11.) Roles and Duties to a Fund Flashcards
Define and describe functionaries, in relation to funds in Jersey
The key parties (people/organisations) who provide a service to and are involved in the day-to-day operations of a fund (in Jersey)
The Collective Investment Fund (Jersey) Law 1988 (CIF Law) lists 17 functionaries, including manager, administrator, trustee and custodian
In order to operate as a functionary in Jersey, and provide a specific function or service to a Jersey fund, one requires a permit, which is issued by the JFSC
You must have a permit for EACH fund for which you act as a functionary
The permit will detail all the functions that may be undertaken for that particular fund and will also detail the conditions under which the he trustee can operate
Describe the role of permits in operating as a functionary to a Jersey fund
In order to operate as a functionary in Jersey, and provide a specific function or service to a Jersey fund, one requires a permit, which is issued by the JFSC
You must have a permit for EACH fund for which you act as a functionary
The permit will detail all the functions that may be undertaken for that particular fund and will also detail the conditions under which the he trustee can operate
Describe the key duties of a manager, one of the main types of functionary of a fund
All funds have a manager who has ultimate responsibility for the operation of the fund
They’re usually the principal operator of the fund
Their duties will be detailed in the management agreement, which is drawn up between the manager and the fund
Usually the manager will have overall responsibility for all aspects of the fund, except for the safe keeping of the assets
Some managers outsource many of their duties but they still remain ultimately responsible for the management of the fund
The manager will receive a fee from the fund plus they will also receive the initial charge paid by investors when they purchase units in the fund. For some funds, the manager may also receive an incentive fee dependent upon the performance of the fund
For a Recognised fund (one of the 2 classifications of public retail funds in Jersey, the other being Unclassified funds), the manager doesn’t have responsibility of performing the function of a registrar, although this can be a function that they take on
For a Recognised fund, the manager will also have additional duties and responsibilities specified in the Collective Investment Funds (Recognised Funds) (Rules) (Jersey) Order 2003
Describe the key duties of an administrator, one of the main types of functionary of a fund
Not that some funds will appoint a separate administrator to the fund. In other instances, the manager many outsource the administration function to a third party, however when this happens the manager will still have responsibility of ensuring that the function is performed property.
Key duties of an administrator include:
The responsibilities of the administrator will be derailed in the administration agreement. This will either be between the fund and the administrator or between the manager and the administrator
The administrator will be paid by whoever appoints them, I.e. the fund or the manager
The administrator usually performs the ‘back office’ functions in relation to the fund. Typical functions would be:
- ) Calculation of NAV (Net Asset Value)
- ) Calculation of the prices at which the units/shares in the fund are sold and repurchased
- ) Preparation of the accounts
- ) Giving instructions for the authorised payments out of the fund’s assets
- ) Maintain the book of accounts
Describe the key duties of a registrar, one of the main types of functionary of a fund
Is responsible for maintaining the register of unit/share holders
The registrar fee will be paid for by the fund
Must ensure that only authorised changes are made to the registrar
For a Recognised Fund, the trustee/custodian has responsibility for the register but this function may be delegated to another party, including the manager
Define the main functionaries (parties) involved in the day to day operations of a fund
Manager
Administrator
Registrar
Investment manager/investment advisor
Custodian
Distributor
Describe the key duties of an investment manager/investment adviser, one of the main types of functionary of a fund
Undertakes the selection of some or all of the fund investments
Will make decisions on how and when investments are to be purchased or sold, and gives instructions accordingly, usually to the manager or administrator
In some circumstances, the investment adviser may give trading instructions on behalf of the fund if specifically authorised by the fund to do so
Where the manager is responsible for making investment decisions, this will often be delegated to an investment manager/adviser. In these circumstances the fee will be paid by the manager, not the fund.
For many Expert Funds (one of the types of fund of a CIS), the investment manager will be the promoter for the fund
Describe the key duties of a custodian, one of the main types of functionary of a fund
Holds in trust the assets of a fund and is responsible for their safekeeping
They may either physically hold the assets of the fund or documents which evidence title to the assets. They may also arrange for others to hold the assets by using sub-custodians
The assets are held in the name of the custodian, but on behalf of the fund
The custodian will be paid by the fund
For an open-ended fund (one of the 2 types of capital/legal structures for all CIS’, the other type being closed-ended funds), the custodian will have responsibility to look after the interests of the unit holders
Where the fund takes the form of a unit trust (one of the types of CIS available to investors), the custodian will usually be the trustee
Their duties will be set out in the custodian agreement, which will be between the fund and the custodian
For a Recognised Fund (one of the 2 classifications of public retail funds in Jersey, the other being Unclassified funds), the custodian will also have additional duties specified in the Collective Investment Funds (Recognised Funds) (Rules) (Jersey) Order 2003
Custodian usually acts for closed-ended fund and don’t have any responsibility towards the unit holders beyond that of holding the assets in trust
Describe the key duties of a distributor, one of the main types of functionary of a fund
They will be paid by the Manager, another of the main types of functionary of a fund
Distributes the fund’s prospectus and generally markets the fund on behalf of the manager of the fund
The role of the distributor sometimes includes that of a subscription/redemption agent. This means that they may also receive applications for subscriptions and redemptions and pass them to the fund operator
In Jersey, many organisations will hold a distributor permit in respect of funds registered in jurisdictions outside of Jersey
Define the other parties that provide a service to a fund, but unlike functionaries DON’T require a permit in order to do so
Auditors
Directors
Define and describe Auditors, one of the other parties that provides a service to a fund, but unlike functionaries DON’T require a permit in order to do so
The auditors are appointed by the shareholders each year at the AGM (Annual General Meeting)
The auditors will be paid by the fund
For Jersey funds, they must be a professional accounting company, with offices in Jersey
Auditors will provide an independent review of the controls and procedures of the manager of a fund, as well as the fund itself
Auditors will provide an audit option which is disclosed in the financial statements of the fund
At the end of the audit, a management report will be provided to the manager, detailing any issues that have arisen as part of the audit
Auditors may also provide additional services, including:
- ) preparation of accounts
- ) distributor status application
- ) review and advise on change in procedures or new ICT systems
Define and describe Directors, one of the other parties that provides a service to a fund, but unlike functionaries DON’T require a permit in order to do so
Where the fund takes the form of a company, it will be necessary to appoint directors
For a Jersey fund, the directors need to be notified to, and approved by, the JFSC
For a Jersey fund, there must be a minimum of 2 Jersey resident directors
The director’s fees and relevant expenses will be paid for by the fund
The directors have ultimate responsibility for the operation of the fund and will need to ensure that regular meetings are held and detailed minutes are kept
Define the parties involved in the operation of a unit trust
Trustee
Managers
Note that the legal structure and the parties involved in Fund Management operations have been developed from the concept of the Unit Trust
Also note that, in order to ensure that the interests of the investors in the unit trust are properly catered for, the trustee is usually an independent body from the trust managers and is likely to be a major bank or insurance company
Define and describe the duties of a trustee, being one of the parties involved in the operation of a unit trust
The trustee of a unit trust is an independent body whose duties involve:
(Revise using ‘ing’ words)
Holding and safeguarding the cash and securities belonging to the Trust
Ensure that the managers are running the trust properly and in accordance with the trust deed
Supervision of the register of unit holders
Settlement of all investment transactions
Collecting and distributing the income of the Trust
Creating and cancelling the units
Issuing of certificates
Also note that, in order to ensure that the interests of the investors in the unit trust are properly catered for, the trustee is usually an independent body from the trust managers and is likely to be a major bank or insurance company
Define and describe the duties of managers, being one of the parties involved in the operation of a unit trust
The manages of a unit trust are responsible for:
Making the day to day investment decisions necessary to the running of the trust
Dealing in units with the investing public
Ensuring that they act in accordance with the trust deed in all aspects
Marketing and advertising of the trust
Also note that, in order to ensure that the interests of the investors in the unit trust are properly catered for, the trustee is usually an independent body from the trust managers and is likely to be a major bank or insurance company
