GUERNSEY Law and Practice Contributed by: Matthew Brehaut, Carey Olsen
All open-ended funds must appoint a Guernsey custodian, licensed by the GFSC. Institutional or expert investor hedge funds can be permitted to appoint a foreign prime broker rather than a local custodian or trustee, which is not required to offer physical segregation of fund assets from its own, so long as the fund prospectus makes clear the risks of such arrangement. Retail or less-sophisticated investor hedge funds can be permitted to appoint a foreign prime broker to take control of the fund’s property, but will nor - mally be expected to appoint a local custodian or trustee to oversee the prime broker. All Route 1 PIFs must appoint a Guernsey- based manager, licensed by the GFSC, which is responsible for making certain representations and warranties to the GFSC on the ability of investors to suffer losses. As expected from a jurisdiction with over GBP500 billion of funds under management and admin - istration, Guernsey has a wealth of first-class fund service providers, including administrators, lawyers, auditors and custodians. This creates a virtuous circle – as funds under management increase, so does the depth of expertise, which in turn attracts further funds under management. Guernsey also benefits from a large number of highly experienced, independent non-execu - tive directors providing additional investment management experience, as well as guidance and oversight for funds, and ensuring that the highest standards of corporate governance are observed. 2.3.3 Local Regulatory Requirements for Non- Local Managers As is the case with regulators of most other juris - dictions, the GFSC has direct authority only over those entities which it has licensed or author -
ised, and which conduct business in or from within Guernsey; and those entities are answer - able to the GFSC. The POI Law makes it a criminal offence, subject to certain exceptions, for any person to carry on or hold themself out as carrying on any “con - trolled investment business” in or from within Guernsey without a POI licence issued by the GFSC. Additionally, it is an offence for a Guern - sey body to carry on or hold itself out as carry - ing on any controlled investment business in or from within a territory outside Guernsey, unless that body is licensed to carry on that business in Guernsey and the business would be lawfully carried on if it were carried on in Guernsey. As such, in terms of services (eg, investment management or advisory) being provided by non-Guernsey entities from outside Guernsey, the GFSC does not have direct authority over those providers, whose authority rightly sits with the regulator in their home jurisdiction. However, in regulating the relevant fund the GFSC will con - sider (as one of the elements in authorising or registering the fund and on an ongoing basis) the quality of the non-service providers. The home jurisdiction, home regulatory body and the size and reputation of the provider are all considered by the GFSC. Funds domiciled in Guernsey are, therefore, free to contract the services of any provider in another jurisdiction, subject always to both a determination by the relevant fund of the “fit and properness” of the service provider and to the oversight of the GFSC over the rel - evant fund. 2.3.4 Regulatory Approval Process The time required to obtain regulatory approval depends on the type of fund registration/authori - sation being sought. More detail is provided in
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