Guernsey is a premier jurisdiction for investment funds and private equity business. The island's reputation, location, tax-neutral status and innovative approach continue to attract leading investment managers.(1)

Overview

Guernsey's funds, investment managers, advisers and fund administrators are regulated by the Guernsey Financial Services Commission (GFSC) under the Protection of Investors (Bailiwick of Guernsey) Law 1987 (the PoI Law).

Under the PoI law, managers, advisers and administrators (licensees) must be licensed in order to conduct certain investment business activities in or from within the Bailiwick of Guernsey(2) (restricted activities)(3) in relation to most collective investment schemes (ie, funds) and other investments (controlled investments).(4)

The attributes of a collective investment scheme subject to regulation under the PoI Law, in broad terms, are:

  • the pooling of investments by investors;
  • the spread of risk by the scheme; and
  • the management of the scheme's assets by a third party

Where one or more of these attributes is absent, the scheme will not be a controlled investment and so will not be subject to regulation under the PoI Law.

In order for a licensee to carry on any restricted activity in relation to a category of open or closed-ended collective investment scheme, the licensee must ensure that the fund is authorised or registered by the GFSC under the rules applicable to an appropriate class of fund.

Classes of authorised and registered fund

Authorised funds are authorised by the GFSC after a substantive review of their terms, promoters and licensees and a determination of their suitability by the GFSC.

Registered funds are registered by the GFSC following the submission by a Guernsey-licensed administrator of a representation that the fund is suitable for registration, having considered the fund terms and its promoter and licensee. In this case, the administrator takes the role of the GFSC in monitoring the fund on an ongoing basis.

The current classes of fund (with the relevant scheme rules referred to in the endnotes below) are as follows.

Authorised

Closed ended

Open ended

 

Authorised closed-ended fund(5)

Class A fund(6)

   

Class B fund(7)

   

Class C fund(8)

Registered

Closed and open ended

 

Registered collective investment scheme (RCIS) fund(9)

 

Private investment fund (PIF)(10)

 

Manager-led product (MLP)(11)

In addition, any authorised or registered fund can apply to be designated as a Guernsey Green Fund if it meets the relevant green investment criteria (ie, the Common Principles for Climate Mitigation Finance Tracking).(12)

Each authorised or registered collective investment scheme requires a Guernsey-licensed administrator (called a 'designated manager' or 'designated administrator' in the rules), and all open-ended schemes, other than hedge funds, require a Guernsey-licensed custodian.

Hedge funds can apply for a derogation from the need for a Guernsey-licensed custodian, provided that they have a suitable non-Guernsey-domiciled custodian.

In addition, each PIF requires a Guernsey-licensed PIF manager. PIFs are limited to a maximum of 50 investors at any time but are not required to have a prospectus.

Timings for grant of authorisation or registration

The registration timings for registered funds are as follows:

  • PIFs and MLPs – one day.
  • RCIS funds – three days.

The authorisation timings for authorised funds are as follows:

  • Class A funds – four to six weeks.
  • Class B, Q and closed-ended funds (non- qualifying investor funds) – four to six weeks.
  • Class B, Q and closed-ended funds (qualifying investor funds)(13) – three days.

Endnotes

(1) An FAQs document on Guernsey hedge funds is available here.

(2) The Bailiwick of Guernsey includes the islands comprising Guernsey and the islands of Sark and Alderney.

(3) Listed in Schedule 2 of the PoI Law, as reproduced in Annex 1.

(4) Listed in Schedule 1 of the PoI Law, as reproduced in Annex 2.

(5) The Authorised Closed-Ended Investment Scheme Rules 2008.

(6) The Authorised Collective Investment Schemes (Class A) Rules 2008.

(7) The Authorised Collective Investment Schemes (Class B) Rules 2013.

(8) The Authorised Collective Investment Schemes (Qualifying Professional Investor Funds) (Class Q) Rules 1998.

(9) The Registered Collective Investment Scheme Rules 2018 and The Prospectus Rules 2018.

(10) The Private Investment Fund Rules 2018.

(11) MLP Guidance Notes 2016 only currently.

(12) See Annex 3 for details of the criteria

(13) Qualifying investor fund – a self-certification by the investors pursuant to a 2007 GFSC guidance note – qualifying investors are professional investors, knowledgeable employees and experienced investors.