Worldwide: Channel Islands Funds Quarterly Update: Q1 2019

1 Developments in the Channel Islands

1.1 Channel Islands removed from Annex II – the so called "grey list"

On 12 March 2019, EU Finance Ministers (ECOFIN) formally confirmed that Guernsey and Jersey have been removed from Annex II - the so called "grey list" - and judged to be cooperative tax jurisdictions.

Jersey's Minister for External Relations, Senator Ian Gorst, commented on the ECOFIN announcement: "Jersey has consistently maintained that we are a jurisdiction of substance, and we have worked quickly and effectively to introduce economic substance legislation, meeting a commitment made to the Code Group in November 2017. I welcome the decision today by ECOFIN to remove Jersey from Annex II, reaffirming our reputation as a cooperative and well-regulated jurisdiction that is committed to the development of new international standards in fair taxation."

Deputy Gavin St Pier, Guernsey's Chief Minister said: "I welcome this decision. I was confident that any objective process would produce this outcome.  We have consistently maintained as a matter of fact, that we are a jurisdiction of substance."

We have monitored developments relating to the new substance law very carefully. Our briefings on the topic can be accessed here for Jersey and here for Guernsey.

Back to top

1.2 New European Investment Fund Policy

The European Investment Bank (EIB) Group published its updated policy on 25 March 2019, replacing an interim approach that was in place whilst the EU Code of Conduct Group on Business Taxation undertook a comprehensive screening process to assess non-cooperative tax jurisdictions. The new policy provides some welcome clarity around Jersey's ability to continue to support the objectives of the European Investment Fund (EIF).

With ECOFIN having formally confirmed Guernsey's and Jersey's positions as cooperative jurisdictions, the new EIB policy confirms that there should be no impediment to private equity firms in Guernsey or Jersey continuing carrying out 'business as usual' with the EIF.

Back to top

1.3 Brexit and the Channel Islands

On 11 March 2019, the JFSC signed a Memorandum of Understanding (MoU) with the Financial Conduct Authority (FCA) to allow funds domiciled in Jersey to continue to market to UK investors through private placement if EU law ceases to apply (in the UK in the event of a 'no deal' Brexit or at the end of any transitional period.) The MoU gives fund managers added certainty around accessing UK investor capital through Jersey in the lead up to Brexit and post Brexit. 

The European Union (Amendment – Withdrawal Agreement) (Jersey) Regulations 2019 came into force on 13 March 2019 which makes it clear in Jersey law that if a Withdrawal Agreement is concluded between the UK and the EU, the arrangements will apply to Jersey during any transition period only in so far as they apply now (via Protocol 3 of the UK's accession treaty).

The Guernsey Financial Services Commission (the GFSC) signed a similar MoU with the FCA on 12 March 2019.

Back to top

1.4 Global Financial Innovation Network expands

The Global Financial Innovation Network (GFIN) was established last year between the GFSC and eleven other financial regulators and related organisations.  GFIN has since grown to an international group of 29 organisations, with the JFSC announcing that it had joined GFIN in 31 Janauary 2019.

GFIN offers businesses a new and practical way to work with financial regulators to scale new products, services and business models. It provides these companies with the ability to test different innovations simultaneously in multiple countries, which will give real-time insight into how a product or service might work in a particular market.

The GFSC continues to be involved in the network's leadership by sitting on the GFIN's coordination group and is one of the GFIN members participating in cross-border trials. The JFSC's membership consolidates the Channel Islands' leadership in responding to rapid technological developments with an agile and collaborative approach to regulation.

Back to top

2 Global developments impacting Channel Islands vehicles

2.1 AIC Code

The Association of Investment Companies (AIC) has published a draft revised AIC Code, which applies to accounting periods beginning on or after 1 January 2019 and is intended to enable boards to satisfy any requirements they may have in relation to the 2018 UK Corporate Governance Code. The AIC Code has been endorsed by the Financial Reporting Council and the GFSC and is supported by the JFSC.

You can read our Q&A on the new AIC Code and implications for London Stock Exchange-listed offshore companies here.

Back to top

3 Jersey Developments

3.1 Feedback on consultation on changes to Codes of Practice

On 22 March 2019, the JFSC published a feedback paper relating to its consultation on proposed amendments to the Codes of Practice (including those applicable to funds and service providers) to address regulatory concerns and to ensure compliance with international regulatory standards.

The feedback paper published by the JFSC outlines that there is appetite to commence the alignment of the Codes of Practice process and this will therefore form a separate feedback paper which will be published shortly.

Amended Codes of Practice (in the form consulted on, save for the changes described in the feedback paper) will be issued shortly and come into force on 1 June 2019. The principal changes that fund managers will need be aware of include:

  • a registered person will no longer permitted to indemnify any other person (including a principal person such as a director) from a financial penalty imposed by the JFSC under its civil penalties regime; and
  • the JFSC will generally expect to see "run off" PII cover covering a period of not less than three years where a fund service business is being wound up.

Back to top

3.2 Consultation on civil financial penalties

On 21 January 2019, the JFSC published a consultation on Civil Financial Penalties: Revised Statement of Principles and Processes. The consultation relates to proposals to revise the JFSC's Statement of Principles and Processes for civil financial penalties. The closing date for responses is 12 April 2019.

Back to top

4 Guernsey Developments

4.1 Guernsey features in new United Nations green and sustainable finance report

Guernsey is part of an international movement towards a low-carbon economic model, highlighted at a high-level conference on sustainable finance which took place in Brussels on 21 March 2019.

The conference has seen the publication of a report, Shifting Gears, by the United Nations' Financial Centres for Sustainability (FC4S) network, which seeks to stimulate action among financial centres in the development of green and sustainable finance.

Guernsey is one of 22 financial centre members of FC4S and the report highlights the process all are making.

FC4S now wants to pursue strategic action from member centres, mobilise their skill to channel capital flows to areas of greatest need, and provide a connection between decentralised action from financial centres and key international policy initiatives.

Back to top

4.2 Handbook on Countering Financial Crime and Terrorist Financing

The GFSC issued the revised Handbook on Countering Financial Crime and Terrorist Financing (the Handbook), in final form on 12 March 2019.

Publication of the Handbook follows the approval of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) (Amendment) Ordinance, 2018 by the State of Guernsey during December 2018.  The revisions to the rules and guidance in the Handbook, together with the revised legislation, bring the Bailiwick of Guernsey's framework for combatting money laundering and terrorist financing into line with international standards issued in 2012 by the Financial Action Task force, as well as addressing recommendations made by MONEYVAL following its mutual evaluation of Guernsey.

The rules and guidance in the Handbook were formally made by the GFSC on 1 March 2019 and will came into effect on 31 March 2019.

GFSC on 1 March 2019 and will came into effect on 31 March 2019.

Read our briefing on the handbook here.

Back to top

4.3 Discussion Paper on proposal to create a single Fiduciary Handbook and revise Pension Rules

The GFSC has recently issued a discussion paper seeking feedback on potential enhancements to the regulatory framework under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000 (as amended) (the Fiduciaries Law) with the objective of ensuring that the regime continues to comply with international standards, while remaining appropriate for the Guernsey market.

The discussion paper makes proposals for the revision and consolidation of elements of policy framework underlying the Fiduciaries Law, specifically:

  • the strengthening and reframing of codes of practice as a single fiduciary rulebook, in line with the Group of International Financial Centre Supervisors Standard on the Regulation of Trust and Corporate Service Providers; and
  • revision of The Pension Licensees (Conduct of Business) & Domestic and International Pension Scheme and Gratuity Scheme Rules (No.2) 2017 (the Pension Rules) to reflect industry feedback and consolidation of the conduct of business elements of the existing Pension Rules within the new single fiduciary rulebook, eliminating elements of duplication.

The deadline for responses to the discussion paper is 30 April 2019 and responses will be considered by the GFSC with a view to consulting on the detailed policy proposals in due course.

Back to top

4.4 Nominated Officer

The GFSC has ceased to require notice of any change to a firm's Nominated Officers from 28 February 2019.

Any person who has taken up a Nominated Officer appointment or ceased to hold such a position from 28 February 2019 is no longer required to complete an Online PQ or Online Appointment.  However, firms are reminded that they must continue to inform the Financial Intelligence Service within 14 days of any change of Nominated Officer.

This change was made in preparation for the effective date of the revisions to the Bailiwick of Guernsey's Anti-Money Laundering and Countering the Financing of Terrorism regime (see 4.2 above) and which does not require notice of such appointments to the GFSC.

All existing and active Nominated Officer appointments recorded on the GFSC's PQ Portal will be deactivated.

Back to top

4.5 Fourth quarter investment statistics 2018

The net asset value of total funds increased by £1.7 billion to £281.7 billion with the net asset value of private equity funds in the island passing £120 billion for the first time in the third quarter of 2018.

Guernsey-domiciled closed-ended funds experienced a quarterly increase of £4.2 billion, which represents an increase of £9.9 billion over the year since 31 December 2017, evidence of Guernsey's ability to continue to offer a good-value, high-quality and pragmatic service in an era when general partners are being increasingly asked to cover a greater share of launch costs.

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
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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