Guidance on Registered Collective Investment Schemes

1 GUERNSEY FINANCIAL SERVICES COMMISSION REGISTERED COLLECTIVE INVESTMENT SCHEME GUIDANCE – NOVEMBER 2021 The purpose of this document is to provide guidance in respect of relevant issues relating to Registered Collective Investment Schemes, due diligence issues that need to be considered by Guernsey licensed service providers to such schemes and the information required to be submitted to the Commission in support of an application. Any questions in relation to this guidance, including those in respect of the Commission’s regulatory approach to Registered Collective Investment Schemes and the responsibilities of Guernsey licensed service providers in their operation of such schemes should be referred in the first instance to the Authorisations and Innovation Division of the Commission. Page Guidance 2 The Structure of the Scheme 2 The Promoter and/or Investment Manager 2 Registration under the Law 5

2 GUIDANCE The Structure of the Scheme

1. A Registered Collective Investment Scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (“POI Law”) can be a limited company (including a protected cell company or incorporated cell company), a limited partnership or a unit trust. The Promoter and/or Investment Manager
2. The promoter and/or investment manager should be an institution regulated and in good standing, or, if conducting activities which do not require regulation, otherwise in good standing.
3. Good standing would imply that the institution itself, its directors, controllers and senior managers had not during the past 5 years been the subject of material disciplinary action by a regulator or professional body, or subject to any conviction for fraud, dishonesty or related offences of a financial nature.
4. The Guernsey licensed service provider associated with the application for registration under the POI Law must certify to the Commission that they have performed sufficient due diligence to be satisfied that the promoter and/or investment manager are fit and proper. In that regard, such service providers should take account of the issues referred to at 9(a), (b) and (c) below and should document their findings and conclusions accordingly.
5. For the avoidance of doubt, applications on behalf of newly formed promoters and/or investment managers will be considered. The Guernsey licensed service provider who is seeking the scheme’s registration will need to consider the track record and experience of the controllers, directors and management of such entities taking into account their previous employment history. Such previous employment history should demonstrate that the individuals possess relevant experience in relation to managing or advising on investors’ funds using similar investment strategies to those that will be adopted by the Registered Collective Investment Scheme. The licensed service provider’s consideration of these matters and conclusions arising should be documented.
6. Where applicants are aware of issues in relation to a promoter and/or investment manager (which term should be taken to include their controllers, directors and management) and associated parties, but are uncertain of their materiality or possible impact on the subject application, they should consult Commission staff prior to submitting the formal application at the time they become aware of the issue.

3 7. Commission staff will assess licensees’ application due diligence as part of their post-facto monitoring of licensees. If the Commission were to find that warranties provided were defective, or misleading, the Commission would take action against the licensee and in appropriate cases would exclude that licensee from future participation in the self-certification programme. 8. The Commission expects each licensee to ensure that its due diligence in respect of the promoter and/or investment manager and associated parties is updated on a regular basis. The Commission will not prescribe the means by which this requirement is to be achieved but as set out in 4 above licensees should take account of the issues at 9(a), (b) and (c) below and should document their findings and conclusions. Where licensees become aware of issues in relation to a promoter and/or investment manager (which term should be taken to include their controllers, directors and management) and associated parties, but are uncertain of their materiality or possible impact on the subject Registered Collective Investment Scheme, they should consult Commission staff, at the time they become aware of the issue. 9. Promoters and/or investment managers (including their directors, controllers and senior managers) must be fit and proper. This can be defined as being a requirement for integrity (or honesty), competence and solvency. Guernsey licensed service providers should ensure that the following issues are covered as part of their due diligence procedures in respect of new client relationships and that their findings and conclusions are documented. (a) Integrity Promoters and/or investment managers (which term should be taken to include their controllers, directors and management) should be of a high reputation and standing. Poor reputation would be considered to be a negative factor. The promoter and/or investment manager must carry on their business with prudence, professional skill and honesty. In the case of promoters and/or investment managers with a limited history, due to the fact that they are newly or recently established, the integrity of the controllers, directors and management should be assessed in the light of previous employment and experience. It would be expected that the Guernsey licensed service provider would make direct contact with relevant individuals’ previous employers as part of the necessary due diligence enquiries. Promoters and/or investment managers would be expected to deal openly and honestly with the Commission and any other regulatory authority to whose regulation they are subject (either on a consolidated basis or directly).

4 (b) Solvency Promoters and/or investment managers should be solvent. A firm regulated in another jurisdiction should also comply with the solvency, capital adequacy or financial resources requirement (as appropriate) laid down by the relevant regulatory body to which it is accountable. Past performance in this respect should also be considered to ensure that relevant requirements have been consistently met in the past. A promoter and/or investment manager that is not regulated would be expected to maintain a surplus of shareholders’ funds as disclosed in its audited financial statements. Past performance in this respect should also be considered to ensure that relevant requirements have been consistently met in the past. Promoters and/or investment managers would be expected to maintain adequate net liquid assets such that they are able to settle their debts when they fall due. In the case of promoters and/or investment managers with a limited history, due to the fact that they are newly or recently established (that is, not being able to produce audited annual financial statements for a period of at least 24 months), it will be necessary for the Guernsey licensed service provider to consider financial projections relating to the proposal under consideration. It will also be necessary to consider whether the controllers, directors and management of such promoters and/or investment managers have previously been responsible for considering the solvency of an entity (for example, if they held a director role or financial control function). Where individuals have been directors or held relevant positions at entities that have gone into liquidation or suffered financial loss it will be necessary to consider the role undertaken by the relevant individual in such situations. (c) Competence The most obvious way to demonstrate competence is to have established a favourable track record, in a business similar to that to be conducted in the Bailiwick. The promoter and/or investment manager should be able to demonstrate an acceptable complaints history. In the case of promoters and/or investment managers with a limited history, due to the fact that they are newly or recently established, it will be necessary for Guernsey licensed service providers to consider whether the controllers, directors and management of such entities have been subject to significant complaints whilst employed by other firms.

5 Promoters and/or investment managers should have staff of adequate skills, knowledge and experience to undertake and fulfil their duties efficiently and effectively. Registration under the POI Law

1. In order to consider granting the requisite registration to the Registered Collective Investment Scheme the Commission must receive a copy of the application form (Form REG 2019), which must be signed by the proposed designated administrator of the scheme. (a) The form requires the proposed designated administrator to make the following declarations: “I confirm that we, as proposed designated administrator of the scheme, have performed sufficient due diligence to be satisfied that the promoter of, and the associated parties to, the scheme are fit and proper and that in this respect consideration has been given to all of the issues set out in the Guidance Document issued by the Commission dated November 2021.” “I confirm that we, the proposed designated administrator of the scheme, are content that the disclosures in the scheme’s prospectus/offer document or equivalent meet the requirements of the Prospectus Rules 2021 and that the following disclosures are made in the scheme’s prospectus/offer document or equivalent: The Company is a Registered Closed-[Open-] ended investment scheme registered pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 2020 and the Registered Collective Investment Scheme Rules 2021 issued by the Guernsey Financial Services Commission (the “Commission”). The Commission, in granting registration, has not reviewed this document but has relied upon specific warranties provided by [ ⚫ ], the Company’s designated administrator.” “The Commission takes no responsibility for the financial soundness of the [Scheme] or for the correctness of any of the statements made or opinions expressed with regard to it.” The Commission attaches great importance to these warranties. It expects applicants to be able to demonstrate that they have documentary evidence to support the warranties given, and to be able to produce that evidence immediately should the Commission request it. Applicants who cannot substantiate their applications may, as noted in paragraph 7 of this

6 guidance, find themselves excluded from participation in the Registered Collective Investment Scheme self-certification programme. (b) Submission of fully completed Forms PQ in respect of controllers, directors of the promoter and scheme (as appropriate); (c) Payment of the application fee required under the relevant fee regulations; (d) Submission of certified complete final copies of the following documents:- (i) prospectus, offering document or equivalent; (ii) the application form, subscription agreement or equivalent; (iii) constitutive documents, that is the articles of incorporation, trust deed or limited partnership agreement, as applicable; (iv) all material agreements entered into by the scheme. (e) The licensing under the POI Law of persons intending to carry on a restricted activity within the Bailiwick of Guernsey in connection with the scheme. Reference should also be made to 3 below. 2. The Commission will declare the necessary registration under the POI Law within three working days of receipt/resolution of all of the above issues. Following receipt of the formal application made by the licensed service provider in respect of the proposed Registered Collective Investment Scheme the Commission will conduct limited enquiries into the parties to be associated with the scheme and will consider the scheme’s investment objectives. Any concerns arising from these enquiries and consideration will be raised with the Guernsey licensed service provider and may, in extreme cases, delay issue of the relevant registration. Where licensees have questions about any aspect of the proposed scheme and its operation or become aware of issues in relation to a promoter and/or investment manager (which term should be taken to include their controllers, directors and management) and associated parties, but are uncertain of their materiality or possible impact on the subject Registered Collective Investment Scheme, they should consult Commission staff, prior to the submission of a formal application to the Commission, at the time they become aware of the issue. This will assist Commission staff in expediting the formal application. The Commission’s limited enquiries and consideration referred to above should not be considered to be a substitute for the licensee’s responsibilities referred to in this document.

7 3. Should the promoter of a Registered Collective Investment Scheme require the establishment of a Guernsey entity that will undertake controlled investment business in connection with the scheme then it will be necessary for such company to be licensed under the POI Law before the relevant authorisation or registration can be issued in respect of the fund. The application process relating to the issue of a licence under the POI Law, will normally take longer than the three working days referred to at 2 above. November 2021