This article provides a practical comparison between two of Guernsey's most flexible regulated fund products: the registered collective investment scheme (registered schemes) and the private investment fund (PIFs). Both registered schemes and PIFs are used across all fund types and asset bases – from private equity funds investing in sustainable energy to hedge funds investing in smart technology.

Comparison

 

Registered schemes

PIFs

Overview

The registered collective investment scheme is a fast-track registration option whereby the 'designated administrator' (as defined below) scrutinises the scheme and promoter in place of the Guernsey Financial Services Commission (GFSC) and takes responsibility for the ongoing monitoring of the scheme.

The registration is granted on the basis of suitability representations made by the designated administrator to the GFSC (achieving an efficient application process).

The PIF is a fast-track registration option which seeks to provide a light-touch regulatory solution for schemes in respect of which management have a close relationship with investors (and which meet the relevant criteria).

The registration is granted on the basis of suitability representations made by the designated administrator to the GFSC (achieving an efficient application process).

Regulatory framework

Registered schemes are regulated under the Protection of Investors (Bailiwick of Guernsey) Law 1987 (POI Law). The designated administrator must be a licensee under the POI Law.

Where a custodian is required, it must be a Guernsey licensee unless otherwise permitted by the GFSC.

Registered schemes are subject to the Registered Collective Investment Scheme Rules 2018 and the Prospectus Rules 2018 which contain:

  • requirements for managing conflicts of interest;
  • various market-standard investor documentation content and disclosure requirements; and
  • various immediate and periodic notification and annual filing requirements. (See the "Prospectus Rules" section below for more information on the applicable content requirements.)

PIFs are regulated under the POI Law. The 'designated administrator' and 'manager' (as defined below) must be licensees under the POI Law.

Where a custodian is required, it must be a Guernsey licensee unless otherwise permitted by the GFSC.

PIFs are subject to the Private Investment Fund Rules 2016 (PIF Rules), which contain minimum requirements for managing conflicts of interest and submitting annual returns and annual audited accounts and set out certain mandatory characteristics of a PIF.(1)

Vehicle type

Companies, limited partnerships, unit trusts or such other vehicle approved by the GFSC.

Companies, limited partnerships, unit trusts or such other vehicle approved by the GFSC.

Closed ended or open ended

Closed ended or open ended.

Closed ended or open ended.

Type or category of investors

No type or category restrictions.

No specific type or category restrictions; however, the 'manager' (as defined below) must declare to the GFSC that it has assessed that the investors can, as far as it has reasonably been able to ascertain after having made careful and appropriate enquiries, sustain any losses incurred on the PIF at the time that they make their investment.

Number of investors

No maximum.

Maximum of 50* (excluding where an investment is made by an investment manager acting as an agent for a wider group of stakeholders (eg, pension schemes and government funds)).

*Subject to the 50-investor restriction; in the first year of a PIF's operation, there is no restriction on the number of investors that may be added. In each subsequent rolling 12-month period, no more than 30 new ultimate investors may be added.

Promoter's track record

There is no requirement to demonstrate the proposed promoter's track record; instead the 'designated administrator' (as defined below) must be satis­fied that the proposed promotor is fi­t and proper.

There is no requirement to demonstrate the proposed promoter's track record; instead the 'designated administrator' (as defined below) must be satis­fied that the proposed promotor is fi­t and proper.

Governance

Depending on the structure, at least one Guernsey-based director, although there are usually more for tax reasons.

Depending on the structure, at least one Guernsey-based director, although there are usually more for tax reasons.

Investor documentation

An offering document and subscription and constitutional documentation complying with the Prospectus Rules and the law governing the chosen vehicle is required.

There is no requirement to have an offering document or equivalent (although it is usual to have to protect the promoter) or subscription or constitutional documentation complying with the law governing the chosen vehicle.

Service providers
  • Guernsey-based and licensed administrator (the 'designated administrator').
  • Auditor.
  • Custodian (in the case of open-ended registered schemes and certain other circumstances where a derogation has been sought and granted (eg, hedge funds)).
  • Guernsey-based and licensed administrator (the 'designated administrator').
  • Guernsey-domiciled and licensed manager (the 'manager'), which:
    • need not have employees (including directors) or offices in Guernsey and can be administered by a licensed administrator, which is usually the case subject to compliance with economic substance requirements; and
    • despite its licence, will not be subject to the Guernsey Conduct of Business or Capital Adequacy Rules.
  • A designated custodian must be named for an open-ended PIF, although this may be the designated administrator or, with the GFSC's approval, a custodian that is domiciled outside Guernsey.
  • Auditor.

Application procedure

Expedited procedure.

Key individuals in relation to the promoter and registered scheme must submit to the GFSC personal questionnaires (Forms PQ).

Further, the procedure includes the submission of an application form (Form REG) setting out general information regarding the structure of the scheme, its investment activities and the parties involved, together with final forms of the offering document, constitutional documents, the subscription agreement and the material agreements to be entered into by the scheme.

Form REG contains declarations given by the designated administrator in respect of the promoter and the registered scheme itself.

Registration is issued within three business days.

Expedited procedure.

The procedure involves a single application form (Form PIF, which applies to the registration of a PIF and the licensing of a PIF manager), together with related Forms PQ for certain persons, including the controllers of the PIF and the manager.

A PIF's registration and the manager's licence will be issued within one business day.

Regulatory fees

Application fee: £3,435.

Annual regulatory fee: £3,435.

As for registered schemes, plus application and annual fees in respect of the manager.

Prospectus Rules

Unless specifically agreed otherwise by the GFSC, the Prospectus Rules apply in relation to all registered open-ended and closed-ended investment schemes, including those registered under the Registered Collective Investment Scheme Rules and the offering of Category 2 controlled investments to members of the public in the Bailiwick of Guernsey, save that the Prospectus Rules do not apply to collective investment schemes registered under the PIF Rules.

The Prospectus Rules seek to provide a clear and concise set of requirements for the disclosure of information on the offering documents issued in respect of a registered collective investment scheme. The disclosure requirements are, broadly speaking, market standard and apply in relation to the following categories:

  • details of vendors and any promoter;
  • terms applying to the offer;
  • particulars of securities that are the subject to the offer;
  • general information concerning investments and investment restrictions;
  • information concerning material contracts;
  • particulars of direct and indirect interests of directors and senior management;
  • financial information and the type and frequency of financial reports;
  • details of directors and certain service providers;
  • material information that an investor reasonably requires to make an informed judgement about the merits of their investment (including suitable risk factors); and
  • certain prescribed statements, including in respect of director responsibility with regard to the preparation of the offering documents and related disclaimers.(2)

Endnotes

(1) Further information on the PIF Rules and application process is available here.

(2) This is not an exhaustive list or reproduction of the exact requirements under the Prospectus Rules. The rules can be referred to in full on the GFSC website.