Consultation Paper on Ancillary Vehicles

Overview

Background

Under the current legal framework, some entities and activities which are closely related to a fund structure or a controlled investment fall within the scope of the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000 (“the Fiduciaries Law”). Whilst acting as a general partner of a Guernsey fund is and will continue to be covered by an exemption under the Fiduciaries regime[1], other activities closely connected to a registered or authorised fund or a controlled investment are not always subject to a statutory exemption. Entities carrying out such activities in most cases seek a discretionary exemption (“DE”)^[2] from the Commission under the current Fiduciaries Law. It has been recognised that the use of the DE regime may not be the most appropriate or efficient mechanism to address such investment-related activity.

The new Fiduciaries Law (“the 2020 Fiduciaries Law”), therefore, introduces a new automatic statutory exemption for such activity[3]. Notification may be made to the Commission of specific activity related to Ancillary Vehicles (“AVs”), vehicles ancillary to a controlled investments and investment business. Where such notification is made in accordance with the Rules, the statutory exemption will apply.  The notification regime is provided for under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (“the 2020 PoI Law”). Taking a risk-based approach, it is hoped that the proposed framework will reduce overlap between the fiduciary and investment regulatory regimes, reduce unnecessary administrative burden and increase certainty of treatment under the Fiduciaries Law, leading to better outcomes for both the Commission and industry.

In August 2020 the Guernsey Financial Services Commission published a Discussion Paper on Ancillary Vehicles[4] (the “Discussion Paper”) seeking feedback from all interested parties on the proposed types of entity and activities which could fall within the new statutory licensing exemption under the 2020 Fiduciaries Law, when notified to the Commission in accordance with rules made under the 2020 PoI Law. It was proposed that the relevant rules (the “Ancillary Vehicle Rules”) and guidance related to the notification of activities in respect of AVs would provide for notification of a general partner of a carried interest L.P. or a co-investment L.P. of a registered or authorised fund.  

The Discussion Paper invited comments on the proposal and suggestions on other types of ancillary vehicles and/ or other activities which should fall under the new exemption where the inclusion of such vehicles or activities would not increase regulatory or money laundering (“ML”) or terrorist financing (“TF”) risks.

Feedback from the Discussion Paper is considered and discussed in greater detail in this Consultation Paper.

This Consultation Paper seeks feedback on the proposed Ancillary Vehicle Rules.   

The draft Ancillary Vehicle Rules, which include guidance, are provided as an Appendix to this Consultation Paper. A reference to the relevant rule is made for each proposal, where applicable.