I have not created a chrooted account yet so I am talking through my *^&^. However, that isn't going to stop me.
I believe that you need to set up a partial image of the real file system in the jail. That partial image has whatever directories and files are required by the jailed process to run. The files in the jail should be stripped down, though. So if you wanted to keep an ftp account in a jail you might set it up like this.
/jail
/jail/etc
/jail/bin
/jail/ftp-home
In this system the /jail/etc directory would have a stripped version of the passwd, group, and shadow files. These three files would only have entries for the ftp daemon account. Then the /jail/bin would have a static image of the ftp daemon binary such as vsftpd. (Static image means that all of the required library modules are compiled into the binary.) THESE files in /jail/etc have to have the proper permissions to allow the jailed account to read them.
Or I could be wrong.