The Guernsey Financial Services Commission (GFSC) in February 2005 introduced a 3 day approval process for establishing "qualifying investor funds" in Guernsey
- The streamlined authorisation process reduced the authorisation time scales which used to apply from 4 to 6 weeks to less than 3 working days.
- QIFs can be established as openended funds or closed-ended funds under the existing regulatory regimes.
- QIFs can be established as single or multi-class unit trusts, investment companies, protected cell companies or limited partnerships.
- QIFs will only be offered to "qualified investors".
- The QIF’s Guernsey administrator must be able to certify compliance with the GFSC’s QIF requirements. Approval will be given by the GFSC on the basis of the administrator’s self-certification.
- The Guernsey administrator will have an ongoing responsibility to monitor compliance with the matters it has self-certified and to ensure its rationale for the selfcertification is clearly documented.
- The GFSC will consider derogations in relation to the rules relating to the relevant classification of investment fund subject to it having sufficient notice before the QIF application.
GFSC Guidance Note
The criteria which must be met in order to establish a QIF in Guernsey is set out in an updated GFSC Guidance Note dated April 2006.
The Guidance Note introduced a one page application form (Form QIF). The form is a one page confirmation from the administrator that the QIF complies with the requirements of the Guidance Note.
The application process also enables administrators to process applications from newly formed promoters.
Definition Of A Qualified Investor
A "qualified investor" is defined as a "professional investor", an "experienced investor" and/or a "knowledgeable employee".
Definitions of the different classifications of investors are referred to as including:
a) a "professional investor": is a person whose ordinary business or professional activity includes underwriting, managing or acquiring investments whether as principal or agent or the giving of advice on investments. It also includes an individual investor who makes an initial investment of not less than US$100,000 or equivalent. The definition also includes financial services businesses or financial service professionals associated directly or indirectly with the operation of the QIF;
b) an "experienced investor" is a person who has in any period of twelve months (or in the course of employment by another person) so frequently entered into transactions of a particular type in connection with investment funds or general securities and derivatives of a substantial size with, or through the agency of, reputable persons who carry on investment business, that he can reasonably be expected to understand the nature of, and the risks involved in, investments of that kind. Alternatively, this requirement is satisfied if an appropriately qualified investment adviser confirms that the investor has obtained "independent advice";
c) a "knowledgeable employee" is: any employee, director, partner or consultant of an appropriately qualified "professional investor" or anyone who has fulfilled such a role within a period of 3 years up to the date of the application for investment in the QIF. The term "employee" will not cover, inter alia, clerical, secretarial or administrative roles. A "knowledgeable employee" will also include any employee, director, general partner, consultant or shareholder of an affiliate appointed by the QIF to advise, manage or administer the investment activities of the QIF and whose investment in the QIF is part of his remuneration or incentive arrangement or co-investment in the QIF.
The GFSC requires a representation to be made by the relevant investors in the application form that the requirements described above in relation to the definition of a "qualified investor" have been satisfied. These requirements are also set out in the Guidance Note.
Promoters And/Or Investment Managers Of QIFs
The administrator also needs to certify in relation to the promoter and/or investment manager of the QIF that it is of sufficient "good standing". Applications for newly formed promoters/investment managers will also be acceptable, provided that the administrator is also able to certify the track record of the relevant individuals forming the new company.
The GFSC will also require that promoters/investment managers are "fit and proper". The basis of how the relevant promoter/investment manager will qualify as "fit and proper" is set out in detail in the Guidance Note.
Authorisation Of The Fund
The existing 3 stage process which applies to non-QIFs is reduced to one. QIFs will be required to submit the relevant offer document, form QIF, its constitutional and third party documents, a cheque in payment of the GFSC’s fee, the appropriate form APC/A/B/Q and the certificate required for certain classifications of funds.
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.