Introduction
Route One – POI Licensed Manager PIF
Route Two – Qualifying Private Investor PIF
Route Three – Family Relationship PIF


Introduction

The Guernsey Financial Services Commission (GFSC) has added two new ways to register a private investment fund (PIF) in Guernsey. A public consultation process showed that there was strong support for a PIF model without the attached Protection of Investors (POI) Law 1987 manager, allowing the industry more flexibility while maintaining protection for investors.

Accordingly, on 20 April 2021 the GFSC published The Private Investment Fund Rules and Guidance 2021 (the revised rules). The revised rules take effect immediately and replace The Private Investment Fund Rules 2016.

Unlike the traditional way of registering a PIF (now known as 'Route One' registration), the two additional routes do not require the PIF to have a manager licensed under the POI Law 1987.

All PIFs currently registered with the GFSC will continue to be registered under the traditional regime as they will meet the requirements under Route One. If an existing PIF wishes to change the basis of its registration using either the new Route Two or Route Three paths to registration, the GFSC has advised that this will be treated as a new PIF application with a corresponding application fee being payable.

The requirements to qualify as a PIF under each of the three routes to registration are described below. Which route a fund takes will depend on its needs and desired outcome.

Route One – POI Licensed Manager PIF

Under Route One, the number of investors must be no more than 50 legal or natural persons holding an ultimate economic interest in the PIF, except where the investment is made by an investment manager acting as agent for a wider group of stakeholders (eg, a manager acting as agent for investors in a collective investment scheme or equivalent, pension holders in an occupational scheme or government funds – whether local or sovereign). The revised rules state that a 'holder' (in relation to a share in a PIF) means the person which is entered in the register as the holder of the share or unit or limited partnership interest or the first named holder in the case of joint holders.

In addition:

  • the scheme must be limited to no more than 30 new ultimate investors being added in the preceding 12 months;
  • the scheme must be either an open-ended or closed-ended collective investment scheme; and
  • there must be a licensee responsible for the scheme's management.

Route Two – Qualifying Private Investor PIF

To register a PIF through Route Two, all investors must meet qualifying investor criteria which are designed to protect more vulnerable investors:

  • All investors must meet qualifying criteria consistent with the definition of qualifying investor under the Qualifying Investor Fund (QIF) regime (it should be noted that there is an enhancement to the criterion for an individual investor which makes an initial investment of not less than $100,000 or equivalent, requiring that the amount invested represents no more than 25% of the individual's investable assets).
  • All investors must fit within the definition of a qualifying private investor (QPI) (for the purposes of this route, a 'QPI' is an investor which is able to evaluate the risks and strategy for investing in a PIF and bear the consequences of investment in the PIF, including the possibility of any loss arising from the investment).
  • Any marketing must be specifically targeted to individual investors which have been identified as QPIs.
  • The number of offers of units for subscription, sale or exchange must not exceed 200.
  • Written disclosure must be made to prospective investors providing at a minimum information on the regulatory status of the scheme, investor suitability and risk warning.
  • The fund must have a designated administrator appointed to it but there is no requirement to appoint a manager.
  • The designated administrator must make a declaration to the GFSC, in the format required, that effective procedures are in place to ensure restriction of the scheme to QPIs.
  • All investors must have received a disclosure statement in the format prescribed by the GFSC.

Route Three – Family Relationship PIF

Route Three will enable a PIF to be created as a bespoke private wealth structure requiring a family relationship between investors. Accordingly, the following restrictions apply:

  • A family relationship must apply between all investors or be an eligible employee of the family (for the purposes of this route, an 'eligible employee' means an employee of the family meeting the definition of a QPI under Route Two).
  • The PIF cannot be marketed outside the family group.
  • The designated administrator must make a declaration to the GFSC, in the format required, that effective procedures are in place to ensure that all investors fulfil the requirement of being related.
  • No capital may be raised by the fund from investors outside the family relationship.
  • The fund must have a designated administrator appointed to it but there is no requirement to appoint a manager.

For further information on this topic please contact Craig Cordle, Michelle Watson Bunn or Tehya Morgan at Ogier by telephone (+44 1481 721 672) or email ([email protected], [email protected] or [email protected]). The Ogier website can be accessed at www.ogier.com.