Guernsey Table of
This is a non-exhaustive
list of the main Guernsey statutes affecting offshore and
non-resident business. The statutes are listed in alphabetical
order – click on the statute for a fuller description
of the statute, the legal regime it forms part of, or in some
cases the text of the law.
Banking Supervision (Bailiwick of Guernsey) (Amendment) Law,
Collective Investment Scheme Rules 1988
Companies (Guernsey) Law 1994
Companies (Guernsey) Law 2008
Company Security (Insider Dealing) (Guernsey) Law 1996
Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey)
Financial Services Commission (Guernsey) Law 1986
Gambling (Betting) (Alderney) Ordinance 1999
Guarantee Companies Ordinance
Immigration Act 1991 (UK)
Income Tax (Guernsey)
Insurance Business (Guernsey) Law 1986
Insurance Business (Bailiwick of Guernsey) Law, 2002
Insurance Managers and Insurance Intermediaries (Bailiwick
of Guernsey) Law, 2002
Limited Partnerships (Guernsey)
Migration of Companies Ordinance
Partnership (Guernsey) Law
Protected Cell Companies Ordinance 1997
Protected Cell Companies (Special
Purpose Vehicle) Regulations 2001
Protection of Investors (Guernsey)
Trusts Law (Guernsey) 1989
(Guernsey) Law, 2007
Regulation of Fiduciaries and Administration Businesses (Guernsey)
April 2009, it was announced that Guernsey had launched
the Island’s first legal resources website. The
site is the result of a joint initiative between Guernsey’s
Royal Court and the Law Officers of the Crown and provides
access to a comprehensive collection and database of Guernsey’s
laws, including consolidated versions and recent changes
Guernsey Law Reports
Guernsey Law Journal and the Jersey and Guernsey Law
launch of this site is an extremely positive development
for Guernsey as a leading international finance centre,”
said Peter Niven, Chief Executive of Guernsey Finance
– the promotional agency for the Island’s
finance industry – said at the time.
prides itself on having modern legislation, especially
for financial services like the new Trusts Law and new
Company Law that we introduced last year and we now have
all this available in a user-friendly online resources
such a comprehensive ‘one stop shop’ will
make accessing materials a much more streamlined process
for anyone wanting information on Guernsey’s legal
framework. The resources will be of particular benefit
to lawyers and other intermediaries who now at the touch
of a button will be able to see exactly what Guernsey
can offer their clients.”
features alongside the likes of the United Kingdom and
the United States on the OECD’s ‘white list’
that was published at the conclusion of the G20 summit
in London at the start of April and was ranked 12th in
that year's Global Financial Centres Index (GFCI) which
was published in March 2009.
Money Laundering Law
see below under Banking.
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
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."
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.
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,"
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.
discussions between the IMF and the Commission at the
end of 2008, it was agreed that the IMF would 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 global crisis, including the
problems experienced at Northern Rock Guernsey and Landsbanki
The areas to be covered by the assessment were unchanged.
A significant aspect was to do with the stability of
Guernsey’s financial sector. It was also to cover
banking, insurance and investment sector supervisory
legislation and practice, together with anti-money laundering
and counter terrorist financing legislation and its
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."
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
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
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.
December 2009, the Guernsey Financial Services Commission
proposed changes to its AML/CFT that will require postage
stamp dealers, bullion dealers, firms of accountants
which are currently not registered with the Commission,
and firms (including sole practitioners) of insolvency
practitioners, auditors and tax advisors to register
with the Commission and to comply with the AML/CFT regulations,
and with the rules in the Commission’s handbooks.
the Commission is conscious that the requirements of
the regulations may appear complex and onerous, especially
to firms which have not previously been subject to any
form of AML/CFT regulation or supervision, the guidance
note provides information to assist such firms.
guidance paper, available on the Commission’s
website, provides a simplified overview of the requirements
of the regulations and the rules in the Handbooks.
April 2010, the Guernsey FSC announced the launch of
a consultation on proposals to overhaul legislation
that governs the prevention of money laundering and
the financing of terrorism in the island.
consultation paper proposes extensive amendments, namely
to the following legislation:
Financial Services Commission (Site Visits) (Bailiwick
of Guernsey) Ordinance, 2008;
The Insurance Business (Bailiwick of Guernsey) Law,
The Insurance Managers and Insurance Intermediaries
(Bailiwick of Guernsey) Law, 2002;
The Protection of Investors (Bailiwick of Guernsey)
The Banking Supervision (Bailiwick of Guernsey) Law,
The Registration of Non-Regulated Financial Services
Businesses (Bailiwick of Guernsey) Law, 2008;
The Regulation of Fiduciaries, Administration Businesses
and Company Directors, etc. (Bailiwick of Guernsey)
The Criminal Justice (Proceeds of Crime) (Financial
Services Businesses) (Bailiwick of Guernsey) Regulations,
The Criminal Justice (Proceeds of Crime) (Legal Professionals,
Accountants and Estate Agents) (Bailiwick of Guernsey)
first part of the consultation discusses harmonizing
the Commission’s on-site inspection powers throughout
all governing legislation.
definition of “regulatory laws” is also
to be amended to provide a consistent definition across
governing legislation. In particular this will improve
the Commission’s checks when considering a license,
by broadening the pool of relevant contraventions of
regulatory laws that the Commission may take into account
when considering an application.
is also proposed that a textual amendment be made to
legislation which governs penalties, namely harmonizing
the texts of Section 88 of the Insurance Business Law,
2002 and Section 65 of the Insurance Managers and Insurance
Intermediaries Law, 2002.
addition, as part of a larger review of the definition
of “FSB Regulations,” the Commission proposes
inserting a new provision into the FSB Regulations which
enables financial services businesses to disclose information
to other financial services businesses and prescribed
businesses, where it appears necessary for the purposes
of forestalling, preventing or detecting money laundering
and terrorist financing. This amendment is supported
by the recommendation in recent IMF reports of other
jurisdictions that they should consider including explicit
provisions to provide for the sharing of information
between financial services businesses.
consultation paper is available on the Commission’s
website, and interest parties were asked to submit comments
by May 21, 2010.
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
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.
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
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
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.
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.
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.
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).
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.
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.
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.
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."
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.”
July 2009, Guernsey's Financial Services Commission
announced proposals to overhaul regulation to enhance
protection and oversight of Retirement Annuity Trust
Annuity Trust Schemes (RATS) have been available as
a form of personal pension provision in Guernsey for
many years. Recently, with other options such as retirement
annuity contracts becoming less widely available, RATS
have been formed in larger numbers.
flexibility in relation to how assets may be invested,
and benefits drawn on retirement, makes them useful
in many circumstances. However, the same flexibility
gives rise to the risk of RATS being used in circumstances
where they are not the best solution or are not fully
understood by the member.
Commission fears that due to the cross-sectoral involvement
in the schemes, regulatory framework, which applies
to the firms which operate in different sectors but
provide services in relation to the same structure or
product, needs revision to set broader, more effective,
late 2008 the Commission circulated a discussion paper
on RATS, highlighting some concerns about the present
position. This arose from discussions with a group of
practitioners across the relevant sectors of finance
business. The problems identified by the group included:
quality of initial advice: there are concerns that
not all firms involved in RATS understand the specific
factors and requirements which apply to them. There
has sometimes been insufficient analysis of existing
pension arrangements and the merits of transferring
out of those into a Retirement and Annuity Trust Scheme.
There has sometimes been inadequate disclosure of
fees and charges. Those have a particular significance
with RATS because they are comparatively expensive
to administer and clients need to be able to factor
that into their decisions. There have also been problems
with the disclosure of commission and investment performance,
There have been issues with the expertise of some
firms to advise on suitable assets to ensure that
Income Tax requirements for RATS are met, and that
the investments are suitable to allow benefits to
be drawn down on retirement.
A particular problem relating to investment policies
pursued within RATS has been the use of heavy gearing
(borrowing) by trustees of RATS, with the serious
risks involved not always being clear to the RATS’
Commission reportedly received some very helpful responses
to the discussion paper. It was clear to the Commission,
both from the number, and the content of those, that
there is widespread concern about the above areas within
firms across all sectors of the finance industry.
a result, the Commission produced a consultation paper
summarizing its proposals for improving the regulatory
framework under which firms provide services relating
Commission’s proposed rules include:
for those advising and acting as trustee of or administering
At set up stage, a trustee accepting trusteeship must
be certain that the RATS and the proposed investment
and investment strategy is a suitable form of retirement
provision for the member;
Before transferring funds from a defined benefit pension
scheme to a RATS, the trustee must produce an impartially
verified report showing that the RATS would be more
financially beneficial over the existing set-up;
Trustees must make the member aware of the risks of
using gearing to enhance investment, and the trustee
must get the member to sign a copy of the statement,
stipulated within the Commission’s guidance
note, underlining that they understand the risks;
Trustees must report full financial reports of the
RATS financial standing to the member at least annually;
The trustee must ensure that, once income starts to
be drawn down and paid to the member in the form of
an annuity, the trustee can demonstrate that the level
of payment is appropriate to secure a satisfactory
provision for the retirement of the member, but also
that reviews are carried out to ensure that the amount
annuitized remains appropriate with respect the amount
remaining in the RATS, and the life expectancy of
A trustee must make fully transparent what its fees
and commissions are, with regards assets at any level,
including not limited to trustee’s own fees
and fees or commissions payable from the assets to
the trustee, any independent financial advisor, other
intermediary, investment or fund manager or adviser.
No financial services business licensed by the Commission
shall inaccurately or misleadingly advertise or promote
RATS, or investments or investment strategies (including
gearing) for use as part of retirement provision involving
RATS. The Commission's proposals are listed comprehensively
on its site, where responses will be welcome until
September 2, 2009.
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.
Law has three main objectives:
- To protect
- To protect the reputation
of Guernsey as an International banking centre;
- To protect the best
economic interests of Guernsey.
capital adequacy rules which are stiffer than the Basle
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").
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."
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."
Commission said its announcement represented guidance
issued by the Commission for the purposes of Regulation
1(4)(a) mentioned above.
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:
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
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
December, 2003, the FSC responded to concerns raised by
the jurisdictions 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
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."
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."
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."
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."
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
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.
Neville, Director General of the Commission explained:
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.
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
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.
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.
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.
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
impose stronger corporate governance arrangements through
the requirement for at least one independent non-group
non-executive director on the Boards of local banks;
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.
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.
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.
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,"
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,"
Guidance Note providing additional Guidance on certain
sections of the Banking Supervision (Bailiwick of Guernsey)
(Amendment Law), 2003 with regards up streaming was published
by the Guernsey FSC in January 2010 and is available on
the Commission's website.
April 2010, the Guernsey Financial Services Commission
published the final draft of new Capital Adequacy Rules,
mandatory for all entities licensed under the Protection
of Investors (Bailiwick of Guernsey) Law 1987. The release
of the Rules in the their final form is the culmination
of a November 2009 consultation.
Capital Adequacy Rules became effective on April 16, 2010,
but contain transitional rules that allow licensees until
June 30, 2010, to meet the requirements.
Guernsey FSC has released details on the following rule
Adequacy Requirements for Designated Managers administered
by another firm: Several respondents asked
whether, for designated managers administered by another
licensee, the Capital Adequacy Rules should be relaxed.
The respondents were concerned about barriers to entry.
The Commission no longer has the power, or the duty,
under section 4 of the Law to consider economic benefit
for licence applicants. The Commission, in arriving
at these Capital Adequacy Rules, has considered the
general risks that it considers licensees are exposed
to. The risk for such licensees is in being a designated
manager; the Commission does not recognise a distinction
between an administered designated manager and one with
its own staff and premises.
of Carry Value for adjustments at Rule 5: The
Commission has been made aware that the concept of carry
value is more appropriate than market value. This is
because, under certain GAAP provisions, some assets
are carried at cost in the balance sheet. The Commission
does not wish to force companies to apply market value
or fair value where they are not required to under GAAP.
Therefore the Commission has accepted this point.
Group Loans: The Commission received significant
feedback about the disallowing of inter-company group
loan debtors. Some respondents suggested to the FSC
that this might be appropriate in cases where capital
is then placed outside the Bailiwick of Guernsey but
should not apply where the debtor is another company
domiciled in Guernsey. The FSC considers that this is
not an appropriate principle on which to negotiate.
It has been regulators’ experience that such arrangements
lead to a recycling of capital that disguises, maybe
unintentionally, insufficient cover to the group as
a whole, the FSC said.
Risk: The absence of a definition of counterparty
risk provided a major problem for respondents. Whilst
the Capital Adequacy Rules have been designed to protect
licensees from an over-exposure to any single counterparty
they were not designed to capture balances with counterparties
for every outstanding bargain or trade. Consequently,
the Capital Adequacy Rules now exclude outstanding trades
unsettled for 15 days or less from the Counterparty
Risk computation. In addition, respondents were concerned
that cash held at bank would also be captured under
counterparty risk. The Commission has accepted this
concern: any cash held at bank with a term of less than
90 days should be excluded from the Counterparty Risk
computation, the new rules state.
Matching of Fees Payable and Receivable:
Lastly, respondents expressed concern at the inclusion
of fees payable (which were directly attributable to
fees receivable) in expenditure for the purposes of
calculating the Financial Resources Requirement. The
Commission has accepted this inclusion did not reflect
the behaviour of such businesses and therefore the risks
of undercapitalisation. Such fees payable are now excluded
from the Financial Resources Requirement (and Liquidity
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 GBP4,070 is payable on registration and
GBP3,860 annually thereafter (for a 'Pure' insurance manager.
Commercial insurance managers pay an annual fee of GBP6,460.
These fees are effective as of January 1, 2010.
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.
March 2010, it was announced that Heritage Insurance Management
in Guernsey had achieved a worldwide first by amalgamating
two Protected Cell Companies (PCCs).
companies, Harlequin Insurance PCC Limited and Friary Court
Insurance PCC Limited, are both insurance PCCs with 17 independently
owned cells between them.
companies were used by Heritage and Heath Lambert Insurance
Management (Guernsey) Limited (now merged) to provide cell
captive insurance facilities to their clients. It was decided
that amalgamating the two PCC companies into one would create
a more efficient structure which ultimately will save money
for the clients involved in the cells.
about the amalgamation, Martin Le Pelley, Compliance Officer
for Heritage, said at the time that: “The amalgamation
of two PCCs is not straightforward as each cell represents
a separate class of share, which in turn means that all
cell shareholders must vote in favour of the amalgamation
in order for it to take place. Nevertheless, having achieved
this milestone, we consider that the combined company will
provide a more secure and efficient platform for our cell
captive clients going forward.”
combined company has retained the name Harlequin Insurance
can choose between various bases of taxation, see Offshore
Legal and Tax Regimes and Offshore Business Sectors.
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.
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.
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:
Collective Investment Schemes Rules 2002 (which
cover Class A schemes); The Collective Investment
Schemes (Class B) Rules 1990 (which cover Class
Collective Investment Schemes Qualifying Professional
Investors (Class Q) Rules 1998 (which cover schemes
designed for qualifying professional investors);
Collective Investment Schemes (Designated Persons)
Licensees (Conduct of Business and Notification)(Non-Guernsey
Schemes) Rules 1994.
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
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.
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
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.
criteria for Qualifying Investor Funds released by
the Guernsey Financial Services Commission in 2006
met with support from the island’s finance industry.
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:
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
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.
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.
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
Commissions 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.
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.
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."
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
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
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
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.
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.
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.
Neville, Director General of the Guernsey Financial
Services Commission, announced following publication
of the report that:
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."
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
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."
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.
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.
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.
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.
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.
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.
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.
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
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.
April 2009, it was announced that the Guernsey Financial
Services Commission, in conjunction with a Working Party
representative of practitioners across the investment
industry, has been preparing new Conduct of Business
Rules mandatory for all entities licensed under the
Protection of Investors (Bailiwick of Guernsey) Law,
1987 as amended.
Conduct of Business Rules are the first, and major,
part of a process to replace the Licensees (Financial
Resources, Notification, Conduct of Business and Compliance)
Rules, 1998 and the Collective Investment Schemes (Designated
Persons) Rules, 1988. The second and final part of the
process is a revision to the Capital Adequacy Rules,
which went into effect in April 2010 (see Banking above).
Conduct of Business Rules recognise the very different
activities undertaken by the population of licensees
under the Law. The main highlights of the Conduct of
Business Rules include:
comprehensive set of rules outlining the Board of
a licensee’s responsibility for the compliance
a recognition that the term 'designated manager' applies
to administrators of open-ended and closed-ended collective
the proposed rules do not impose MiFID-style provisions
on licensees; nevertheless, the Rules recognise that
group requirements will apply to some firms and do
not, therefore, conflict with MiFID provisions;
the client money rules have been made more rigorous.
October 2009, Guernsey’s Chief Minister, Lyndon
Trott, expressed confidence that discussions between
the jurisdiction and key players in Europe will secure
the future for the funds industry in Guernsey.
said that he was fully aware and had been for some time
of the serious threats posed by the EU Alternative Investment
Fund Managers Directive, which seeks to regulate all
alternative investment funds including private equity
and closed-ended listed funds, where the island is a
political and industry response, being led by the Commerce
and Employment Department with the Guernsey Financial
Services Commission and the Guernsey Investment Funds
Association, has involved a series of meetings in Brussels.
development demonstrates just how vital it is that Guernsey
continues to build relationships with Brussels.”
is increasingly influential in setting global regulatory
standards and our continued prosperity will increasingly
depend on our relationship with them.”
States team has held discussions with the European Fund
and Asset Management Association, a number of financial
institutions in Europe, and other key individuals involved
in this debate.
and Employment Minister Carla McNulty Bauer said that
the purpose of discussions in Brussels were four-fold:
ensure that there is a clear understanding among decision-makers
of Guernsey’s current regulatory regime;
To obtain information on how the directive is likely
to be amended and when it is likely to be finalized;
To offer suggestions on how the directive could be
amended to ensure that it meets the objective of better
regulation but also ensures that European professional
investors can continue to access global capital markets;
To develop appropriate contacts within the various
European institutions to build relationships and understanding
McNulty Bauer said: “There is no doubt that this
directive has the potential to have a significant impact
on the global alternative funds industry. Guernsey is
not immune from those effects.”
the directive also presents a significant opportunity
for us. Our standards of regulation of alternative funds
are high and stronger than that of many EU Member States.
My Department is confident that Guernsey is well placed
to achieve equivalence under the directive at some time
in the future, though that will depend on how the directive
changes during the coming months.”
directive is unlikely to be finalized until the summer
of 2010 and will then not come into force until 2014
or 2015. Until that time the status quo remains and
Guernsey’s fund industry can continue to enjoy
its current market access for the next five years.
Finance, the promotional agency for the Island’s
finance industry, has assured that, despite the European
Union’s continued steps towards introducing the
controversial Alternative Investment Fund Managers Directive,
the future of Guernsey as a leading funds domicile is
not in jeopardy.
Niven, Chief Executive of Guernsey Finance, said:
am confident that no matter which approach is finally
adopted by the European Union, Guernsey is well positioned
to remain an attractive and competitive jurisdiction
for European professional investors.”
the latest proposals any third country hedge fund or
private equity group will be able to gain an EU passport
if it complies with the new rules and its home country
applies global standards. We certainly believe that
Guernsey meets all the relevant criteria, not least
through our long-standing commitment to adopt international
standards on regulation, transparency and information
exchange. This has been recognized by the Island’s
inclusion on the OECD ‘white list’ and the
findings of the Foot Review.”
added: “Guernsey’s government, industry
and regulator will be continuing the joint work to understand
the implications of the Directive, lobby for changes
to the proposals, and promote a better understanding
of our regulatory regime and alternative funds industry
to ensure we have the best possible outcome for the
May 2010, European Union finance ministers reached an
agreement on a mandate for the Spanish Presidency of
the EU to negotiate with the European Parliament on
a directive establishing an EU framework for managers
of alternative investment funds. A final vote on the
draft directive by the European Parliament was scheduled
for July, 2010.