The principal law governing investment funds and licensees in Guernsey is The Protection of Investors (Bailiwick of Guernsey) Law, 1987 (the "POI Law"). This law was overhauled in 2008 primarily to bring the regimes for open and closed ended investment schemes under one law. New rules were published and came into force at the end of last year; the Authorised Closed Ended Investment Schemes Rules 2008; the Registered Collective Investment Scheme Rules 2008; and the Prospectus Rules 2008. The Authorised Rules cover not dissimilar ground to the existing rules for open ended investment schemes, e.g. the Class B Rules. A fund which is authorised is regarded as supervised at the highest level in Guernsey and must comply with the Authorised Rules if closed ended and the Class B Rules if open ended. (In respect of open ended investment schemes there are also the Class A Rules and the Class Q Rules which might be chosen in place of the Class B Rules). A fund which is registered under the Registered Rules is regarded as only lightly regulated in Guernsey. These rules cover both open and closed ended investment schemes.

The Prospectus Rules provide for the contents of, amongst other things, the prospectus for a registered investment scheme. They do not apply to schemes governed by the Authorised Rules, but rules relating to the contents of any prospectus for an authorised closed ended investment scheme will be found in the Authorised Rules and for an authorised open ended investment scheme in the relevant open ended rules, e.g. the Class B Rules.

In addition to collective investment schemes, the POI Law also covers licensees, in particular administrators and custodians of investment schemes based in Guernsey. To date the licensees have been supervised pursuant to the Licensees (Financial Resources, Notification, Conduct of Business and Compliance) Rules and the Collective Investment Schemes (Designated Persons) Rules. These rules also deal with the minimum required capital for licensees.

However, both those sets of rules are due to be revoked and replaced with the Licensees (Conduct of Business) Rules and the Capital Adequacy Rules. The first of those has been issued in draft form for the purpose of consultation and is available on the Guernsey Financial Services Commission website. Comments are sought by the close of business on 28 May, 2009.

The idea is to have a single set of rules covering responsibility of the board of a licensee for compliance and to provide for more appropriate client money rules. The rules also cover the conduct of business, record keeping, complaints, safe keeping of assets, conflicts of interest and notifications. There are also provisions concerning the categorisation of clients.

The draft rules do not however deal with capital requirements. It is anticipated that there will be further draft rules released for consultation later this year, i.e. the Capital Adequacy Rules.

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.