defining the investments that fall in scope of the regulated activity of investment business.  Clarificatory notes have been added to the definition of futures that are in scope, the definition of contracts for difference has been amended and a definition of financial derivatives has been added.

Commentary

These amendments have been trailed for some time and tend to reflect the regulatory framework for peer jurisdictions and neighbouring countries.  Whilst the activity of making arrangements is not defined, it should be noted that making introductions that result in investment activity is exempt from the regulatory net.

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