Report Recommends Changes To Guernsey Fund Sector

by Robin Pilgrim, LawAndTax-News.com, London

09 June 2006

The report of a Committee chaired by Advocate Peter Harwood, tasked with ensuring the continuing health of Guernsey's investment sector, was published this week, and recommends some fundamental changes to regulatory laws.

The committee was appointed in 2005 to consider investment sector legislation and regulation and to report to the Guernsey Financial Services Commission and to the Commerce and Employment Department.

The key recommendation made by the Committee's report is to create a "registered" fund sector, alongside the existing "regulated" sector. Unlike regulated funds, registered funds would not need prior approval from GFSC.

The report suggests that the same framework should apply to both open and closed end funds, which should be subject to a dedicated Funds Law, leaving the existing Protection of Investors Law to deal with other aspects of investment business.

It also recommends that public offers should be made subject to specific Prospectus legislation, rather than to the current Control of Borrowing regime, and that provision of services to certain funds domiciled outside Guernsey should also be liberalised.

The report additionally recommends that definitions of investment business in the POI Law be reviewed, that economic benefit should be abandoned as a criterion for licensing investment firms, and that some of the sets of rules made under the POI Law should be merged.

The report further reflects on the importance of expanding Guernsey's intellectual capital by attracting new service providers in areas other than fund administration, and notes the significance of personal tax rules and housing policy in achieving those objectives.

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

"We very much welcome the proposals put forward in the Harwood Committee report. Streamlining authorisation and licensing processes will benefit: the investment sector by allowing faster responses; the Commission by letting its dedicated staff extend their monitoring of licensees rather than on pre-vetting funds; and Guernsey in general by ensuring that the service delivered by Guernsey investment firms continues to support and enhance our established reputation."

"Recent trends have seen new businesses - stockbrokers, asset managers and private wealth managers - outside the pure funds sector establish themselves here in Guernsey. We also endorse the report's recognition of the importance of expanding the widest range of investment activity in Guernsey."

"Once we have seen how the investment sector responds to the consultation, we look forward to working with them, with the Finance Sector Group and the Department of Commerce and Employment to bring about agreed change as soon as possible."

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