Guernsey private fund reforms to open up new opportunities

Guernsey's private investment funds regime looks set to become even more attractive to investors and managers after the Island's financial services regulator cut back restrictions limiting the number of investors and removed requirements for external auditors and risk disclosure statements.

The PIF regime – introduced in 2016 – will continue to be accessible only to a limited category of investors and will still require a Guernsey-licensed administrator, but the changes announced by the Island's financial services regulator will make PIFs more scalable, and are likely to reduce operational costs.

As part of the changes, a new QPIF product merges two of the former qualifying routes to PIF status into a single category, which may only admit a broader category of Qualifying Private Investor, but removes the old requirement for the appointment of Guernsey-licensed manager.

The changes also put the Guernsey regime out of line with competitor offshore private fund regimes that require a cap on investor numbers.

Guernsey's financial services regulator, the GFSC, has announced that:

• The cap on investors has been removed, but the requirement that the fund must only be offered privately and to qualifying investors is still in place
• PIFs no longer need to appoint external auditors but must submit financial statements to the GFSC every year (and where an external auditor is appointed, they must operate from Guernsey)
• Risk disclosure statements or offering documents are no longer required, but administrators must obtain a standard declaration form all investors confirming their qualified status and understanding of risk
• All currently registered PIFs will be subject to the revised rules, but there is no need for existing PIFs to update their current investor or service declarations

Partner John Scanlan, an investment funds specialist in Bedell Cristin's Guernsey practice, said: "These changes can only make the PIF regime more attractive, both from the point of view of managers and investors.

"We already see widespread use of PIFs by emerging managers and for club deals and JVs – it is likely that the changes will open up new opportunities for Guernsey professionals in marketing PIFs to larger and more established managers."