Guernsey: Eurozone In Turmoil While Guernsey Stands Strong

Last Updated: 2 July 2012
Article by Patricia White

Most Read Contributor in Guernsey, November 2017

Originally published in HFM Week, Guernsey Special Report, May 2012

Patricia White of Legis Fund Services limited discusses how the fund industry in Guernsey is faring at a time when the eurozone economy remains fragile.

While the debt crisis continues to plague the eurozone there is a constant fear of the impact in the wider global economy. Concerns remain that the eurozone is in recession after GDP fell 0.3% in the final three months of 2011, with a further contraction anticipated in the first quarter of 2012. Manufacturing downturn is greater than expected and unemployment in the 17 countries adopting the euro has hit its highest since the currency began in 1999. Thankfully, the UK has dodged a double-dip recession for now, with the economy growing by 0.3% in the first three months of the year, and the manufacturing sector expanding at its fastest pace for 10 months in March.

By contrast, while the Guernsey fund industry showed a modest 1.6% increase in assets under management and administration in 2011, this reflects 30% growth over the two year period and 47% growth in the last four years since the end of 2007, out-performing competing jurisdictions and a commendable achievement in the current economic climate. Our ability to avoid the worst of the impact of the global recession is attributable in part to recognition of the essential requirement to position Guernsey as a top-tier jurisdiction.

Guernsey is recognised as a leader in global regulation and co-operation following positive assessments by the IMF and OECD; both organisations published reports commending the island's high standards of regulation and Guernsey is included in the OECD white list. Notwithstanding this the Guernsey Financial Services Commission (GFSC), while robust, has a reputation for its pragmatic and open-door approach placing it ahead of our competitors.

Obstacles for new business

The cost and implementation of changes in compliance and regulation can act as obstacles to new business flows, topical issues currently being AIFMD, FATCA, and Dodd Frank. The UK Bribery Act also came into force in July 2011 with unknown extraterritorial reach and severe penalties for non compliance. Those affected must demonstrate they have adequate procedures in place identifying bribery risks and ensuring procedures are in place to mitigate the risks identified.

Concerns regarding AIFMD, which initially threatened to significantly impact our fund industry, have been significantly allayed since the first draft of the directive. November's Level 2 regulations, concerning rules relating to third countries and de minimis calculations, resolved many of these concerns and Guernsey is well positioned for the final outcome by offering an equivalent regime.

Opportunities may also present themselves for Guernsey in terms of providing an alternative form of regulatory regime for those products which have no EU connections, bearing in mind that the industry cost of implementing the requirements of the AIFMD should not be underestimated. We have seen a positioning of fund managers seeing up their operations and funds (particularly private equity vehicles) in Guernsey in an endeavour to avoid any negative aspects of the final outcome of the legislation.

The draft FATCA regulations were released by the IRS in February this year and represent a complex set of rules designed with the objective of limiting tax evasion by US persons. Impacted organisations may need to adjust their existing operating model in order to avoid a punitive withholding tax of 30% on US investments and become compliant, as well as review their new business take-on procedures. To further exacerbate the challenge, the regulations will remain fluid up until and beyond the first deadline in June 2013.

The Dodd Frank Act prompts changes to the ways hedge funds must operate to better protect investors, affecting investment advisers with a place of business in the US and certain custodians. Those affected should have registered with the SEC by the February 2012 deadline and consideration must be given to technology, operations and infrastructure to meet the new regulatory requirements, which among other things requires the appointment of a compliance chief for each fund.

The importance of good corporate governance is underpinned in the aftermath of the Weavering scandal emanating from the Cayman Islands. _e publication of the Finance Sector Code of Corporate Governance by the GFSC, containing principles and guidance for adherence to good corporate governance, and requiring submission of an annual assurance statement to confirm the same, is welcome and provides assurance that Guernsey does not underestimate the importance of these principles.

With a growing number of conflicting cross-jurisdictional and cross-functional regulatory requirements, businesses need to take a more universal approach to compliance and risk management. As a well regulated jurisdiction, the increasing focus on compliance and regulation means Guernsey is well positioned compared to those adopting a lighter touch approach.

Extending its reach

The Guernsey fund industry now looks beyond traditional UK and eurozone markets, securing and further developing growth from non-traditional emerging markets. The versatility of Guernsey's fund regime and product types means that we have an attractive offering for jurisdictions such as Mena, India, China and Russia.

Guernsey's Registered Fund regime, available for open-ended and closed-ended funds, facilitates a three-day approval process which is a popular choice for promoters who can demonstrate an established track record, combining both a speedy approval process with the security of regulatory oversight. Authorised Qualifying Investor Funds also offers a three-day process, the most appropriate choice being affected by the requirements of the detailed disclosure in the offering documents.

Licensing of a GP can also be fast-tracked to a ten-day process. Competing jurisdictions can only achieve this turnaround time through their unregulated fund regimes.

We are seeing an increasing demand for listed funds, the perception being that the listing authority provides an additional layer of regulation and oversight as well as potential liquidity. LSE statistics show that for non-UK companies Guernsey is the jurisdiction of choice. There are significantly more Guernsey companies listed on the LSE main market and the SFM than any of our competitor finance centres. Playing host to the Channel Islands Stock Exchange, which is an internationally recognised Market Authority and FSA approved, further enhances our service offering. Its competitive pricing and responsive approach makes it an attractive alternative to other exchanges.

As a jurisdiction, we are seeing growth in funds of hedge funds, private equity business and alternative asset classes generally including infrastructure, Shariah compliant and green funds.

Guernsey has an exceptionally well-developed private equity infrastructure in terms of its regulatory environment and legislation, for both limited partnership law and company law. Tax laws facilitate organisational structuring through a tax neutral environment; no tax liability is payable in this jurisdiction. The Private Equity News/State Street CFO survey reports that more than 61% of participants indicated Guernsey as their preferred destination for private equity outsourcing and Guernsey was ranked as the highest placed jurisdiction in the Stability Index 2011.

We have a track record of working with promoters and Shariah advisers to structure funds which comply with the fundamental principles of Islamic finance and recognise the importance of maintaining the Shariah-compliant status of the funds. Similarly, we understand the values which underpin green funds, whose investments are focused on sustainability and 'clean' technology or energy and which have evolved from the ethical funds that have been present in the investment market for some time. The flexibility of our fund regime also sees Guernsey gaining a reputation as a centre of excellence for more esoteric asset classes such as fine art, wine, timber, and rare and classic cars.

Overall, I remain cautiously optimistic for the remainder of the year. While the Guernsey funds industry continues to see growth, new fund launches continue to take longer to get to market as fund raising remains difficult. Investors take an extremely cautious approach to investment while economic uncertainty continues and markets will remain sensitive to any negative data emanating from the eurozone.

While the possibility of a significant upturn in the pace of growth for the remainder of 2012 is highly unlikely, the UK economy has avoided recession and growth is likely on some level. With Guernsey funds promoted or sponsored by leading institutions in more than 55 finance centres, and with over 50 years of proven financial services experience, an excellent track record, a flexible regulatory environment, good infrastructure and political stability, Guernsey is a highly respected domicile which I expect to fare well in this difficult economic climate and continue to stand strong.

Patricia White is managing director of Legis Fund Services Limited, a Chartered Accountant and a Chartered FCSI and has over 20 years experience in the offshore finance industry.

For more information about Guernsey's finance industry please visit

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions