The recent announcement of plans to open a representative office in Hong Kong during the first quarter of 2016 rounded off a particularly active 2015 for Guernsey's financial services sector, explains Guernsey Finance's chief executive Dominic Wheatley.
The Hong Kong office to be located at Three Pacific Place in Admiralty is Guernsey Finance's second overseas outpost, in addition to our Shanghai office which opened in 2008. It is ideally situated at the heart of Hong Kong's finance district and will further enhance our developing relationship with Hong Kong and its business community.
Our China representative, Wendy Weng, who is based in Shanghai, will use the office as a base from which to carry out further promotional activities concentrated on the wider South East Asia market, while it will also be utilised by the Guernsey Financial Services Commission (GFSC) to provide regulatory advice to those in the region who might be considering Guernsey-specific ventures.
The Hong Kong initiative follows the appointment in the autumn of Zoë Cousens as our first Middle East representative. Ms Cousens, who is based in Dubai, is now helping to promote Guernsey's financial services industry in the Middle East as an on-the-ground contact for Guernsey. She is now a key conduit for Middle Eastern firms and clients interested in Guernsey and will assist in hosting and arranging meetings, seminars or events for Guernsey businesses visiting the region.
Another exciting appointment for Guernsey sees Richard Le Tocq, who is also chairman of the Guernsey branch of the Institute of Directors, lead Locate Guernsey – the newly formed agency mandated to encourage and facilitate businesses and high net worth individuals (HNWIs) to move to the island.
Ahead of Mr Le Tocq taking charge it was reported at the end of October that Guernsey's Commerce and Employment Department had received more than 50 relocation enquiries from off-island businesses and individuals. Of these, five translated into actual relocations, with an additional 25 remaining live and investigating locating to Guernsey. In these instances, Locate Guernsey will assist by providing advice requested by enquirers and, if required, facilitate meetings and introductions to governmental and other contacts.
Across all the key pillars of our industry there have been positive stories to tell and examples of our standing within the mainstream of international finance.
One of the most demonstrable instances came in May when KPMG published its report, International Capital Flows. The report reinforced Guernsey's reputation as a leading funds domicile after revealing the extent to which the island facilitated the flow of capital globally, including £105 billion of investment in Europe – 49 percent of which originates from investors located outside Europe itself.
The report highlighted Guernsey as an integral conduit facilitating the raising of capital from investors in different countries, subsequently allowing for the redeployment of this capital into global assets. The report emphasised the fact that global investors are comfortable utilising Guernsey structures, in large part due to the island's reputation, regulatory track record and high standards of transparency. Similarly, it reaffirmed Guernsey's particular expertise in alternative investment assets – a key asset class for many investors.
This was followed in July by the European Securities and Markets Authority (ESMA) announcing its recommendation to grant Guernsey a 'third country' passport under the Alternative Investment Fund Managers Directive (AIFMD). Guernsey is one of only three jurisdictions to receive the recommendation, which, if approved by the European Commission, Parliament and Council in 2016, would further enhance Guernsey's position to distribute funds into Europe.
Guernsey has had its own opt-in equivalent AIFMD regime fully operational since 1 January 2014 in order to demonstrate the high standards that its funds industry works to, but the ESMA recommendation would further solidify this position and enable Guernsey to operate on a level playing field with its European counterparts once approved by the relevant European authorities – expected sometime in 2016.
Within the ESMA advice the strong relationship between Guernsey's fund industry and the European marketplace was evidenced in data that showed Guernsey was the third largest non- EU fund domicile, behind the US and Cayman Islands, for the number of non-EU Alternative Investment Funds (AIFs) and non-EU Alternative Investment Fund Managers (AIFMs) marketing into the EU Member States of the UK, Ireland, Sweden, the Netherlands, Luxembourg, Finland, Denmark and Belgium for the ninemonth period up to March 2015.
OECD Convention extension
In August, a clarification from the Organisation for Economic Cooperation and Development (OECD) clarification, agreed by the UK's HM Treasury and Ministry of Justice, about Guernsey's position within the OECD further reinforced our standing within the funds arena.
The statement, agreed to inform EU and EEA authorities of Guernsey's position, states that: "The OECD Convention was extended to Guernsey on 20 July 1990. This means that the OECD Convention applies to Guernsey and it is part of UK's membership of the OECD. OECD decisions and recommendations apply to the same extent to Guernsey as they do to the UK."
The clarification over whether or not a fund's domicile is in the OECD has become increasingly important in order to meet requirements of certain market regulators. For example, in some jurisdictions there are prohibitions on the marketing of funds which do not originate from an OECD country.
More positive news for the funds sector came in Q4 with confirmation that two funds were re-locating to Guernsey. VinaCapital Vietnam Opportunity Fund migrated its domicile from the Cayman Islands, while SafeCharge International Group Limited relocated its fund domicile from the British Virgin Islands. In explaining their decisions, both funds said Guernsey's well-established infrastructure for the administration of funds listed on the London Stock Exchange (LSE) was a key factor, as was the fact that having a Guernsey domicile would enable the company to enjoy greater exposure to potential investors.
Our banking sector has also been boosted in recent months. Firstly, when the island's newest bank, FNB Channel Islands (FNBCI), officially opened for business in July. FNBCI, the Guernsey branch of FirstRand Bank Limited – South Africa's largest banks by market capitalisation – enhances FirstRand's presence in Guernsey as it already provided a wide range of fiduciary services through FNB International Trustees Limited.
This was then followed by ABN AMRO's announcement at the end of September that it was to transfer its Jersey private banking business to the Guernsey subsidiary.
A fit for fintech
In addition, last year saw Guernsey positioning itself to take advantage of opportunities in the digital age. A strategy document to guide the future of Guernsey's fintech sector was published by PwC and our Commerce and Employment Department in July. The paper included analysis of the Guernsey and international environment within the fintech sector to identify key market attributes and the future direction and involvement of local and off-island industry experts and stakeholders.
In Guernsey's favour is the fact that it is so well connected to the rest of the world, sitting at the centre of a hub of subsea fibre cables linking the UK with the Americas, Europe, the Middle East and Africa. This ensures Guernsey possesses the highly secure data connectivity, resilience and cyber security that the global finance sector and e-gaming industries require. The GFSC's open door policy with fintech entrepreneurs also enables the Commission to work with practitioners to develop new regulatory responses where they are required to meet the needs of innovative products and emerging markets.
Company Law updates
In a move that impacts all sectors, updates to Guernsey's Company Law came into force at the beginning of September. Changes in legislation and associated regulations had made amendments to the Law necessary in order to address practical issues and to ensure that Guernsey remains a highly regarded and competitive jurisdiction.
Amendments were designed around feedback from industry users and now include companies being able to register an alternative name in a non-roman script i.e. using foreign characters. Feedback from industry and practitioners is that the amendments have made a number of administrative processes more straightforward and corporate actions such as amalgamations, migrations and takeovers more efficient.
What is clear from this small snapshot of just some of the developments in the recent past is that Guernsey's finance industry continues to thrive and develop. This is most definitely an exciting and challenging time. Modern finance requires a combination of effective regulation, a robust AML regime, global standards of transparency, and an industry that delivers real substance, excellent advice and high quality service, within a stable political, financial and legal environment. Our continuing success is testimony to our ability to deliver consistently on all of these.
An original version of this article was published in the eprivateclient Special Review – Guernsey 2016 report, January 2016.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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