New Guernsey Fund Consent Regime Comes Into Force

by Philip Morton, Investors Offshore.com

01 February 2007

Earlier this month, the Guernsey Financial Services Commission announced that it was consulting on proposals to streamline the consent process for closed-ended investment funds. Following the conclusion of the consultation period, the new regime will come into force today.

The main thrust of the framework is that the Commission will grant the required fund consent under the Control of Borrowing Ordinances within three working days, provided that an appropriately licensed Guernsey service provider has certified to the Commission that:

• They have performed sufficient due diligence to be satisfied that the promoter and associated parties are fit and proper;
• Effective procedures are in place to ensure that the fund is not offered directly by the issuer to the public within the Bailiwick of Guernsey. For the purposes of this framework the public means any person not regulated under any of Guernsey’s financial services regulatory laws; and
• The status of the Registered Closed-ended Investment Fund is specifically referred to in the prospectus, offering document or equivalent such that neither the Commission nor the States of Guernsey Policy Council have reviewed the prospectus, offering document or equivalent and that neither the Commission nor the States of Guernsey Policy Council takes any responsibility for the financial soundness of the fund or for the correctness of any of the statements made or opinions expressed with regard to it.

The introduction of the Registered Closed-ended Investment Fund regime today means that applications by closed-ended investment funds for consent under the Control of Borrowing can be made in one of three ways:

1. The three stage consent process by which the Commission assesses the application in detail;
2. The Qualifying Investor Fund regime, which is restricted to investment funds aimed at professional, experienced and knowledgeable investors as defined;
3. The Registered Closed-ended Investment Fund regime as referred to in this press release.

The specific issue of Principal Managers of open-ended collective investment schemes authorised under the Protection of Investors Law is not a matter that requires either legal changes or the revision of formal regulatory rules, as it is a matter of Commission policy.

In light of industry support for this proposal the Commission announced this week that, with effect from Thursday, there will not be any Guernsey regulatory requirement to establish a Principal Manager in connection with an authorised open-ended collective investment scheme.

The question of whether such an entity will be established in Guernsey will become solely a commercial issue for the promoters of the relevant scheme.

A Principal Manager established in Guernsey will continue to require licensing under the Protection of Investors Law and, in this respect, applications for new Principal Managers will need to be made as necessary.

Peter Neville, Director General of the Guernsey Financial Services Commission announced that:

“These new arrangements, which take on board proposals outlined by the Harwood Report, demonstrate once again the benefits of effective co-operation with the investment fund industry. Our action also shows that the Commission is willing to make changes as soon as we can, once they have been agreed. Taken together with the record number of investment fund applications processed by the Commission during 2006 these changes to Commission policy demonstrate the commitment we have to the continuing strength of the Guernsey investment fund sector”.

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