COLLECTIVE INVESTMENT SCHEMES 

Since 1987 the Guernsey Financial Services Commission have been responsible for the regulation of Collective Investment Schemes within the Island of Guernsey under the provisions of the Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended.

A Collective Investment Scheme is any arrangement relating to property the purpose or effect of which is to enable investors to participate in profits realised by the scheme and in which the investors do not have day to day control over the management of the property within the scheme and further which involves the pooling of the contributions of investors and the profits for income of the scheme.

Not all Collective Investment Schemes are regulated by the Guernsey Financial Services Commission. Some arrangements are specifically excluded from the regulatory environment under the Protection of Investors legislation. The main exceptions are:

1. Arrangements where each of the investors enters into the scheme for purposes which are ancillary for their own business purposes;

2. Arrangements where each of the investors is a body corporate in the same group as the manager of the schemes;

3. An arrangement where the primary purpose is to enable persons participating in the scheme to share in the use or enjoyment of a particular asset;

               4. Contracts of insurance;

               5. A body corporate other than an open-ended investment company;

               6. A close-ended unit trust.

Collective Investments Schemes which are regulated are operated through either a company or a trust. A company might be a simple investment company or a protected cell company using cells for individual sub-funds or classes.

In order to operate regulated schemes must fall within one of the four categories of scheme that exist in Guernsey. These categories are A1, A2, B and Q. A scheme falling within the A1 category must comply to the fullest extent possible with the Collective Investment Schemes Rules, otherwise known as the Class A rules published by the Commission. Schemes authorised under this category are eligible to be recognised in the United Kingdom pursuant to Section 87 of the Financial Services Act, 1986. Such schemes also have the benefit of a compensation scheme established by the Commission. Class A2 schemes must also meet the full requirements of the Class A Rules save for certain specific exceptions that have been declared acceptable by the Commission. These are dealt with on a case by case basis. Such schemes still provide the protection of the compensation scheme. Class B Scheme require compliance with a more limited set of rules known as the Class B Rules. Such a scheme does not qualify for recognition under the Financial Services Act 1986 as there is no compensation scheme for the protection of investors.

Class Q schemes are the latest addition to the categories of schemes permitted in Guernsey. These schemes are intended for qualifying or professional investors and as such benefit from greater flexibility within the rules governing them. The schemes do not qualify for recognition under the Financial Services Act, 1986 nor do they entitle investors to the protection of the compensation scheme.

No matter which route is taken for the creation of a scheme the Commission require that there is a Manager and a Custodian or Trustee in respect of the scheme. The role of the Manager is to promote the Fund and to undertake the management of the fund including the settlement of investments, the calculation of prices and the production of reports and accounts. The Manager may delegate certain functions. The Custodian or Trustee is responsible for the safe keeping of the assets of the fund.

Application Procedure

The approval process in respect of a Collective Investment Scheme may be divided into three stages. The first stage is an application for consent in principle is filed with the Guernsey Financial Services Commission. The basic details concerning the scheme are outlined and the main parties are identified. Assuming permission in principle is granted the second stage involves an application for interim approval. In order to obtain interim approval it is necessary for scheme particulars to be lodged together with the appropriate application form with the Guernsey Financial Services Commission. Save in the case where Class Q scheme a compliance certificate from a lawyer is required. The third stage in the application process is the application for final authorisation. At this stage all material agreements and relevant documentation is lodged with the Commission for final approval before the launch of the scheme.

The application procedure takes approximately 8 - 10 weeks. Delays may be occasioned where it is necessary for a party unknown to the Commission to be approved. The delays depend upon the provision of information regarding the relevant parties and approvals in other jurisdictions.

For further information on any aspect of Collective Investment Scheme and copies of the appropriate application forms please contact this office by e-mail, telephone, post or fax.

Other information is made available on the website of the Commission which might be found at: www.gfsc.gg