Licenses under the POI Law – Finance and Banking

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The Investor Protection Act (Bailiwick of Guernsey) 2020 (“the POI Act”) requires that anyone carrying out “controlled investment activity” in or from the Bailiwick of Guernsey to hold a license issued by the GFSC in under the POI law (a “POI license”; a “POI license holder”).

“Controlled investment company”

The exercise of a controlled investment activity involves three elements:

  • engage in “restricted activity”; Which one is
  • as part of a “controlled investment”; and who is done
  • by way of business.

The restricted activities, listed in Annex 2 of the POI Law, are the promotion, subscription, registration, trading, management, administration, advice, custody and operation of a investment stock exchange.12

Controlled investments are listed in Annex 1 of the POI Law, which includes undertakings for collective investment, general securities and derivatives.

“By commercial means” is not defined, but an element of payment or compensation above de minimis levels is normally required.

Who needs a POI license for a Guernsey fund?

Considering the above criteria, most activities performed by service providers in Guernsey funds in Guernsey will generally require a POI license. Specifically:

  • The administrator. The POI law and the various rules governing Guernsey funds require a legal entity, POI licensed holder domiciled in Guernsey as a “nominated administrator” (for simplicity, the term we have used in these documents is “administrator “).
  • The Guardian. For open-ended funds, and subject to limited exemptions for PIFs and hedge funds, the POI law and the various rules governing Guernsey funds require a legal person, a POI license holder domiciled in Guernsey as a “Designated Custodian” or “Designated Trustee”.
  • The director.
  • The general partner.
  • The trustee, the union, the representative.

Which does not do you need a POI license for a Guernsey fund?

  • Any provider of a Guernsey fund services which is not incorporated in Guernsey and which does not carry on a regulated activity in Guernsey. This typically includes foreign investment managers and investment advisers. Although they may provide restricted activities at controlled investment, they do not provide them “within or from” the Bailiwick of Guernsey.
  • People. The POI law provides for the licensing of entities, not individuals. The administrators of the fund, the general partner, the manager, etc. are therefore not approved.

The application process

The GFSC may grant or deny an application at its discretion and, when considering whether or not to grant a license, the GFSC is required to take into account the need to protect the public and the reputation of the Bailliage as a financial center. . Among the issues for the GFSC to consider in making a decision is whether the applicant is a suitable and appropriate person to operate the proposed business and how it is proposed to organize the operation of the proposed business. the company to which the request relates.

The GFSC has the power to impose conditions on a license holder either on the granting of a license or at any time after its issue and also to cancel or suspend a license in certain specified circumstances.

PI request

Each applicant is required to have adequate personnel resources, policies, procedures, facilities and systems to conduct operations, including:

  • record keeping;
  • compliance;
  • anti-money laundering measures; and
  • internal control and other systems.

If the applicant proposes to delegate certain responsibilities to other service providers, the arrangements must be acceptable to the Commission and demonstrate that the delegate has the necessary capacity.

Each applicant must also meet the capital requirements specified by the 2021 licensee rules (capital adequacy).

An application is made by submitting an investment license application file to the GFSC, containing:

  • a “Form RA / 1” request;
  • a business plan indicating the business activities proposed by the applicant;
  • a budgeted balance sheet and an income statement over three years;
  • documentary evidence relating to the beneficial ownership of the applicant;
  • copies of any agreement by which the management of the applicant has been delegated;
  • proof of the constitution or establishment of the applicant;
  • proof of appropriate insurance coverage for directors and officers;
  • evidence of an auditor’s willingness to act;
  • a business risk assessment;
  • financial statements of the applicant (if applicable);
  • supporting documents regarding the applicant’s share capital;
  • a letter from an administrator confirming that the capital requirements specified by the 2021 licensee rules (capital adequacy) are met and
  • the application fee (currently £ 2,371).

An online personal questionnaire and / or an online appointment must be submitted via the GFSC “Online PQ Portal” for each natural person who is a beneficial owner, controller, partner, administrator, secretary of company, a money laundering reporting officer, a compliance officer or a manager of the requester.

Upon receipt, the GFSC will assess and review the application package and notify the applicant, or their professional advisers, of any issues requiring further development or clarification.

The GFSC aims to respond to applicants within 28 days of receiving a fully completed application package. An “accelerated license” (“FTL”) may be issued within an accelerated time frame (10 business days) for parties seeking to provide management services to qualifying investor funds or registered funds.

The GFSC will also accept POI license applications under the FTL regime prior to an application for funds for Guernsey AIFs that need to meet the requirements of the EU National Private Placement Scheme. In such circumstances, the license application package should also include details of the fund’s investment objectives, investment strategy, asset classes, target investors and geographic marketing sector.

Footnotes

Note A to Annex 2 specifies that Party A performs a restricted activity when it contracts with Party B for Party B to perform a restricted activity.

Note C of appendix 2 excludes joint ventures and activities between group entities from restricted activities.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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