Guernsey Reviews Collective Investment Scheme Rules

by Jason Gorringe, Tax-News.com, London

15 February 2012

The Guernsey Financial Services Commission has published a consultation document on new rules to be placed on 'Class B' Collective Investment Schemes.

While the Collective Investment Schemes (Class B) Rules 1990 have been subject to various amendments they have not previously been the subject of a detailed review. In light of recent amendments made to the rules relating to Class A open-ended collective investment schemes in Guernsey and the introduction of rules covering authorized closed-ended investment schemes and registered collective investment schemes, the Guernsey FSC said it considered it appropriate to conduct a review of the existing rules.

Class B schemes are the most common form of open-ended collective investment schemes regulated by the FSC, ranging from retail funds aimed at the general public via institutional funds to the strictly private funds established for a narrow range of investors; their investment objectives and risk profiles are similarly wide-ranging.

As a result of the broad implications of a rule change, the Commission appointed a working party, consisting of members of the investment fund sector, legal practitioners and Commission staff, to undertake the review.

The Commission underscored that the new, draft Rules continue to place emphasis on sufficient disclosures being made in the principal documents and scheme particulars that are available to investors, rather than using prescriptive requirements for issues such as investment and borrowing restrictions, and investors being given sufficient time after notification of a change to the operation or management of the scheme to redeem their holdings should they wish to do so.

The draft Rules continue to provide the Commission with powers to disapply any of the rules where it is satisfied that compliance with the provisions is not necessary in the interests of investors. In addition various provisions that required the Commission’s formal statement of approval (or an equivalent) have been removed and replaced by notification requirements instead.

The draft Rules, expected to enter into force during the second quarter of 2012, will become mandatory for all schemes authorized as Class B Collective Investment Schemes under the Protection of Investors (Bailiwick of Guernsey) Law, 1989, as amended.

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