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In
its Annual Report for 2003, the Guernsey Financial
Services Commission (GFSC) drew attention to
the publication during the year of the International
Monetary Fund's (IMF) report on the Bailiwick's
financial regulation and criminal justice framework,
revealing that Guernsey was assessed by the
IMF to have a high level of compliance with
international standards of regulation in banking,
insurance, securities, trust and company service
provision, anti-money laundering and combating
the financing of terrorism.
Additionally,
the report announced that during 2003, the Commission
was involved in a number of initiatives with
industry, working to ensure that the Bailiwick
maintains its competitive edge whilst adhering
to recognised standards. Director general of
the GFSC, Peter Neville observed that: "2003
was a very good year for the Commission. We
received an excellent IMF report, which commended
our high regulatory standards. These same standards
were cited by Robert Finch, the Lord Mayor of
the City of London, as good reason to do business
with the Island and he acknowledged that we
stand alongside the City in terms of our integrity,
innovation and standards of service."
In
March, 2004, the Financial Services Commission
issued a statement on anti-money laundering
standards for existing customers following the
issue of revised Recommendations by the Financial
Action Task Force in 2003. The statement requires
financial services businesses to assess the
risk of each business relationship and to make
sure that they have customer due diligence information
appropriate to the level of risk.
It allows businesses in the financial services
sector to consider whether simplified or reduced
information is appropriate for low risk businesses
and lower risk customers. This could mean for
example, locally resident retail customers who
have a relationship which is understood by the
financial services business.
"The
Commission has worked with the Guernsey Joint
Money Laundering Steering Group, which contains
representatives from across the finance sector,
in developing this new statement,” explained
Peter Neville. “The
statement extends the existing flexibility provided
by the Commission's Guidance Notes on the Prevention
of Money Laundering and emphasises that unnecessary
demands on lower risk customers should be avoided,"
he added.
The Commission said that it was not issuing
more detailed recommendations at that stage
on how the FATF standard should be applied in
practice. It further announced that it intended
to consult with industry by way of observation
during on-site visits and by way of discussions,
to develop such recommendations for inclusion
in the revised Guidance Notes. A revised version
of the Guidance Notes was to be issued only
after full consultation with industry and the
other Crown Dependencies.
Following
discussions between the IMF and the Commission
at the end of 2008, it was agreed that the IMF
will undertake its assessment of the Bailiwick
of Guernsey late in 2009. This assessment was
originally scheduled to take place in January
2009, but the IMF took into account the severe
effects of the current global crisis, including
the problems experienced at Northern Rock Guernsey
and Landsbanki Guernsey.
The areas to be covered by the assessment will
be unchanged. A significant aspect will be to
do with the stability of Guernsey’s financial
sector. It will also cover banking, insurance
and investment sector supervisory legislation
and practice, together with anti-money laundering
and counter terrorist financing legislation
and its implementation.
Peter Neville, Director General of the Commission
said: “The Commission is eager to participate
in the IMF’s assessment process and looks
forward to the broader perspective a later assessment
will bring. For substantially more than a year
we have been presented with significant challenges
in crisis management. We have met these challenges.
The very positive findings of the inquiry by
Michael Foot of the Promontory group into the
role played by the Commission in the Landsbanki
Guernsey case should stand Guernsey in good
stead."
He
added: "We hope that one of the outcomes
of the IMF’s future assessments will be
the pulling together of the lessons learned
by supervisors around the world during the crisis.
Here in Guernsey the response has already included
the introduction of a depositor compensation
scheme. The hard look that Guernsey will be
taking at the nature of its banking sector and
the relationship between the financial industry
in Guernsey and its counterparts in the UK will
also be relevant to the IMF’s assessment.
The IMF will want to gauge the effects of the
financial crisis and the global economic downturn
on the shape of the finance industry and the
products and services it offers.”
In
December 2008, a new regulation was introduced
in Guernsey to prevent money laundering, which
restricts the sale or purchase in the course
of certain businesses of precious metals, precious
stones or jewellery, where the payment is made
in cash and exceeds GBP10,000. These regulations
were proposed by the Guernsey Financial Services
Commission, which sought to extend the Bailiwick’s
anti-money laundering regime in order for it
to meet international standards.
The
Regulations are made under Sections 49A and
54 of the Criminal Justice (Proceeds of Crime)
(Bailiwick of Guernsey) Law, 1999 and are titled
The Criminal Justice (Proceeds of Crime) (Restriction
on Cash Transactions)(Bailiwick of Guernsey)
Regulations, 2008 and were effective from December
1, 2008.Any person who contravenes the restriction
commits an offence and is liable, for a first
offence, to a fine of up to twice the value
of the cash involved. The Guernsey government
has asked that dealers in precious metals, precious
stones or jewellery should report any attempted
transactions in excess of GBP10,000 as suspicious
to Guernsey’s Financial Intelligence Service.
The
Trusts Law 1989 provides a modern statutory
basis for trust management activity. The Edwards
Report acknowledged that Guernsey ranks highly
among IOFCs for the quality of its regulation.
Unlike the banking sector, however, the Guernsey
trusts industry has not been subject to any
formal system of supervision.
Partly
as a result of the Edwards Report, a law was
prepared by the States' Advisory and Finance
Committee under the name of The Regulation of
Fiduciaries and Administration Businesses (Bailiwick
of Guernsey) Bill 2000. The law - known as the
Fiduciary Law - came into effect on April 1,
2001.
Anyone
who, by way of business, carries on regulated
fiduciary activities in or from within the Bailiwick
of Guernsey requires a fiduciary licence granted
by the Commission under the Fiduciary Law. Section
2 of the Fiduciary Law sets out the activities
which are regulated, and section 3 provides
for exemption in some circumstances.
A licence is required by any company, wherever
registered, providing fiduciary services in
the Bailiwick and by Guernsey-registered companies
providing fiduciary services anywhere in the
world.
There are two categories of fiduciary licence:
A full fiduciary licence can only be granted
to a company or a partnership, and authorises
all regulated fiduciary activities. A full
fiduciary licence authorises the licensee
and its directors or partners, managers
and employees to carry on regulated fiduciary
activities (where the directors, etc. do
so in the course of their duties to the
licensee).
A personal fiduciary licence can only be
granted to an individual and authorises
the holder to carry on a restricted range
of fiduciary activities. Those include acting
as a company director, as trustee (but not
as a sole trustee), and as executor of a
will or administrator of an estate. The
holder of a personal fiduciary licence is
prohibited from advertising by The Regulation
of Fiduciaries (Fiduciary Advertisements
and Annual Returns) Regulations, 2001.
The
law contains a 'four eyes' rule, standards for
capital adequacy and compulsory indemnity insurance.
The offer or provision of fiduciary services
without a licence incurs criminal sanctions.
Prudential rules are also imposed; clients'
funds need to be segregated from other trust
assets; and new accounting safeguards have been
installed.
The
law provides extensive powers to the Guernsey
Financial Services Committee in the granting,
refusal, revocation, and application of conditions
to fiduciary licences. It also has authority
to control the names of, and advertising by,
fiduciary businesses, rights to obtain information
and documents, and powers to conduct investigations.
The Guernsey law of trusts was codified in 1989
along broadly Anglo-Saxon lines in the Trusts
(Guernsey) Law 1989. This law does not apply
directly in Alderney or Sark, but has a substantial
influence on trusts in those jurisdictions.
Trust
documents are in English. There are no registration
requirements for trusts, no fees are payable
on formation, and there are no annual reporting
requirements other than for resident trusts
(ie those with resident beneficiaries). Trust
accounts must be kept but there is no audit
requirement.
The
maximum perpetuity for Guernsey trusts is 100
years. The law provides for non-recognition
of foreign judgements, and forced heirship provisions
in foreign law can be over-ridden. The Hague
Convention has been incorporated into Manx Law.
In
September 2005, the Guernsey FSC launched a
consultation with trust professionals, lawyers,
accountants and regulators to: investigate the
requirement for changes to enable new trust
products and services to be available to the
Fiduciary Sector in Guernsey; to consider the
availability of competitor trust products and
services from other jurisdictions; to consider
marketing requirement for the Fiduciary Sector;
and to make recommendations for the desired
changes.
New
trust legislation (the Trusts (Guernsey) Law,
2007), which was approved in July 2007, came
into force on March 17th, 2008. The changes
overall are designed to create a more flexible
framework for the local trust industry, and
to ensure that Guernsey, as a jurisdiction for
the establishment and administration of fiduciary
structures, remains well placed and competitive.
Some
of the most significant changes to the Island’s
trust legislation include:
The introduction of (non-charitable) Purpose
Trusts;
Removal of limits on the length of a trust’s
duration – allowing perpetual trusts;
Clarification of the position of retiring
trustees, making the transfer process more
streamlined;
Clarification of the circumstances under which
information has to be given to beneficiaries;
Abolition of the liability of directors of
corporate trustees based in Guernsey or acting
as trustees of Guernsey law trusts, particularly
as a way to encourage greater use of Private
Trust Companies (PTCs); and
Revision of arrangements regarding limitation
periods and Alternative Dispute Resolution
(ADR).
The
new law has its roots in a series of proposals
made in the ‘Evans Report’, which
was published following a root and branch
review of the Island’s trust legislation
by a working party under the chairmanship
of Guernsey advocate Rupert Evans.
“This
is yet another example of how the Guernsey
government, the Island’s financial regulator
and its industry practitioners, continually
work together to maintain an environment that
maximises business flows,” stated Peter
Niven, Chief Executive of GuernseyFinance
– the promotional agency for the Island’s
finance industry.
Guernsey
has more than 50 years experience in providing
trust and corporate services. As of February
2008, the Island hosted more than 140 licensed
fiduciaries, ranging from large organisations
to independent, boutique operations. Together,
they held between GBP200 and GBP300bn worth
of assets in trust.
Mr
Niven added that: “Guernsey’s
fiduciary industry has built a reputation
for professionalism and expertise in using
the modern structures that are available on
the Island for the preservation of both institutional
and individual/family wealth and assets. The
amendments to Guernsey’s trust legislation
include several significant changes like the
introduction of Purpose Trusts that will particularly
enhance the Island’s fiduciary environment."
He
concluded: “However, we are far from
resting on our laurels and work continues
to introduce legislation that will allow the
establishment of Foundations. The addition
of this innovative tool will ensure that the
Island’s practitioners are able to offer
their internationally mobile clients the widest
spectrum of products and services.”
Banks
are registered in Guernsey under the Banking
Supervision (Guernsey) Law 1994 as amended in
2003, which is administered by the Guernsey
Financial Services Commission. Applications
from new banks are carefully vetted both from
a prudential point of view and commercially.
The
Banking Law has three main objectives:
To
protect depositors;
To
protect the reputation of Guernsey as an
International banking centre;
To
protect the best economic interests of Guernsey.
It
contains capital adequacy rules which are stiffer
than the Basle requirements.
In
November 2001 the Financial Services Commission
announced that it would be applying customer
'due diligence' standards according to the Basel
Committee on Banking Supervision's "Customer
Due Diligence for Banks" paper (4 October
2001, "the CDD paper").
Section
2.2.3 of the CDD paper sets out what the Commission
now regards as best practice for banks on introduced
business. The criteria listed under paragraph
36 include the recommendation that "all
relevant identification data and other documentation
pertaining to the customer's identity should
be immediately submitted by the introducer to
the bank, who must carefully review the documentation
provided. Such information must be available
for review by the supervisor and the Financial
Intelligence Service or equivalent enforcement
agency, where appropriate legal authority has
been obtained."
Under
Regulation 1(4)(a) of the Criminal Justice (Proceeds
of Crime) (Bailiwick of Guernsey) Regulations,
1999, in determining whether a person carrying
on any financial service businesses in the Bailiwick
of Guernsey is in compliance with the regulations,
a court may take account of "the Guidance
Notes on the Prevention of Money Laundering
issued from time to time by the Guernsey Financial
Services Commission and any other guidance issued,
adopted or approved by the said Commission."
The
Commission said its announcement represented
guidance issued by the Commission for the purposes
of Regulation 1(4)(a) mentioned above.
In
early 2002 the Guernsey FSC, along with its
peers in Jersey and the Isle of Man announced
new measures to tighten anti-money laundering
regimes.
The new measures included three main features:
In
addition to being required to know their
own customers, banks and other institutions
will be required to look beyond their customers
(for example, when they are trusts or companies)
to establish the principals behind them.
The new measures tighten up the requirements
on banks and other institutions to ensure
that due diligence is done properly - even
where the customer is referred to them by
another institution which claims to have
carried out the background checks already.
All institutions will be required to embark
upon a progressive risk prioritised programme
to bring the records of existing accounts
up to current standards (where there are
deficiencies in information and documentation
held) if the nature of the client or transaction
meets certain criteria.
In
December, 2003, the FSC responded to concerns
raised by the jurisdiction’s financial
services sector by clarifying kyc rules for
'introduced business' following the introduction
of the FATF's revised 'Forty Recommendations'
which included rules comparable to the Basle
rules but administratively somewhat simpler.
The
FSC said: "Accordingly, from the date of
this statement, the Commission will adopt the
standard embodied in FATF Recommendation 9 (see
below) with regard to the provision of information
to financial services businesses in respect
of introduced business. As a minimum, financial
services businesses should receive written confirmation
from the introducer, by way of a certificate
or summary sheet(s), detailing the necessary
information and the documentation held by the
introducer and also take adequate steps to satisfy
themselves that copies of the necessary information
specified in FATF Recommendation 9, will be
made available upon request without delay."
"The
Commission expects that financial services businesses
should have a programme of testing to ensure
that introducers are able to fulfil the requirement
that relevant documentation can be made available
upon request without delay. This will involve
financial services businesses adopting ongoing
procedures to ensure they have the means to
obtain that information and documentation."
"In
order to determine that the new standard is
being applied, the Commission, during its on-site
visits, will seek to verify that financial services
businesses have obtained the necessary information
by way of a certificate or summary sheet(s)
and that the requirement for copies of such
identification data and other relevant documentation
to be made available upon request without delay
has been tested."
"It
should be noted that, ultimately, the responsibility
for customer identification and verification
will remain, as always, with the financial services
business relying on the introducer."
In
August 2008, the GFSC issued a consultation
paper to members of the Association of Guernsey
Banks to seek their views on proposals to amend
several key areas of regulatory policy and to
introduce a range of measures aimed at safeguarding
retail depositors.
The
proposals, contained in the paper 'Consultation
on Parental Upstreaming and the Introduction
of Depositor Protection and Ombudsman Schemes,'
aim to reinforce Guernsey’s reputation
as a mature and well regulated finance centre.
The consultation closed on September 15, 2008.
Peter
Neville, Director General of the Commission
explained:
“The
review has its origins in the 'credit crunch'
and more specifically in the problems experienced
by the Guernsey subsidiary of Northern Rock
plc prior to its transfer into public ownership.
"That
episode led us to consider the vulnerabilities
inherent in a banking model that is widely used
in Guernsey, which involves gathering retail
deposits and then lending a large proportion
of those funds to the parent bank – what
we call 'upstreaming'. The Northern Rock case
also highlighted the fact that we do not have
a deposit protection scheme to protect people
who put their money with banks based here."
In
order to provide greater protection for retail
depositors the GSFC proposes to reduce parental
upstreaming to a maximum of 85% of total assets.
The Commission may also impose further restrictions
based on the level of perceived risk associated
with the parent bank.
The
regulator also wants to discourage the use of
branch structures for new licensed banks, unless
they are perceived to be systemically important
at least in their home jurisdiction or are highly
specialised in nature, and introduce a deposit
protection scheme limited to a maximum of GBP35,000
per individual depositor and to retail depositors
only.
The
GFSC says its proposals would strengthen the
banking sector by requiring greater transparency
through disclosure by individual banks to their
depositors of: the existence (or otherwise)
in the jurisdiction of a deposit protection
scheme; the existence or possibility of parental
upstreaming; and the status and nature of support
extended by the parent to the local bank.
Other
proposals would:
require banks to monitor the liquidity and
solvency of the parent entity when they place
funds with it;
require banks to have in place a contingency
plan to withdraw some or all upstreaming without
destabilising the parent;
impose stronger corporate governance arrangements
through the requirement for at least one independent
non-group non-executive director on the Boards
of local banks; and
introduce an ombudsman scheme. Such a scheme
would not be limited to the customers of banks
and therefore this proposal will require further
consultation with other regulated financial
services sectors in Guernsey. The Commission
believes that the introduction of such a scheme
will afford further safeguards to depositors
and customers generally.
The
consultation paper sets out the benefits that
would flow to Guernsey from having a deposit
protection scheme and addresses the costs associated
with a scheme which would be funded by the banking
sector.
The
views of the banking sector are also being sought
on the possible establishment of an ombudsman
scheme to resolve complaints from members of
the public who have suffered losses or have
other grievances.
"The
way forward which is being suggested would involve
limiting the costs by having the Commission
provide resources to support an ombudsman in
a way which did not conflict with our supervisory
and regulatory responsibilities," Neville
added.
"Once
we have received the responses to the paper
on the proposed ombudsman scheme, we will consider
extending the consultation process to the other
parts of the finance sector," he concluded.
Insurance companies are regulated by the Financial
Services Commission under the Insurance Business
(Guernsey) Law 1986, updated by the Insurance
Business (Bailiwick of Guernsey) Law, 2002,
the Insurance Managers and Insurance Intermediaries
(Bailiwick of Guernsey) Law, 2002, the
Insurance Business (Bailiwick of Guernsey) (Amendment)
Ordinance, 2008, and the Protected Cell
Companies Ordinance 1997.
The
minimum capital requirement of a licensed insurance
manager or
a licensed insurance intermediary is GBP25,000
or 125% of the
licensee’s professional indemnity insurance
deductible or excess, if higher; a fee of GBP3,630
is payable on registration and GBP3,450 annually
thereafter (for a 'Pure' insurance manager.
Commercial insurance managers pay an annual
fee of GBP5,770.
Annual
audits are needed, and there are substantial
annual information requirements, including business
plans, solvency calculations, reports on claims,
banking and investment schedules, and, for life
companies, actuarial certification.
Collective
Investment Funds are supervised by the Financial
Services Commission (FSC) under the Protection
of Investors (Bailiwick of Guernsey) Law,
1987 (as amended) and the Collective Investment
Scheme Rules 1988.
Open
ended funds may be established as Class
A, B or Q funds and are constituted as companies,
protected cell companies or unit trusts.
Closed ended investment funds are constituted
as companies, unit trusts, limited partnerships
or protected cell companies.
Open
ended schemes are authorised and entities
involved in controlled investment business
are licensed under the Protection of Investors
(Bailiwick of Guernsey) Law, 1987, as amended.
The Commission has made a number of rules
under the Law which set out the detailed
requirements to be followed by all authorised
schemes and licensees. These include:
The
Collective Investment Schemes Rules 2002
(which cover Class A schemes); The Collective
Investment Schemes (Class B) Rules 1990
(which cover Class B schemes);
The
Collective Investment Schemes Qualifying
Professional Investors (Class Q) Rules
1998 (which cover schemes designed for
qualifying professional investors);
The
Collective Investment Schemes (Designated
Persons) Rules 1988;
The
Licensees (Conduct of Business and Notification)(Non-Guernsey
Schemes) Rules 1994.
Class
A schemes are those which meet the Commission's
Collective Investment Schemes Rules 2002
and are therefore eligible for recognition
by the UK Financial Services Authority for
sale to the public in the United Kingdom
under section 270 of the Financial Services
and Markets Act 2000.
The
rules for Class B schemes incorporate a
measure of flexibility. This policy recognises
that Class B schemes range from the retail
fund aimed at the "general public"
via institutional funds to the strictly
private fund established solely as a vehicle
for investment by a single institution.
Their investment objectives and risk profiles
are similarly wide-ranging.
The
Class Q Rules seek to provide a clear and
concise set of requirements for the operation
of professional investor funds and have
been designed to encourage innovation.
A
Qualifying Investor Fund (QIF) regime was
Introduced following consultation with the
financial services industry in the latter
half of 2004, and was welcomed by the island's
fund industry. Under a streamlined application
process, the Commission undertakes to grant
fund approval within 3 working days provided
that an appropriately licensed Guernsey
applicant has certified that: the fund will
be restricted to professional, experienced
and knowledgeable investors; the applicant
has conducted due diligence on the promoter
and associated parties and has found them
to be fit and proper; and the applicant
is satisfied as to the fund's economic rationale
and the disclosure of any risks associated
with the investment vehicle.
New
criteria for Qualifying Investor Funds released
by the Guernsey Financial Services Commission
in 2006 met with support from the island’s
finance industry.
Chief
executive of GuernseyFinance, Peter Niven,
suggested that the move "will serve to bring
more business to the island", whilst Chairman
of the Guernsey Investment Fund Association,
Mike de Haaff, announced that:
"GIFA
welcomes the change in criteria as it brings
Guernsey in line with other offshore jurisdictions.
The change in definition of a professional
investor will encourage more take up of
QIFs and can only be seen a positive move
for the island’s fund industry."
Under the new rules, the definition of Professional
Investor has been widened to include an
individual investor who invests a minimum
of USD100,000 in such a fund.
The
revised guidance note issued by the FSC
also re-emphasised the due diligence obligations
which Guernsey Licensees undertake when
submitting applications for Guernsey Qualifying
Investor Funds.
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, leading the Guernsey
Financial Services Commission to issue a consultation
document: ‘The regulatory framework for
Hedge Funds in Guernsey’ in November
2003, setting out a range of practical issues,
and seeking views from interested parties
on those issues and the solutions which may
be available.
The
Guernsey Financial Services Commission also
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.
In
mid-2004, the GFSC published a document setting
out its main conclusions regarding hedge funds.
The findings are directed at the funds industry
for vehicles which are popular with institutional
investors, said Fiona French, the commission’s
assistant director of investment business:
"We always had the power to waive our rules.
Now we’re saying publicly to hedge fund managers
that these are the ones we’re prepared to
waive to establish funds here. We’re technically
not changing the rules because some elements
we’ve always waived."
Areas
where the commission will show flexibility
include: not requiring a Guernsey-domiciled
and licensed custodian to fill the role of
a suitably qualified prime broker; no need
for complex segregation requirements for prime
brokers holding fund assets; waivers for funds
which can demonstrate a need to use estimates
of net asset value in advance of final NAV
determination; and where estimation is permitted,
there may be waivers of client money rules
requiring segregation of subscription and
redemption monies.
In
May, 2006, the report of a Committee 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 recommended the
creation of 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 recommended 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 recommended 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."
In
May 2008 the Guernsey Financial Services Commission
commenced a public consultation on a proposal
to fast track the application process for
specified licensees associated with Qualifying
Investor Funds or Registered Closed-ended
Investment Funds.
The
main thrust of the proposal is that a Licence
Assessment Committee will be convened to consider
the issue of a licence under the Protection
of Investors (Bailiwick of Guernsey) Law,
1987 (the POI Law) within 10 business days
of receipt of a complete formal application,
together with confirmations from an appropriately
licensed Guernsey service provider to the
Commission that:
They have performed sufficient due diligence
to be satisfied that the beneficial owners
or controllers of, and relevant parties
to, the applicant for a licence are fit
and proper and meet the requirements as
set out in the POI Law and that in this
respect consideration has been given to
all of the issues set out in the Guidance
Document issued by the Commission;
They have undertaken sufficient due diligence
to confirm that the application for a licence
under the POI Law which includes the relevant
application form and supporting documentation
and information, is complete and accurate.
The
introduction of the Qualifying Investor Fund
regime in February 2005 and the Registered
Closed-ended Investment Fund regime in February
2007 provided fund promoters and their Guernsey
regulated service providers with two fast
track application processes for defined investment
funds, giving a guaranteed response time from
the Commission.
Since
the introduction of the two regimes, a significant
number of fund applications have been made
under them, and at the same time associated
licence applications under the the POI Law
have been made for parties seeking to provide
management services to the funds.
Due
to the statutory obligations imposed on the
Commission when considering applications for
licences under the POI Law, which do not apply
in the same way to fund applications, the
Commission said that it is not possible to
guarantee considering applications for licences
in the same time scale that apply to the two
fast track fund application processes.
The
Commission has acknowledged that this apparent
“mis-match” in timescales is not
ideal and proposes to introduce a regime which
will reduce the timescale for the consideration
of licence applications in specified cases.
Due
to the statutory obligations referred to above
it is not possible to reduce the relevant
timescale to that applying to the associated
fund applications, but it is considered that
the proposed regime will introduce certainty
of response in respect of licence applications
made to the Commission.
The
Commission proposes to introduce a framework
applicable to licence applications under the
POI Law for parties seeking to provide management
services to Qualifying Investor Funds or Registered
Closed-ended Investment Funds.
Parties
seeking to conduct activities such as administration
or custody for such funds or who intend to
conduct restricted activities in connection
with other types of investment fund business
and/or non-fund business will need to apply
and be assessed under the Commission’s
standard licence application process.
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