As always the pace of regulatory change in the Guernsey Financial Centre is unrelenting.

In 2013 a lot of work has been driven by international legislation, namely the European Union's Alternative Investment Fund Managers Directive (AIFMD) and the Foreign Account Tax Compliance Act (FATCA). There have been changes in leadership and reorganisations at two highly regarded Guernsey based institutions - the Guernsey Financial Services Commission (GFSC) and the Channel Islands Stock Exchange (CISX). A number of international co-operation agreements have been signed during the year, further demonstrating Guernsey's willingness to maintain the very highest standards of transparency. However, the regulator and legislature still found time during the course of the year to implement refinements to existing legislation and accommodate the introduction of The Foundations (Guernsey) Law 2012 ('the Foundations Law').

Guernsey Financial Services Commission

A new director general, William Mason, took the helm at the GFSC in March. He was previously head of risk at the Central Bank of Ireland and before that worked at the Financial Services Authority in the UK.

In June the GFSC announced an internal reorganisation. The Banking and Insurance Divisions were combined to form the Banking and Insurance Supervision and Policy Department. A new 'Innovation Unit' was formed to assess the authorisation of innovative new businesses seeking to be established in Guernsey. A 'Conduct Unit' was established to take a GFSC-wide lead on conduct supervision and policy, and a specialist 'Risk Unit' was created to deliver risk based supervision.

It wasn't all change, however. A consultation on Consolidating and Revising the Regulatory and Supervisory Legislation issued was launched in June, extended in July and then in October it was announced that industry concerns about the volumes of changes had been listened to and the consolidation would not proceed in its current form.

Following a further consultation with respect to the fees levied by the GFSC, it was announced that, with few exceptions, the fee tariff in the investment sector would remain unchanged in 2014 and rise by 0.3 per cent in all other sectors. This was very positively received by industry.

Investment Fund Sector- the AIFMD

As discussed in my previous article, the introduction of the AIFMD has been a major focus of the investment fund sector in Guernsey for a number of years.[1] Following the European Securities and Markets Authority's approval of the co-operation arrangements, the GFSC signed 27 bi-lateral co-operation agreements with EU/EEA securities regulators in July for the supervision of alternative investment funds, including hedge funds, private equity and real estate funds.

These agreements mean that Guernsey funds will continue to be able to receive investments from appropriately qualified investors in those countries through those countries' private placement regimes, subject to completion of the notification procedure of the national securities supervisor.

The AIFMD (Marketing) Rules, 2013 ('the Marketing Rules') were adopted with an effective date of 22 July 2013. The Marketing Rules were introduced to ensure that collective investment schemes and fund managers established in the Bailiwick of Guernsey who wish to market into the EEA meet the requirements of Articles 42 and 43 of AIFMD and assist the GFSC to enable it to effectively cooperate with EU competent authorities.

The AIFMD Rules, 2013 ('the AIFMD Rules') were approved by the GFSC with an effective date of 2 January 2014. The AIFMD Rules enable Guernsey fund managers and depositaries to opt in to an AIFMD equivalent regime. Guernsey fund managers and depositaries who wish to be subject to the AIFMD Rules will be able to apply to the GFSC.

Guernsey's twin track approach to have an AIFMD equivalent regime for marketing into Europe as well as offering fund structures which are not subject to AIFMD regulation for marketing outside the EU zone, offers fund promoters the best of both worlds with respect to the management of alternative investment funds.

The GFSC has released an initial set of Frequently Asked Questions (FAQs) on its website in order to help explain how Guernsey funds will be impacted by AIFMD and how such funds may continue to be marketed into the European Economic Area under AIFMD. These FAQs were updated in February 2014.

Investment Fund Sector- Other Developments

While the AIFMD was the principal focus for much of 2013 it was not the only enhancement to the investment fund industry's regulatory environment. In February, for example, the remaining provisions of the Control of Borrowing (Bailiwick of Guernsey) Ordinance, 1959 were repealed and requests for consent under this legislation ceased to be necessary.

In October the Authorised Collective Investment Schemes (Class B) Rules, 2013 ('the Class B Rules') were introduced replacing the 1990 Rules. These rules affect the regulation of open ended investment funds not affected by the AIFMD.

On 19 December 2013 a new Fast Track Application Process for Investment Compartments of Existing Registered Collective Investment Schemes and Qualifying Investor Funds was introduced. This enhancement provides for sub funds of existing Qualifying investor funds and Registered Collective Investment schemes to be approved by the GFSC within three days of receipt of the appropriately completed forms.

Fiduciary Sector

The Foundations Law came into force as of 7 January 2013. On 13 January 2013 amendments to the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000, as amended were made to take the existence of foundations into account. Further, a Code of Practice for Foundation Service Providers was introduced on 5 August 2013.

The Foundations Law is intended to reflect accepted civil law characteristics of foundations but is not a replication of the foundation laws of other jurisdictions. The draftsman has considered market needs and has looked to create something bespoke that should be well suited to meet the requirements of the island's clients. The Foundations Law received considerable attention in the IFC Guernsey 2013/14[2] and so a detailed analysis has not been provided here.

Banking and Insurance Sectors

On 12 June 2013 the GFSC issued a consultation paper to industry on proposed changes to the current large exposure regime, which has remained largely unchanged since 1994. Banks incorporated in the Bailiwick will be most affected by the proposed changes, but there are also some changes to the regular reporting of large exposures that affect branch banks. For that reason, this paper was sent to all licensed banks in the Bailiwick.

On 24 September 2013 a consultation was started with respect to the implementation of Guernsey Financial Advice Standards. Of particular significance in the proposed changes will be the requirement for relevant authorised insurance representatives and investment advisors, who are advising retail clients, to obtain a FCA level 4 qualification within a specified timescale. At the same time a consultation on revising the insurance regulations and codes was also launched.

Capital Markets

The UK Takeover Panel's amendments to the Takeover Code, which came into effect on 30 September 2013, will make all companies listed on the Alternative Investment Market (AIM), and which are incorporated in Guernsey, Jersey, UK and Isle of Man, subject to the Code. Currently, only companies which are treated by the Takeover Panel as being centrally managed and controlled in Guernsey, Jersey, UK or Isle of Man are subject to the Code. As a result of these changes, it will no longer be necessary to satisfy such residency test for the Code to apply. This is expected to be welcomed by those companies that are managed and controlled elsewhere, such as the large number of Chinese, Asian and other international groups, which are listed on the AIM.

London Stock Exchange (LSE) data shows that at the end of December 2013 there were 115 Guernsey-incorporated entities listed on the Main Market, AIM and the Specialist Fund Market (SFM). Guernsey added 17 new entities to the LSE markets during 2013, which is more than any other jurisdiction except the UK. Jersey added 12, Cayman added nine, BVI seven, and Bermuda and Ireland each listed three entities.

Closer to home, in April 2013 the Channel Islands Stock Exchange (CISX) celebrated its 15th anniversary and approved its 5,000th security for admission to its Official List and in June, Jon Moulton became the Chairman of the CISX.

The CISX underwent a reorganisation towards the end of 2013. Two new entities were formed. The Channel Islands Securities Exchange Authority Limited (CISEA) was formed to act as the new exchange regulatory authority and the Channel Islands Securities Exchange Limited was created as the new exchange.

The structure of the new exchange was set up to separate the commercial and regulatory functions and to ensure that high standards of corporate practice and governance are in place. All listed issuers on the Official List of the CISX were transferred to the Official List of the CISEA on 20 December 2013.

International Co-operation

In November 2013 Guernsey concluded its 50th bilateral Tax Information Exchange Agreement (TIEA) with Bermuda and now has TIEAs with jurisdictions including: Switzerland, Gibraltar, Hungary, Slovakia, Swaziland, Brazil and Lesotho.

On 27 January 2014 Guernsey entered into two further bilateral Double Taxation Arrangements (DTAs). Guernsey has now signed comprehensive DTAs with 10 jurisdictions: Hong Kong, the Isle of Man, Jersey, Luxembourg, Malta, Mauritius, Qatar, Seychelles, Singapore and the UK.

On 13 December Guernsey signed a Model I intergovernmental agreement with the US Government in relation to FATCA. This builds on the TIEA that Guernsey has had with the US since 2002, the adoption of automatic exchange of information under measures equivalent to the EU Savings Tax Directive in 2011 and the package of tax measures signed with the UK Government in October

In November the GFSC signed a Memorandum of Understanding (MoU) with the Chinese Securities Regulatory Commission. The MoU provides the basis for a framework of cooperation and exchange of information between the two sets of authorities in relation to securities and futures business.

The Guernsey Government had previously signed a TIEA with the Chinese central government tax authorities in October 2010, as well as a MoU with the Shanghai Financial Services Office in November of the same year. The GFSC signed a Statement of Cooperation with the China Banking Regulatory Commission in November 2011.


Guernsey is an international finance centre with a 50-year track record, which continues to be a great jurisdiction within which to do business. We have an intelligent regulator that listens to business and works together with government to ensure that sensible decisions are reached. International best practice is followed and the finance industry is extremely competitive and responsive to changes in regulations. We engage with our trading partners in the EU, US, China and the world to offer high levels of corporate governance and transparency across all of the sectors of our industry.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.