Guernsey FSC Launches Hedge Fund Consultation
by Robert Lee, Tax-News.com, London
19 November 2003

The Guernsey Financial Services Commission has issued a consultation document: ‘The regulatory framework for Hedge Funds in Guernsey’, setting out a range of practical issues which are faced by the growing number of hedge funds domiciled in Guernsey, and seeking views from interested parties on those issues and the solutions which may be available.

The growing use of Guernsey structures as vehicles for hedge funds has highlighted a number of areas where the existing investment fund framework can create problems. With this consultation paper the Guernsey Financial Services Commission seeks input from interested parties to the issues highlighted and the solutions which the Commission is prepared to consider.

The Guernsey Financial Services Commission recently issued guidance on the disclosure regime for closed-end investment funds. That guidance re-emphasised the flexible nature of the Commission’s approach. Guernsey domiciled closed-end funds are subject to Guernsey company law and the Control of Borrowing regime, and it is clear, from the closed-end hedge funds already established under those arrangements, that few structural problems arise.

In the open-ended sector, the position is more complex. Open-ended funds are subject to the Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended, (“POI”) and to rules and regulations made under that law. POI provides, inter alia, that all Guernsey open-ended funds must be authorised by the Commission - there is no provision for “unauthorised” funds – and that each fund must have a designated manager and a designated trustee or custodian.

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