Following the Jersey Financial Services Commission's feedback paper in April on proposed amendments to the Financial Services (Investment Business (Client Assets)) (Jersey) Order 2001 – or CAO – the Government of Jersey has amended the CAO as of 17 May.
A transitional period of three months (to 17 August) allows all affected parties to make the necessary changes.
Why this is important
Following a review of the CAO, it was determined there was a need for enhancements to achieve full compliance with certain IOSCO recommendations.
Jersey was specifically noted to not have fully adopted measures with respect to due diligence on the selection of custodians/third parties and regarding disclosing the asset protection regime afforded for investments in overseas jurisdictions.
Within this scope, the Commission took the opportunity to simplify and modernise elements, where appropriate. The amendment ensures Jersey’s investment business regime remains aligned to its key markets.
Main changes
The key changes relate to protected property (client assets). The requirements in respect of custodians (including sub-custodians) and third parties in respect of the lending of protected property were aligned and enhanced to comply with the IOSCO requirements.
The two principal changes were:
• Due diligence requirements being introduced in respect of the selection, appointment or delegation of an approved custodian/third party
• Disclosure being required to clients in respect of the asset protection regime or the insolvency regime, including the investor compensation regime, when the client’s protected property is held overseas.
In making the changes, some other updates were required, such as a consistent and appropriate definition of protected property and the clarification that a registered person is acting as a trustee when holding a client’s protected property. Some of these changes required other Articles of the CAO to be updated for consistency.
Who will this change impact?
The amendment will impact registered persons who are within the scope of the CAO for protected property in respect of:
• Custodians (including sub-custodians)
• Lending to third parties
• Assets held overseas.