The ability of collective investment schemes based in Guernsey to access the single market will progress unimpeded by whatever ‘flavour’ of Brexit ultimately is agreed betweeen the UK and the remaining EU 27, according to comments from Dominic Wheatley, chief executive of Guernsey Finance.
“From the Guernsey perspective, we are not planning on any specific Brexit outcome,” Wheatley says, noting that officially the UK government is aiming for a March 2017 deadline for triggering Article 50 negotiations to leave the Union.
And despite the latest legal ruling in the UK – subject to appeal by the UK government – that the government has to debate the triggering of Article 50 in Parliament, rather than relying solely on so-called royal prerogative to commence negotiations, Wheatley says it would be “a brave Parliament to do anything other than proceed with Brexit”.
The key challenge remains the uncertainty over what, exactly, Brexit will look like. However, whatever the outcome, Wheatley stresses that Guernsey has its own, independent relationship with Brussels, and that agreed private placement rules provide a stable route for funds to be raised from Europe via Guernsey.
“That tried and tested route to market remains valid,” he says, adding that “there will be no restrospective impact in terms of passporting.”
The passporting position has been reviewed and even re-reviewed as part of considerations around the first batch of non-EU jurisdictions considered by Esma, the European Securities and Markets Authority, in its advice to the European Commission. According to figures carried in Esma’s final advice document – https://www.esma.europa.eu/file/19173/download?token=iIF9KFXx – extension of the EU’s AIFMD passport to Guernsey could result in a 20% uplift in capital raising per fund. Over five years, there could be a 27% rise in aggregate investments into EU assets through Guernsey based funds.
“We are already ‘double-approved’ by Esma and are as well positioned as can be. None of that is technically dependent on any specific Brexit arrangements. Our relationship with Brussels is the result of direct negotiations.”
With regulatory certainty in place, Wheatley goes on to note that Guernsey will continue its focus on developing local skills required to service what is expected to be a still growing financial services sector following the Brexit.
Guernsey is not about offering brass plates, he stresses. As the book of business develops, there is a need to develop relevant skills in the local population and sometimes import skills to meet the demands of business.
“For an island nation that in itself is something that requires attention and planning. There is a skills policy in Guernsey combining training, retraining, lifestyle education, alongside acceptance and acknowledgement of the need to import skills.”
Currently, about a third of GDP is directly linked to international finance business, however this does not include related services such as legal or accounting. The overall impact on GDP taking these into account will be substantially higher. Up to 80% of exports are represented by financial services.
Another area where Guernsey is keen to press on is around beneficial ownership registers and globally recognised standards, such as the OECD’s Common Reporting Standard.
“Guernsey isn’t a reluctant follower of these trends, it is an enthusiastic desciple,” Wheatley says.
He adds that the jurisdiction has been consistent on anti money laundering, and that it is committed to developing standards that are in line with global standards. Guernsey is committed to having a registry of beneficial ownership and the discussions ongoing internationally around the nature of such a registry and access to it – the issue was highlighted globally and across multiple jurisdictions following publication of the Panama Papers. Wheatley highlights that, for example, French courts have suggested it would be unconstitutional in that country to have a public register of ownerhip; but Guernsey is intent on allowing access to its registry by, for example, tax authorities and international criminal investigation authorities, to ensure its not a haven of any sort for the wrong kind of money or money placed for the wrong reasons.
“We are committed to international efforts to not provide a haven to proceeds of crime, funding terrorism, and not being part of any tax avoidance structures.”
On the Common Reporting Standard, Wheatley notes that there is work ongoing to deliver the implementation such that the jurisdiction can meet the relevant dates upcoming (the first CRS reporting by institutions takes place by the end of the first quarter of 2017; exchange of information by so-called Competent Authorities starts by the third quarter of 2017).
“It is important for those delivering to get on with the job. It is not just about paying lip service; we actually need to do a lot of work to make effective these initiatives.”
Finally, on the issue of Guernsey’s manager-led product regime, announced earlier in 2016, Wheatley says that it has been “well received” and that the jurisdiction is moving ahead with consultation around a a regime for private investment funds. That consultation closes on 9 November, and is intended to plug a gap seen in the regulatory regime, where the Guernsey Financial Services Commission deems a product not to be a fund versus existing authorised and registered collective investment scheme products.
“It’s part of developing structures available for clients,” Wheatley says.
“We’ve always innovated, going right back to protected cell company legislation of the 1990s, which has become standard across many juridictions now.”