Guernsey: Maintaining The Competitive Edge In The Guernsey Financial Centre

Last Updated: 12 June 2014
Article by Joe Truelove

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.

Conclusion

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.

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

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

Authors
Joe Truelove
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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