Guernsey is a premier jurisdiction for investment funds and private equity business. The island's reputation, location, tax neutral status and innovative approach continues to attract leading investment managers.
Guernsey's funds, investment managers, advisors and fund administrators are regulated by the Guernsey Financial Services Commission (GFSC) under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (the PoI Law).
Under the PoI law, managers, advisors and administrators (licensees) are required to be licensed to conduct certain investment business activities in or from within the Bailiwick of Guernsey1 (restricted activities2) in relation to most collective investment schemes (ie funds) and other investments (controlled investments3).
The attributes of a collective investment scheme subject to regulation under the PoI Law, in broad terms, are:
- the pooling of investments by investors
- the spread of risk by the scheme
- the management of the assets of the scheme by a third party
Where any one or more of these attributes are absent, the scheme itself will not be a controlled investment and so will not be subject to regulation under the PoI Law.
In order for a licensee to carry on any restricted activity in relation to category of open- or closed-ended collective investment scheme, the licensee must ensure that the fund is either authorised or registered by the GFSC under the rules applicable to an appropriate class of fund.
Classes of Authorised and Registered Funds
Authorised funds are authorised by the GFSC after a substantive review of the fund's terms, promoters and licensees and a determination of their suitability by the GFSC.
Registered funds are registered by the GFSC following the submission by a Guernsey licensed administrator of a representation that the fund is suitable for registration, having considered the fund terms, its promoter and licensee. In this case the administrator takes the role of the GFSC in monitoring the fund on an ongoing basis.
The current classes of fund (with the relevant scheme rules referred to in the footnotes below) are:
|Authorised||Closed Ended||Open Ended|
|Authorised Closed-Ended Fund4||Class A Fund5|
|Class B Fund6|
|Class C Fund7|
|Registered||Closed and Open Ended Funds|
|Registered Collective Investment Scheme (RCIS) Fund8|
|Private Investment Fund9 (PIF)|
|Manager Led Product10 (MLP)|
In addition, any authorised or registered fund can apply to be designated as a Guernsey Green Fund if it meets the relevant green investment criteria, comprising The Common Principles for Climate Mitigation Finance Tracking11.
Each authorised or registered collective investment scheme will require a Guernsey licensed administrator (called a designated manager or designated administrator in the Rules) and all open-ended schemes, other than hedge funds, will require a Guernsey licensed custodian.
Hedge funds can apply for a derogation from the need for a Guernsey licensed custodian, provided they have a suitable non-Guernsey domiciled custodian.
In addition, each PIF will require a Guernsey licensed PIF Manager and is limited to a maximum of 50 investors at any one time but is not required to have a prospectus.
Timings for grant of authorisation or registration
PIF and MLP: 1 day
RCIS Funds: 3 days
Class A Fund: 4-6 weeks
Class B, Q and closed-ended (non-QIF): 4-6 weeks
Class B, Q and closed-ended (QIF12): 3 days
Formation and Regulatory Fees
A table of application, annual and notification fees payable in respect of the fund's authorisation or registration are attached at annex 4. In addition to these there will be the statutory fees applicable for establishing and maintaining the vehicle, which will depend on the type of vehicle and service provider chosen, plus professional fees. We would be very happy to supply this further detail on request.
Our Investment Funds team have put together an FAQ as a useful guide to Guernsey hedge funds. Read the FAQ here.
1 The Bailiwick of Guernsey includes the islands comprising Guernsey as well as the islands of Sark and Alderney
2 Listed in Schedule 2 of the PoI Law – as reproduced in annex 1 below
3 Listed in Schedule 1 of the PoI Law – as reproduced in annex 2 below
4 The Authorised Closed-Ended Investment Scheme Rules 2008
5 The Authorised Collective Investment Schemes (Class A) Rules 2008
6 The Authorised Collective Investment Schemes (Class B) Rules 2013
7 The Authorised Collective Investment Schemes (Qualifying Professional Investor Funds)(Class Q) Rules 1998
8 The Registered Collective Investment Scheme Rules 2018 and The Prospectus Rules 2018
9 The Private Investment Fund Rules 2018
10 MLP Guidance Notes 2016 only currently
11 See annex 3 for details of the criteria
12 Qualifying Investor Fund – a self-certification by the investors pursuant to a 2007 GFSC Guidance Note – Qualifying Investors are professional investors, knowledgeable employees and experienced investors
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.