Guernsey: Special Investment Business Update - Spring 1999

Last Updated: 22 April 1999
Article by David Archer
GUERNSEY REGULATION PASSES TEST OF UK REVIEW

Suggestions made by Mr Edwards (pictured right) in his report for changes to Guernsey's regulatory and legislative framework are being studied by special working groups set up by the banking, insurance, investment and fiduciary divisions of the Commission. Their investigations, along with the conclusions of the Commission, will be reported to a coordinating group established by the States of Guernsey Advisory and Finance Committee to oversee issues raised by the report. Membership of the group includes representatives of the Island Government along with Mr Peter Crook, the Commission's Director General, together with one of the Crown Officers.

Mr Crook says:

'We need to analyse carefully all of Mr Edwards' suggestions, several of which reflect a different approach, through a fresh and objective eye, to an existing successful operation. Whatever changes are deemed necessary by the coordinating group will be taken forward by the Commission as part of its existing development programme. During the next three years there will be several alterations to the Bailiwick's regulatory structure, not the least of which will be the introduction of significant new company and trust legislation.'

He adds: 'It should not be forgotten that some of the issues raised by Mr Edwards involve potential significant change to the UK's regulation of financial services. Some of his other suggestions for Guernsey were already in hand before his review was announced. This includes the up-dating of insolvency legislation, the regulation of fiduciary services and directors and the introduction of 'all crimes' money-laundering legislation. Other issues, such as whether the Commission should have political representation and the introduction of a separate enforcement division, had not been considered previously.' says Mr Crook.

The review by Mr Edwards, a former UK Treasury executive, was initiated by the UK Government. It looked at the laws, systems and practices for regulation; the combating of financial crime, and international cooperation by the international finance centres of the Bailiwick of Guernsey, the Bailiwick of Jersey and the Isle of Man. It was published on 19 November last in four volumes. The first volume contains Mr Edwards' own assessment of how the three Crown Dependencies meet the terms of the review. The remaining volumes were prepared by each of the insular authorities in consultation with Mr Edwards and serve as a professional's guide to the financial services available in and financial regulation of each territory. Mr Crook says: 'The tone and conclusions of the report are positive. There is, for example, favourable comparison with fellow OECD members and others, as can be seen from the following extracts. 'The Crown Dependencies have been very successful. They are clearly in the top division of offshore finance centres.' 'Compared with other offshore centres they have developed reputations for stability, integrity, professionalism, competence and good regulation.' 'The Islands' judicial and prosecution system have shown themselves well able to deal with international finance centre business.'

NEW DIRECTOR WILL OVERSEE REGULATION OF FIDUCIARIES

The Commission's long-held plans for the supervision of the trust and company administration sector of financial services businesses ill the Bailiwick have come closer to fruition with the appointment of Mr Talmai P. Morgan (pictured) as its first Director of Fiduciary Services and Enforcement. He will be mainly responsible for the introduction of a new regulatory regime for trust and company administration under pioneering legislation which the Commission is preparing in consultation with the Crown Officers and representatives from the finance sector of the economy.

Mr Morgan (46), who took up his duties in January, graduated from Cambridge University with an honours degree in Economics and Law before qualifying as a Barrister in London in 1976.

Subsequently he held various commercial appointments in London before moving to Guernsey in 1988 to work for Barings. He joined the Bank of Bermuda four years ago to head up their trust company.

Mr Peter Crook said:

'Mr Morgan's training and background make him ideally suited to supervise fiduciary business. His legal background will also enable him to provide invaluable support for the very occasional enforcement problem that may arise.'

FUNDS MARKETED IN SOUTH AFRICA

South Africa has become the latest country in which Guernsey funds rnay be marketed to the public following approvals granted by the republic's Financial Services Board. The approvals relate to a number of sub-funds of two Guernsey authorised Class A1 schemes. Mr Nigel Taylor, Director of Investment Business at the Commission, says:

'In 1998 the FSB of South Africa enacted new legislation which requires non South African fund promoters to obtain authorisation for their funds before they can be marketed to South African residents. Such funds have to meet certain criteria also applied to South African unit trusts.'

Mr Taylor explains that regular exploratory talks regarding the possibility of marketing Guernsey funds in South Africa had been held with the FSB for several years before 1998, and that the FSB had been supplied with detailed information about the Guernsey regulatory regime for funds.

'At the request of the Guernsey fund managers concerned, the Commission has provided the FSB with written confirmations regarding the authorised status of the Guernsey funds.' said Mr Taylor.

Guernsey retail funds can also be publicly marketed in Australia, Hong Kong, Ireland, japan, the Netherlands, Switzerland and the United Kingdom.

PROGRESS AT CISX

During February, the number of Listings on The Channel Islands Stock Exchange ("CISX") increased from three to eleven.

First there was the addition of Exeter Enhanced Income Fund Limited, a Secondary Listing of a closed-ended investment company, and second the Listing of seven Unit Trusts managed by Schroder Investment Management (Guernsey) Limited. Of these latter funds six were Secondary Listings, with one Primary Listing.

Ozannes Securities Limited sponsored the listing of Exeter Enhanced Income Fund Limited whilst Guernsey International Fund Managers Limited sponsored the listing of the seven Schroder funds.

As a consequence, the total value of securities listed on the Exchange is now in excess of US$2.5 billion.

Tammy Menteshvili, Chief Executive, says: 'The CISX is steadily developing and there have been a number of milestones. With regard to trading activity, the total volume of International Energy Group Limited shares traded on the CISX to date is in excess of 2.3 million shares.' 'Interest in utilising the listing and trading facilities of the Exchange continues to grow and further announcements will be made in due course.' Further information on the Exchange may be obtained from its web-site: www.cisx.com

MORE CAPTIVES ESTABLISHED IN GUERNSEY

Guernsey continues to remain an attractive location for the formation of new captives by non-UK parents. Among the latest is Contrex Insurance Limited set up by the IIR Group (Institute of International Research), based in the Netherlands and specialising in conferences, training, exhibitions and publishing.

IIR describes itself as the world's market leader in business conferences. Abigroup, a major Australian Construction Group, quoted on the Australian Stock Exchange, has established Abigroup Risk Management Services Limited. The parent has substantial government and private projects in Australia.

Among new captives with UK parents is one formed by Hiscox plc, a well-known group within Lloyd's, plus two others set up by major UK holiday and tour operators. One is Thomson Travel Insurance Services Limited which is owned by Thomson Travel Group plc and the other is Absolut Re Limited, owned by First Choice Holidays.

INTERMEDIARIES MUST BE REGISTERED

Legislation empowering the Commission to supervise the market conduct of those advising on and/or selling insurance products in Guernsey and Alderney is now in operation and is expected to be extended to Sark in the near future. The July 1998 amendment to the Insurance Business (Guernsey) Law, 1986, requires all insurance companies and intermediaries to be either registered or recognised by the Commission.

Registered insurers are those with a physical presence in the Bailiwick by having an office and/or agents. Those without a physical presence have to be recognised. All domestic insurance must be placed only with registered or recognised insurers. Since January, when the amended law came into operation, 51 domestic insurers have been registered.

The Commission has also received in excess of 50 insurance intermediary applications of which 33 have been registered. Applications from more than 110 recognised insurers have also been processed. Guidance notes and a Code of Conduct are available from the Commission.

MASTERS IN CORPORATE GOVERNANCE

Nine Guernsey students have gained the dual qualifications of MSc in Corporate Governance and Administration/Grad ICSA, the Civil Service Board and Finance Training Agency have announced. One of the nine, Joanne Luff, of Dresdner Private Banking, Kleinwort Benson, also received during the graduation ceremony at Bournemouth University, a prestigious Livery Award from the Worshipful Company of Chartered Secretaries and Administrators. The award was for the best performing student, including all UK students, on the course. Another successful student was Audrey Branch of the Commission's banking division.

Jane Walden, Deputy Training Manager at the FTA, said: 'All the students endured a demanding two year schedule of studies involving weekend lectures. It was the first Masters' programme delivered in the Island by a UK university. However, its success has attracted fifteen more students on the second run of the two-year programme.

There have been successes, too, for those studying for the Securities Institute Diploma. Against a general pass rate of 53% for the private Client Investment and Advice Module, Guernsey students gained a remarkable 78% with four students obtaining credit grades. This course was delivered for the first time on the Island by City of London trainers Hyperion, who were commissioned jointly by the Guernsey Fund Managers Association and the FTA. BPP Financial Education has since delivered a second, fund management module, that also leads to the diploma. Five other students have recently completed MSc courses in Corporate Governance and will graduate in November - a 100% pass rate.

PERSONALITY OF THE YEAR

Judges at the European Risk Management Awards gala evening held at the Dorchester Hotel, London, selected Steve Butterworth, Director of Insurance at the Commission, as the industry's personality of 1998. The judges commented that Mr Butterworth (pictured) is 'no ordinary regulator' and 'an obvious choice' for the award and he was complimented for promoting Guernsey world-wide and for his speeches at international meetings on captives, regulatory issues and the avoidance of insurance fraud.

EXTENSION OF POI LAW

Following a lengthy consultation process with representatives of the finance sector of the Guernsey economy and their professional advisers, the Protection of Investors (Bailiwick of Guernsey) Law, 1987 ("the POI Law") was extended with effect from 1 July 1998 to encompass "Category 2: General Securities and Derivatives" as controlled investments.

Prior to the extension, the only controlled investments under the Law were "Category 1: Collective Investment Schemes". This initiative was taken in order to further safeguard the interests of the investing public and the reputation of the Bailiwick as an international finance centre. Since 1 July 1998, the majority of existing licensees have applied for an extension of their licence and some 100 institutions have applied for a licence solely in respect of Category 2 controlled investments.

The Commission applies the same selection criteria to those entities carrying on Category 2 controlled investment business as Category 1 . Any entity now engaging, by way of business, in a "restricted activity" in connection with a "controlled investment" (as set out in Schedules 2 and 1 respectively to the POI Law) should be duly licensed. Enquiries in this respect should be addressed to the investment business division of the Commission.

SOLID DEPOSITS AT YEAR END

Total deposits held with Guernsey banks at the end of December 1998 reached a record level of £52,922 million. This is an increase of over 7% on the same time last year. The currency breakdown at the year- end was split 45% US dollars; 35% sterling; 14% currencies joining EMU and 6% other currencies.

The total number of banks at the year end stood stood at 78, the same number as at the end of 1997 but with a slightly different constituency of banks (as three new licences were issued during the year substituting three surrenders). Of the three new banks one was from Germany (Hamburgische Landesbank) and two from Greece (National Bank of Greece and Ergobank). The three banks surrendering these licences were two restructuring UK clearing banks (who reduced their number of bank licences by one each) and one subsidiary of a UK conglomerate which no longer wished to carry on banking business.

STATISTICS

The figures shown below give a brief statistical overview of the current status of the principal activities within Guernsey's financial services sector.

 78   Licensed banks                      Deposits £52.9bn

191   Open-ended investment schemes       Managed £10.5bn

202   Closed-ended investment schemes     Managed £5.2bn

349   Captive insurance companies plus    Total assets  £5.2bn*
 30   PCC cells

 13   Offshore life companies             Total assets £2.2bn*

*1997 figures

ELEVEN PCCS - THIRTY CELLS

Two new Protected Cell Companies ("PCCs") formed for insurance purposes during December brought the total number established during the year to eleven which, between them, have over 30 cells. Director of Insurance, Steve Butterworth, says: 'This demonstrates both confidence in and a continuing high level of interest in our innovative PCC legislation which, since its introduction in 1997, has been reviewed and strengthened.' Among companies who incorporated PCCs last year were Guardian Insurance, and Benfield and Polygon as a joint venture. Later entrants were sponsored by Chubb and Swiss Re New Markets. Under the name of European Credit & Guarantee Insurance PCC Limited, Swiss Re, in conjunction with Winterthur, through Xenum Finance, will insure credit and surety and related classes of insurance and reinsurance. Chubb intend to use Foundation Reinsurance PCC Limited to offer their corporate clients a structure which will lower their total cost of risk, retain elements of their traditional insurance programmes and finance risk not easily insurable in the conventional market.

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
 
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