Promoters of authorised funds, whether open-ended or closed-ended, which will be offered to qualified investors may take advantage of the Qualifying Investor Fund or “QIF” fast-track application process.
Open-ended QIFs are subject to the Class A, Class B or Class Q Rules and the QIF Guidelines published by the GFSC. Closed-ended QIFs are subject to the Closed- Ended Rules and the QIF Guidelines.
Fast Track Authorised QIF Fund Regime
There is also a three day approval process for authorised funds established as QIFs in Guernsey. This fast track approval process is available to all authorised funds, whether open or closed-ended. This fast track process is similar to the registration by the GFSC of a “registered” fund.
GFSC Supervision of Self-Certification
The criteria which must be met in order to establish a QIF in Guernsey is set out in a GFSC guidance note dated May 2007. It should be noted that the GFSC strictly monitors the self-certification by administrators of fast-tracked funds. Regular checks are undertaken and steps taken to ensure that administrator’s due diligence standards are maintained.
There is general recognition that the self-certification process has to be properly regulated by the GFSC to ensure that the reviews undertaken by a Guernsey fund administrator are at least as comprehensive as those undertaken by the GFSC.
QIFs must only be offered to qualified investors (detailed below). The QIF’s Guernsey administrator must be able to certify compliance with the GFSC’s QIF requirements.
Approval will be given by the GFSC on the basis of the administrator’s self-certification. The Guernsey administrator will have an ongoing responsibility to monitor compliance with the matters it has self-certified and to ensure its rationale for the self-certification is clearly documented.
Definition of Qualified Investor
A “qualified investor” is defined as a “professional investor”, an “experienced investor” and/or a “knowledgeable employee”. Definitions of the different classifications of investors are:
- a professional investor includes any individual investing at least US$100,000 (or currency equivalent) (subsequent investments by that individual may be for lower amounts) or a person whose ordinary business or professional activity includes underwriting, managing or acquiring investments whether as principal or agent or the giving of advice on investments. The definition also includes financial services businesses or financial service professionals associated directly or indirectly with the operation of the QIF;
- an experienced investor is a person who has, in any period of 12 months (or in the course of employment by another person), so frequently entered into transactions of a particular type in connection with investment funds or general securities and derivatives of a substantial size with, or through the agency of, reputable persons who carry on investment business. The experienced investor can reasonably be expected to understand the nature of, and the risks involved in, investments of that kind. Alternatively, this requirement is satisfied if an appropriately qualified investment adviser confirms that the investor has obtained independent advice; or
- a knowledgeable employee is any employee, director, partner or consultant of an appropriately qualified professional investor or anyone who has fulfilled such a role within a period of three years up to the date of the application for investment in the QIF. The term employee will not cover clerical, secretarial or administrative roles. A knowledgeable employee will also include any employee, director, general partner, consultant or shareholder of an affiliate appointed by the QIF to advise, manage or administer the investment activities of the QIF and whose investment in the QIF is part of his remuneration, incentive arrangement or co-investment in the QIF.
The GFSC will expect a representation to be made by the relevant investors in the fund’s application form that the requirements described above in relation to the definition of a qualified investor have been satisfied.
Promoters and/or Investment Managers of QIFs
The administrator will need to certify (in relation to the promoter and/ Applications for newly formed promoters or investment managers will also be acceptable, provided that the administrator is also able to certify the track record of the relevant principals.
The GFSC will also require that promoters or investment managers are fit and proper. The basis of how the relevant promoter or investment manager will qualify as fit and proper is set out in detail in the relevant GFSC QIF Guidance Note.
The QIF regime is complemented by a fast track process for consideration of any local fund manager’s licence application. A local fund manager is not legally required, but where the fund structure includes a Guernsey fund manager or the fund is structured as a limited partnership and has a Guernsey general partner, the GFSC will process the application for the licence of such entity (again with reliance on the administrator’s certification) under the fast track licensee application process and put it before the GFSC’s Licensing Committee within 10 business days of receipt.
Authorisation of the Fund
Application to the GFSC is made by submitting the prospectus or private placement memorandum, Form QIF, the constitutional and third party material contracts, a cheque in payment of the GFSC’s fee and, where relevant, any administration self-certification documents.