Guidance Note on Applications and Notifications for Manager-Led Products

Guidance Note Applications/Notifications in respect of Manager-Led Product November 2021

Guernsey Financial Services Commission www.gfsc.gg 2 Contents Glossary of Terms................................................................................................................................... 3 Purpose ................................................................................................................................................... 5 1: Introduction .................................................................................................................................... 6 2: Applications....................................................................................................................................... 7

Guernsey Financial Services Commission www.gfsc.gg 3 Glossary of Terms AIFMD means Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 AIF means a collective investment undertaking, including investment compartments thereof, which: (i) raises capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors; and (ii) does not require authorisation pursuant to Article 5 of the UCITS Directive, whatsoever its legal form including under a contract, by means of a trust or under statute and whether it be open- or closed￾ended unless it meets one or more of the exemption provisions set out in AIFMD. This Guidance Note only applies to AIFs that are Collective Investment Schemes, as defined below AIFM means legal persons whose regular business is managing one or more AIFs AIFMD Rules means the AIMFD Rules 2021 Collective Investment Scheme for the purposes of this Guidance Note, the definition of a collective investment scheme concurs with paragraph 1 of Schedule 1 of the POI Law. It will be registered in accordance with section 8(1) of the same Law and may be open- or closed￾ended Commission the Guernsey Financial Services Commission POI Law the Protection of Investors (Bailiwick of Guernsey) Law, 2020 Designated Administrator for the purposes of this Guidance Note, the person designated as such by the Commission in respect of the collective investment scheme.

Guernsey Financial Services Commission www.gfsc.gg 4 Trustee for the purposes of this Guidance Note the person designated as such by the Commission in respect of the collective investment scheme, and may be: (i) the designated trustee in the case of a unit trust scheme (ii) the designated custodian in the case of a registered scheme other than a unit trust scheme UCITS Directive means Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009

Guernsey Financial Services Commission www.gfsc.gg 5 Purpose This Guidance Note is to assist applicants to understand the principles underpinning the Manager-Led Product and the methodology for application and notification. In so doing, applicants will gain a sense of the standards required by the Commission in order to maintain the position and the reputation of Guernsey as a highly regarded jurisdiction of choice.

Guernsey Financial Services Commission www.gfsc.gg 6 1 Introduction 1.1 Scope The Manager-Led Product may be used by managers that are considered AIFMs under the AIFMD Rules and are seeking to market an AIF into a host country under the National Private Placement Regime. The Manager-Led Product may apply to open-ended or closed-ended funds for whom the AIFM is seeking registration under section 8 of the POI Law and associated prospective licensees that are not the AIFM – for example General Partners to Limited Partnerships. 1.2 Applicable Rules The AIFM will be subject to the AIFMD Rules. Designated administrators and trustees will continue to be required to follow those provisions of the Licensees (Conduct of Business) Rules 2021 in respect of funds, registered under section 8 of the POI Law, which fall within the Manager-Led Product regime. Where there is conflict between the two Rules, Rule 1.1(3) of the AIFMD Rules empowers a mechanism whereby the AIFMD Rules take precedence in the case of AIFs. 1.3 Derogations The AIFM will be entitled to consider the appropriateness of requesting derogations from the Commission, providing such derogations are acceptable to the host country and that the reporting requirements are maintained to the required standard.

Guernsey Financial Services Commission www.gfsc.gg 7 2. Applications 2.1 To become AIFMs utilising the Manager-Led Product Regime Existing licensees wishing to become AIFMs and utilise the Manager-Led Product regime should send in to the Commission a completed Form GAIFMLP. Due to the Manager-Led Product regime placing reliance on the AIFM, the applicant should submit the detailed documentation requested and expect rigorous scrutiny from the Commission team. Applicants that require a licence will also be required to submit a Form RA/1. The application form should also enclose derogation requests, which will also be considered critically. Applicants are encouraged to discuss proposed derogations with the Commission at an early stage. In any event, such AIFM should not hold itself out as meeting the full provisions of the AIFMD Rules, if derogations have been granted. 2.2 Existing AIFMs Existing AIFMs, which have already opted-in to complying with the AIFMD Rules and which are considering using the Manager-Led Product regime, should identify how its business model, controls and procedures may change. AIFMs should notify the Commission of such changes well in advance of any notification of proposed licensee and fund using the Manager-Led Product regime. In this instance there is no need to complete a Form GAIFMLP. The Commission will instead evaluate the changes. 2.3 Licences within an AIF management structure The Commission anticipates that the Manager-Led Product will be particularly suitable to AIFMs that structure their AIFs using legal forms requiring a management company – for example a limited partnership and requisite general partner. Such companies will still require a licence under section 4 of the POI Law. The AIFM should notify the Commission using a Form MLP, which also covers the proposed collective investment scheme, and the Commission will issue a licence to the management company under section 4 of the POI Law within one business day of receipt. The Commission attaches great value to the warranties made by the AIFM and will treat any evidence of misrepresentation extremely seriously. No rules will be applied to such licensees. However, with each additional Form MLP submitted for a new licensee, AIFMs should consider the ongoing applicability of their existing business model, procedures and controls, and notify the Commission of any changes thereon for our evaluation. In addition, the AIFMs should consider the ongoing applicability and appropriateness of existing derogations.

Guernsey Financial Services Commission www.gfsc.gg 8 2.4 Proposed Collective Investment Schemes/AIFs As stated at 2.3, the Commission will require submission of a Form MLP and will attach great value to the warranties made by the AIFM. The Commission will register the collective investment scheme under section 8 of the POI Law within one business day of receipt. No rules will be applied to the collective investment scheme. However, as well as ensuring that reporting requirements are met, the AIFM will also need to consider very carefully the ongoing appropriateness of the disclosures made within a Form GAIFMLP concerning the investment strategy, objectives, leverage and risk profiles of the AIFs. In this context, the Commission encourages any AIFM considering the registration of an open￾ended collective investment scheme to discuss this with the Commission at an early stage. The Commission is cognisant of the liquidity challenges faced by the open-ended sector and would be unlikely to welcome any AIF that has an investment and/or leveraging strategy that challenges the liquidity profile required by the dealing days. Similarly, any highly leveraged funds that present high solvency risks are unlikely to be welcomed, whether open-ended or closed-ended.