Substance in the fund management sector, particularly in the
context of the Alternative Investment Fund Managers Directive
(AIFMD) and Base Erosion and Profit Shifting (BEPS) initiative, is
of increasing importance, a newly-published white paper has
The Guernsey Finance white paper
Investment funds - why substance is key, written by funds
journalist Kirstie Brewer, examines how the need to prove that an
offshore fund manager has the necessary 'substance' to its
business dealings and functionality has never been more acute,
particularly in the context of the current climate of regulatory
reforms and politically-motivated improvement of tax transparency.
The white paper looks specifically at what substance is, where it
came from and how to get enough of it.
Guernsey Finance Chief Executive Dominic Wheatley said it was
clear that substance requirements were going to be of the utmost
importance in the years ahead, particularly with the growing raft
of regulation and international policy initiatives. The recent
recommendation from the European Securities and Markets Authority
(ESMA) that Guernsey should be granted a 'third country'
passport under AIFMD was further proof that the Island is ready to
meet those requirements.
"Guernsey has now come in the top tier of two successive
ESMA reviews of third countries and these, together with the recent
review by MONEYVAL, demonstrate the quality of financial services
regulation in Guernsey. The Island was also one of only five
jurisdictions to receive an unqualified and positive assessment
from ESMA in its most recent advice," said Mr Wheatley.
"This clearly offers a greater degree of certainty for
investment managers utilising Guernsey for funds which are then
sold into the European Union. Unlike some other jurisdictions,
Guernsey has a financial services industry with substance where
governance and administrative functions are performed within the
Island to a level that meets not only the demands of international
regulatory standards but also the expectations of the
Gavin Farrell, Partner at Mourant Ozannes in Guernsey, explains
in the white paper that Guernsey offers a very strong substance
"From a Guernsey regulatory and structural perspective we
provide the substance that is required for the management and
running of the Guernsey entities, both the products and their
management companies. Not only because we have all the service
providers in Guernsey - custodians, administrators, lawyers, banks
and accountants - who provide live services to those entities but
also because the individuals appointed at the board level are very
credible individuals and under a regulatory burden and scrutiny to
exercise their managerial and fiduciary duties," said Mr
* The white paper, 'Investment funds - why substance is
key', can be viewed
here. It was written by funds journalist Kirstie Brewer,
formerly the Investment Editor at hedge fund trade publication
HFMWeek, who has expertise in the alternative investment fund
management sector and corporate governance.
Observing a recent discussion between the children of a successful entrepreneur, I was reminded once again of the potential impact of family members being provided with differing information about the family enterprise.
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