Originally Published in Investor Services Journal, June 2007
Guernsey’s fund industry is in 2007 continuing to experience the growth that was the hallmark of 2006 and in particular there has been significant interest from fund promoters and sponsors in the Island’s new registered closed-ended funds regime. Indeed, already 32 such funds have been given consent by the Guernsey Financial Services Commission (GFSC) since its introduction on 1 February this year.
The ‘registered fund’ regime streamlines the consent process – making domiciling funds in the Island simpler and quicker – by shifting the burden of responsibility for reviewing the promoter and the investment manager and the prospectus or admission document from the GFSC to the proposed Guernsey licensed fund administrator.
The main thrust of the registered closed-ended funds framework is that required fund consent will be granted within three working days (72 hours) provided that a Guernsey licensed fund administrator has certified to the Commission that:
It has performed sufficient due diligence on the promoter;
The fund is not offered directly to the Guernsey public; and
The status of the fund is specifically referred to in the prospectus.
The introduction of the registered closed-ended investment fund regime means that applications by closed-ended funds for consent can be made in one of three ways:
The three stage consent process by which the Commission assesses the application in detail;
The Qualifying Investor Fund (QIF) regime, which is restricted to investment funds aimed at professional, experienced and knowledgeable investors; and
The new registered closed-ended investment fund regime
The new regime might not be appropriate for funds where the Commission’s usual consent process is required by another regulator, for example, the Dutch AFM when a fund lists on Euronext.
Yet, as the only investor qualification requirement is that the fund is not marketed to the Guernsey public, listed CREST/Euroclear traded funds can be launched as Guernsey registered funds without the practical difficulties associated with establishing the qualification of the relevant investors which apply to QIFs.
The new registered closed-ended funds regime has its origins in the root and branch review of investment sector legislation that was conducted by a working party under the stewardship of leading Guernsey advocate Peter Harwood. It made a series of recommendations to enhance the environment for conducting funds business in the Island, including the categorisation of funds into ‘regulated’ and ‘registered’ funds, and the remainder of which will come on-stream later in 2007 and into early 2008.
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