The Guernsey Financial Services Commission (GFSC) is celebrating its tenth anniversary this year. Since establishment, the GFSC has become the focal point of Guernsey's financial services sector. When approving the Financial Services Commission (Guernsey) Law in 1988, the States of Guernsey declared that the objective of the GFSC was "to provide effective, professional supervision and modern regulation of the finance sector to the highest international standards within a diverse and innovative environment." In practice, the GFSC is both regulator and promoter, protecting and developing the finance sector of the Island through close liaison with the Island's banking, insurance and investment industries. The GFSC has worked tirelessly to enhance the reputation of Guernsey, and can be paid no better compliment than being used as a blue print by our neighbouring island of Jersey.
THE LAST TEN YEARS
Over the last ten years Guernsey has flourished as an offshore financial centre. The Chairman of the GFSC highlighted in his recently published Annual Report, that during the last ten years, the percentage of contribution made to the Island's gross national product by the finance sector has increased from 40% to 60%, the number of banks has grown to 78, and deposits more than five-fold to nearly £50 billion.
The investment sector has seen the number of funds under management more than double to 372, while assets under management have increased four-fold to £16 billion. In the insurance sector, the number of offshore insurance companies established in Guernsey over the period has trebled from 118 to 352, and the Island is recognised as Europe's premier and largest captive insurance domicile.
THIS LAST YEAR
This last year saw particularly impressive growth with the investment business sector increasing funds under management by 25%, and 125 new funds being established. At the end of the year, there were 6 more banks, and deposits were up by 14% to nearly £50 billion. In the insurance sector, a further 26 captive insurance companies were approved during the year.
The announcement of the creation of a Channel Islands Stock Exchange based in St. Peter Port is anticipated to broaden the services available to the investment industry in Guernsey and attract further business to the Island. The investment business sector has seen new legislation extending The Protection of Investors (Bailiwick of Guernsey) Law 1987, so that all forms of investment business are regulated. This legislation was introduced after nearly two years of consultation and comes into force in July, 1998. The sector has also seen the introduction of class Q funds which ease investment restrictions on funds aimed at professional investors, and was an initiative promoted by the Guernsey Fund Managers Association.
NEW COMPANY LAWS
During the last eighteen months, a significant number of changes have been made to company law. The Companies (Amendment) Guernsey Law 1996 came into force on 1st March, 1997. The legislation introduced measures to assist practitioners as well as protect the Island's reputation. These measures provide the Court with the ability to disqualify directors when they believe their conduct means that they are unfit to be directors of a company. In addition, the legislation covers wrongful and fraudulent trading, introduces provisions concerning participating in meetings, and a provision allowing companies to choose whether or not to have a company seal.
Other amendments to the Company Law include the following:-
1) The Protected Cell Companies Ordinance, which introduced a new type of company, The Protected Cell Company (PCC). The important feature of PCCs is that the assets of each cell are segregated to avoid any danger of contamination by the insolvency of another cell of the company. The PCC structure is currently limited to investment in the insurance sector but its extension to other areas is being considered. Guernsey is the first jurisdiction to incorporate this structure into their laws.
2) The Guarantee Companies Ordinance 1997 provides for the incorporation of companies limited by guarantee as well as by shares.
3) The Amalgamation of Companies Ordinance 1997 enables two or more companies to amalgamate and continue as one, and it enables overseas companies to amalgamate with a Guernsey company.
4) The Migration of Companies Ordinance 1997, now enables a company incorporated in another jurisdiction to migrate from a jurisdiction and be registered as a Guernsey company and vice-versa.
Other laws expected to be entered on the statute book in the coming months include legislation covering merger relief and relief in respect of group re-constructions, power for a Guernsey company to issue shares of no nominal or par value, the power for a Guernsey company to provide financial assistance to enable a person to buy shares in that company, as well as enabling the company itself to purchase its own shares.
Trusts are governed by The Trusts (Guernsey) Law 1989, as amended, and provide the Royal Court of Guernsey with jurisdiction in dealing with cases involving trusts. The Court has jurisdiction in respect of an offshore trust where the trustee is resident in Guernsey, or where any of the trust assets are situated or administered on the Island, or if the terms of the trust give the Court jurisdiction.
The law has proved a simple and effective basis for administering trusts. It requires the highest standards of conduct from trustees. It includes a unique concept of a trustee acting "en bon pere de famille", that is, as a good father would act in the best interests of his children.
Significant discussion has taken place during the last year on the regulation of trustees, company administrators, and companies providing executorship services, collectively referred to as "Fiduciary Business". In June 1997, the GFSC formed a joint working group to consider the introduction of Fiduciary Business Law, and in October the joint working group issued a consultation document which attracted considerable comment from the industry. The responses from the consultation process are being considered by the joint working group and a second consultative document is expected. The trust industry is most supportive of this new area of regulation and the new legislation is being encouraged by The Association of Guernsey Trustees and the local branch of the Society of Trust and Estate Practitioners, which has over 280 members.
EDUCATION AND TRAINING
There has been a significant improvement in the training available to Guernsey practitioners since the establishment of the Financial Training Agency by the GFSC in 1996. The Agency has facilitated the introduction of three professional qualifications to the Island; the M.S.C. in Corporate Governance and Graduate of The Institute of Chartered Secretaries and Administrators, the new ACIB/Degree Link, and The Securities Institute Diploma. The facilities available at the Agency, including a comprehensive library, prove popular for both students and companies wishing to provide in-house training.
A long history of political and economic stability, an excellent legal framework, and the high quality of financial institutions on the Island have all played a part in bringing the Island to the attention of international corporations, private clients and their advisers. The supporting services of legal and accounting firms and good communications have also been important factors in gaining a reputation as a leading offshore financial centre. Guernsey recognised many years ago that financial services are a long-term business, and that it was essential to ensure that the quality of the business which it handles was not compromised in any way. This approach to business promoted by the GFSC and upheld by the Island's business sector should certainly hold the Island in good stead in the future.