Guernsey has introduced a new fund classification to the island for the first time with the launch of new manager-led products (MLPs).
Revealed at yesterday’s Guernsey Funds Forum, as was reported in advance of the event in an exclusive video report by International Investment, the MLPs have been developed and approved following extensive discussions with the Guernsey financial services regulator and are available to be used by firms straight away.
The new classification of fund has been made possible through the Guernsey Financial Services Commission’s (GFSC) risk-based approach to regulation – shifting a proportion of the compliance onus onto managers. The launch was fully revealed by Dominic Wheatley, chief executive of Guernsey Finance, in his opening speech at yesterday’s event.
“As you all know Guernsey has always adapted well to the changing requirements of fund managers and investors,” he said at the event. “Our core strategies as a finance centre are founded on a reputation for quality and compliance, economic stability, effective regulation, global standards of transparency and AML, real substance in our industry, and the ability to respond quickly to changing market demands.
“This year sees a continuation of this with the introduction of our MLP. This is a clear demonstration of the advantages of risk based regulation and shifting the focus of regulation to the regulation of managers rather than relying on the direct regulation of funds themselves.
MLPs ‘available immediately’
“The consultation period has concluded and I’m pleased to confirm that MLPs are available immediately”
Wheatley pointed that this first application of the principle MLPs will respond to the same market pressures that have given rise to Luxembourg’s RAIFs (which stands for revolution in the alternative investment fund and is due for full roll out at the end of June) and Malta’s NAIFs (which stands for notified alternative investment funds framework and was launched in February).
‘Streamlined and more efficient’
The launch will allow for “appropriate derogation of alternative investment fund managers directive (AIFMD) rules” and will facilitate “streamlined and more efficient fund formation processes”.
However, Wheatley believes that Guernsey’s MLPs go further than both NAIFs and RAIFs in allowing “regulatory efficiencies for managers housing several funds in Guernsey, whilst maintaining appropriate segregation, thereby nullifying contagion risk”.
“We see this as offering a very attractive vehicle for managers needing substance in the island, an area in which we expect to grow,” added Wheatley.
“Once an AIFMD has been licensed by the Commission, they will then be able to launch new partnership structures and corporate funds by simple notification.
“Capital will be concentrated at the AIFM level. This will facilitate the quick and efficient launch of new funds with a minimum requirement for red tape but with no diminution of the quality of regulatory oversight.”
International Investment attended yesterday’s event and spoke to the Guernsey Financial Services Commission about its role in the launch.
‘Reaction to the AIFMD’
Emma Bailey, director of investment supervision and policy at GFSC, said that the new product is a “reaction to the AIFMD”, pointing that it should not be seen as a lighter touch type of regulated investment but more of a recognition “that regulation should be focussed on the manager”.
“The response has been very positive (today, but I’d imagine there will be more questions over the next week. Guernsey Finance has led the launch, but on our website are the guidance notes. We are open to have those discussions should anyone (want to) have them.
Wheatley added that more products of this kind are already being consulted on at the moment and that in the last seven days, representatives from the Guernsey Investment Fund Association GIFA and the GFSC have started work on a very private fund regime, which should go to consultation in June.
‘First of a number of developments’
“We see this as very much the first of a number of developments based on a similar theme of moving the focus of regulation to facilitate greater ease of doing business and speed to market without compromising on regulatory standards.
“The consultation is likely to recommend a relaxation of prospectus disclosures whilst maintaining high standards of governance.”