Offshore Services - Guernsey

In the second half of 2007 the Guernsey Financial Services Commission released a consultation draft of the Collective Investment Schemes (Class A) Rules 2008. These will replace the current rules which were introduced in 2002. The rules regulate matters in relation to open-ended collective investment schemes authorized in Guernsey as class A schemes.

Once these rules have been finalized, Her Majesty's (HM) Treasury will be formally requested to pass a designation order in respect of the rules. Before this order can be made, the UK Financial Services Authority must confirm that the new rules provide protections equivalent to those applicable to UK-based open-ended investment companies or unit trust schemes. The designation order is significant in that once it is received, class A funds subject to the new rules may be marketed directly to the public in the United Kingdom.

HM Treasury previously issued a designation order in respect of the existing class A rules. However, since those rules were introduced in 2002, changes have been made to the regulation of investment funds in the European Union. The changes, which have liberalized the regulatory regime, have meant that the more tightly controlled Guernsey class A funds have been a less attractive option for promoters. This is reflected in the statistics maintained by the Guernsey Financial Services Commission, which show that of the 276 open-ended investment funds authorized, only 15 of these are class A funds.

The new class A rules, which have been drafted with reference to the UK collective investment scheme sourcebook, have sought to correct this position. One important change is that class A funds will be permitted under the new rules to enter into hedging transactions.

The new rules will bring Guernsey funds into line with the EU approach, providing further opportunities for investment through Guernsey.

ILO