Guernsey: AIFMD & Guernsey - More Options Than You Might Think

Last Updated: 25 July 2013
Article by Fiona Le Poidevin

Most Read Contributor in Guernsey, November 2017

Guernsey Finance Chief Executive Fiona Le Poidevin outlines Guernsey's funds offering following the introduction of the Alternative Investment Fund Managers Directive (AIFMD).

In July 2013 the global economy is continuing to throw up significant events but these are nothing in comparison with what we saw and experienced five years ago when the financial crisis was unravelling before our eyes. Indeed, it is precisely the events of 2008 which now frame our current environment, including economic, as well as political and social developments. This includes the introduction of the Alternative Investment Fund Managers Directive (AIFMD) with effect from 22 July 2013.

AIFMD was born out of a belief within the European Union (EU) that a lack of oversight of the alternative investment funds sector, in particular hedge funds and private equity, had contributed to the global financial crisis. Yet, now it's not so much what got us to this point but how we will go about dealing with it which concerns us, particularly with still so many unknowns. The Directive has been the subject of much debate and its implications remain unclear – and are likely to do so post 22 July 2013 – due to the fact that much of the detail is open to interpretation by individual Member States.

AIFMD seeks to regulate EU-based Alternative Investment Fund Managers (AIFMs), managers of EU established Alternative Investment Funds (AIFs) and managers that market AIFs into the EU. So, in essence, if either the manager or the fund has a relationship with the EU then the Directive comes into play.

Guernsey is not in the EU and therefore, is not required to implement AIFMD. However, with Europe still one of our biggest markets, we have a large proportion of business which does relate to the EU in some form and so potentially falls within scope of the Directive. As such, we have had to be alive to what will be required now and in the future to maintain access to EU markets. Yet, Guernsey also has a substantial – and growing – amount of funds business which originates from locations such as the US, Middle East, Latin America, Russia, India and Asia that does not touch the EU at all.

Therefore, we have also had to be mindful of the fact that we do not want to prohibit this business and in fact, we believe that our position outside of the EU but within the European time zone actually offers an opportunity to attract more non-EU work.

The Guernsey options

Guernsey is introducing a regime to ensure that we can continue to service both EU and non-EU business following AIFMD coming into effect. There will be a full AIFMD equivalent offering for those EU investors and managers who need or choose to take this route. There will also be a continuation of the existing regime for those who fall outside the scope of AIFMD (non-EU business); and the maintenance of the same, if slightly amended, process for those who are able to take advantage of National Private Placement (NPP) regimes.

An important point to make is that Guernsey's position as a third country means that we do not have to introduce a fully equivalent AIFMD regime for our alternative investment managers and funds to maintain access to EU markets from 22 July 2013. The existing NPP regimes will continue to offer a route for managers and funds based in third countries, such as Guernsey, to access the EU until at least 2015 and most likely, 2018.

However, in order to continue under NPP after 22 July 2013, AIFMD imposes additional regulatory obligations under Articles 42 and 43. On 7 June 2013, the Guernsey Financial Services Commission (GFSC) issued The AIFMD (Marketing) Rules, 2013, together with a notification form. The forms are for Guernsey-based managers to notify the GFSC of which EU (and wider EEA) countries they will market each fund. The GFSC has confirmed that it is able to accept completed forms prior to 22 July 2013.

In addition, it has recently been confirmed that the GFSC has signed bilateral cooperation agreements with 27 securities regulators from the EU and the wider European Economic Area (EEA), including the UK, Germany and France.* The European Securities and Markets Authority (ESMA) had previously given its approval for the content of potential cooperation agreements but the fact that they have now been signed means that Guernsey funds will continue to be able to receive investments from appropriately qualified investors in all these EU/EEA countries through their NPP regimes post 22 July 2013, subject to completion of the notification procedure of the relevant national securities supervisor.

However, the Directive does also provide the framework for establishing a full passporting regime and the European Commission is expected to implement this regime for non-EU managers of alternative funds in July 2015. Guernsey intends to fully engage with the consultations on the third country passporting regime to ensure that Guernsey AIFMs will be ideally placed to take advantage of the new benefits of being able to market AIFs on a pan-European basis with a single authorisation, as the regime is currently envisaged to work. Indeed, the GFSC is expected to shortly issue a domestic consultation on the full AIFMD equivalent opt-in rules which Guernsey will introduce in due course.

These opt-in rules should allow bilateral marketing of an AIF product to certain EU Member States prior to the implementation of a third country passport regime.

What does this mean for you?

So, in summary, Guernsey managers and funds with no connection to the EU will continue to be able to use the existing regime. Those who want to be able to continue to access the EU will continue to be able use to the NPP regimes. However, a fully AIFMD equivalent regime for those with an EU connection who need or choose to take this route will also be available. It is expected that this will be introduced early in 2014 so that there is time for it to be fully embedded prior to the full passporting regime coming on-stream from July 2015.

For those marketing into the EU, it is likely that the NPP route will continue to be favoured by many due to the depth and breadth of the requirements that fund managers will have to satisfy for AIFMD. Indeed, it is expected that full-blown AIFMD compliance will only be sought if there are particular reasons to do so, e.g. for investor relations.

For those managers with elements of EU and non-EU business, the potentially onerous and costly compliance with AIFMD will mean that parallel structures are likely to be given serious consideration. It will be possible to break the non-EU business away into a parallel or feeder structure for which AIFMD compliance would neither be required nor necessary. If, on the other hand, it is necessary or otherwise desirable to comply with the AIFMD requirements, then you can do this in Guernsey too.

What we are trying to say is that a one size fits all approach does not suit everyone and Guernsey is able to provide a range of options. We believe that this approach enables us to provide an offering with real choice in servicing both EU and non-EU markets. However, as mentioned at the outset, the real implications of the Directive are still evolving – and will continue to do so post 22 July 2013 – due to the fact that much of the detail is open to interpretation by Member States.

Substance: managers and depositories

A recent survey of European asset managers by fund software provider Multi funds showed that 77% of respondents were considering establishing AIFs for non-EU investors 'offshore' as a way to put them outside of the scope of the Directive. However, of course, this can only be truly claimed to be the case if there is sufficient substance offshore. This also applies to managers of AIFs for EU investors who are looking to avail of the continuing NPP regimes.

Indeed, interpretation over what constitutes 'substance' goes to the heart of much of the debate about the implications of AIFMD. What is clear is that letter box entities cannot claim to be managers and substance will be required in a jurisdiction where a manger is claiming to be domiciled. Similarly, under the delegation rules, the extent to which activities such as portfolio and risk management can be outsourced must be considered and it needs to be ensured that the real decision making powers lie with the entity that is claiming to be the manager.

Guernsey is at a huge advantage as a fund domicile because of the existing standards we already employ regarding oversight and because of the substance which is already present in structures domiciled in the Island. For example, Guernsey already plays host to a number of major managers, such as Apax, BC Partners, Man Group, Permira and Terra Firma who all have offices and staff here. In addition, we have a range of fund administration groups, ranging from major international names to boutique, independent operations, coupled with qualified Non-Executive Directors, who are experienced in providing management functions.

In addition, AIFMD is introducing a requirement for depositories to provide extra oversight to the fund structure. Guernsey can service depository requirements through its existing range of on-Island custodians who are already used to providing not just custody services such as dealing and settlement but also a fiduciary role played by a trustee – hence the name, custodian trustee.

Yet, much of Guernsey's core business of closed ended private equity and real estate funds will be able to access AIFMD's lighter touch regime that permits a wider range of entities, such as lawyers and registrars, to carry out custodian functions.

Therefore, Guernsey is already extremely well placed to meet the requirements for enhanced oversight and substance and yet, many of our AIFs will be able to access a lighter regime in relation depository requirements. In addition, we have the benefit of having opened in early June this year for applications from managers and depositories who want to continue to access the EU market post 22 July 2013.

Of course, providing they can prove sufficient substance to their arrangements, one option might be for a fund to opt to be self-managed. Ben Morgan, a Partner at Carey Olsen in Guernsey, has said that it would be wrong to assume that all existing Guernsey funds will opt to be self-managed and therefore be non-EU AIFM managed. He believes that some will want their UK operation in the EU to be the AIFM and will therefore have the option to be AIFMD authorised but managing a Guernsey fund.

To conclude, Guernsey's position as a third country, the Island's planned regulatory regime and its infrastructure and expertise mean that as a domicile it ultimately offers optionality for the international fund community. In dealing with AIFMD, Guernsey has recognised not only the importance of the EU market but also the truly global nature of its investor base.

Originally published in Global Fund Media's Special Report: AIFMD Implementation Guide, July 2013.

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