Authorised Closed Ended Investment Schemes Rules ( ACIS ) Registered Collective Investment Schemes Rules 2008 ( RCIS ) Compared. Which to Choose?

Transcription

1 page 1 of 5 forward contact us Corporate Authorised Closed Ended Investment Schemes Rules ( ACIS ) Registered Collective Investment Schemes Rules 2008 ( RCIS ) Compared Which to Choose? October 2010

2 p 2 of 5 Background On 15th December 2008, changes were made to Guernsey s Regulatory Regime for open and closed ended collective investment schemes. The most significant changes affected closed ended collective investment schemes. This paper analyses: The changes that have been made; The impact the changes will have on the establishment and operation of closed ended collective investment schemes in Guernsey, and The differences between the regulatory regimes now applicable. Repeal of COBO The Control of Borrowing (Bailiwick of Guernsey) Ordinance, 1959, ( COBO ), the mainstay of regulatory authorisation for closed ended investment funds in Guernsey, was repealed insofar as it has any application to investment funds. Simultaneously with its abolition, closed ended investment funds were designated with open ended investment funds as collective investment schemes and brought within the regulatory scope of the Protection of Investors (Bailiwick of Guernsey) Law, 1987 ( POI ). New Rules Open ended investment funds have always been subject to regulations under POI. The repeal of COBO required the introduction of new regulations under POI for closed ended funds. The Guernsey Financial Services Commission ( GFSC ) introduced three new sets of rules; the Prospectus Rules 2008, the Registered Collective Investment Schemes Rules 2008 (applicable to both open and closed ended investment funds) and the Authorised Closed Ended Investment Schemes Rules 2008 offering, between them two different regulatory regimes. The RCIS rules offer a fast-track GFSC approval process that involves little or no review by the GFSC at the inception of the relevant Fund and relies upon increased due diligence expectations on the part of the Fund s administrator in Guernsey. Funds to be authorised under the ACIS Rules will be subject to GFSC scrutiny at the outset and, consequently, the initial authorisation process will take longer. Existing investment funds will be deemed to have elected to be authorised (in the case of open ended funds under the pre-existing authorised Investment Schemes Rules of Class A, B or Q and in the case of closed ended funds under the new ACIS Rules 2008) unless they elect to be treated as registered open ended collective investment schemes or registered closed ended collective investment schemes as the case may be, prior to 30 April In view of this ability to elect, we have been asked which regime an existing fund should elect. This note looks at whether there are any real differences between the two regimes insofar as they relate to existing closed ended investment schemes. Standard COBO Fund Authorisations versus the ACIS Rules Before comparing the ACIS Rules and the RCIS Rules, it is worth taking a look at the Authorised ACIS Rules by themselves to see how they differ from standard authorisations that would have been given under COBO for investment funds. It was standard practice for the GFSC to attach conditions to consents under COBO. These conditions are now reflected within the ACIS Rules. The only differences between the COBO conditions and the ACIS Rules are as follows: 1. Conflicts of Interest The ACIS Rules introduce formal requirements dealing with conflicts of interest between service providers and the Authorised Closed Ended Investment Scheme, essentially, requiring dealings between related service providers and the scheme itself to be on an arm s length basis.

3 p 3 of 5 2. Information Particulars As far as Information Particulars are concerned, the ACIS Rules essentially mirror pre-existing Form APC requirements for closed ended investment funds, the only difference being that the Information Particulars should now state that the scheme is an authorised closed ended investment scheme and, obviously, the old wording in relation to the Control of Borrowing Ordinance has disappeared. There is no requirement for existing closed ended investment funds to update their Information Particulars but if they do, the Information Particulars would have to be revised to comply with the ACIS Rules. 3. Immediate Notifications The GFSC under COBO used to require notification in the event of proposed changes of method to operation of the fund, in particular, changes to constitutive documents, information particulars, service providers or investment parameters. The GFSC used to stipulate under COBO that no change to any of these could be made unless the GFSC had confirmed that it had no objection to the change. The notification requirement remains (albeit in slightly more detail) and with new requirements to notify: (a) any proposal to list or delist the scheme on a stock exchange; or (b) any actual or intended litigation involving the scheme. Interestingly, there is no requirement to seek GFSC approval under the ACIS Rules for any notification event, although it may be prudent still to confirm that the GFSC has no objection whenever a notification is made. The periodic notification requirements under COBO which related to annual reports and Quarter end statistical information remain. All in all then, there is very little that is new under ACIS. ACIS versus RCIS The key features summarised in the guidance notes to both sets of rules, are almost identical. Each must either be registered or authorised as the case may be with the GFSC (albeit the ACIS Rules specify that the ACIS schemes are subject to continuing supervision). Registered or authorised collective investment schemes may be established as companies, unit trusts or limited partnerships or such other vehicle or entity as may be approved by the GFSC. Each scheme must be established with the objective of spreading risk and the criteria must be specified in the Information Particulars. The ACIS Rules make provisions for disclosures which must be made to investors in the Information Particulars. The RCIS Rules stipulate that registered collective investment schemes must adhere to the Prospectus Rules 2008, which also make provision for disclosures that must be made to investors in the Information Particulars. These disclosure requirements do differ in some respects. Provisions regarding both immediate and periodic notifications to be made to the GFSC regarding changes to the scheme, financial statements and statistical information are included in both the RCIS Rules and the ACIS Rules. The notification requirements are less detailed under the RCIS Rules. Under the RCIS Rules, the administrator of a registered investment scheme is required to give written notice forthwith to the GFSC in respect of any proposed change of designated manager or designated custodian and any proposal to reconstruct, amalgamate, terminate prematurely, wide up or extend the life of the registered investment scheme. The RCIS Rules contain no other immediate notification requirements, although the periodic notification requirements with regard to annual statements and quarter and statistical information are identical to the ACIS Rules. The only difference in periodic notification requirements is that the administrator of an RCIS scheme must notify the GFSC each year of any change in respect of the information contained in the application form submitted for registration as a registered investment scheme or, in the absence of any change, notify the GFSC by way of confirmation of no change.

4 p 4 of 5 For both ACIS and RCIS schemes the GFSC is willing to consider the appointment of a custodian or trustee that is domiciled outside Guernsey but neither RCIS closed ended nor ACIS schemes are required to appoint a custodian. Both ACIS and RCIS schemes require a Guernsey administrator. Conclusion The only significant changes between the two regimes are: i that there are slightly more notification requirements for authorised collective investment schemes; The GFSC s existing policy of selectivity will continue in respect of both RCIS and ACIS schemes. RCIS schemes must not be offered directly to the public in Guernsey. However, they may be offered to regulated entities in Guernsey or offered to the public by entities appropriately licensed under the Protection of Investors (Bailiwick of Guernsey) Law, No such restrictions apply to ACIS schemes. ii iii iv Information Particulars must contain different disclaimers and disclosures reflecting the different status of the Funds; registered collective investment schemes may not be offered directly to the public in Guernsey; and GFSC will not review the Prospectuses of registered collective investment schemes. Both sets of Rules contain similar requirements regarding management and custody of assets, the only difference being custody requirements for open ended schemes under the ACIS Rules. Both sets of rules contain identical conflicts of interest requirements. The Prospectus Rules contain similar requirements for disclosure within Information Particulars to those that apply under Part 4 of ACIS but the Information Particulars of RCIS Funds are required to contain different disclaimer wording and restrictions on offering language. From a cost perspective, the fees are identical for both the application and ongoing charges of the GFSC. It makes no difference whether the scheme is authorised or registered. Registered Funds will be perceived to be less regulated than authorised funds. Certainly, the involvement of the GFSC at the inception stage will be much reduced and the fast track approval process will be attractive, but if a fast track initial approval process is not a priority, we can see little merit in adopting the RCIS regime and would suggest that existing funds might choose to remain as authorised closed ended investment schemes. Please note that this briefing is only intended to provide a very general overview of the matters to which it relates. It is not intended as legal advice and should not be relied on as such. Carey Olsen 2010

5 p 5 of 5 back home Contact us For further information or professional advice please contact our lawyers below. Carey House PO Box 98 Les Banques St Peter Port Guernsey GY1 4BZ Tel: +44 (0) Fax: +44 (0) Graham Hall, Partner graham.hall@careyolsen.com Telephone: +44 (0) Andrew Boyce, Partner andrew.boyce@careyolsen.com Telephone: +44 (0) Ben Morgan, Partner ben.morgan@careyolsen.com Telephone: +44 (0) Tom Carey, Partner tom.carey@careyolsen.com Telephone: +44 (0)