Private Investment Funds ("PIF")
Applicable law
Regulatory permissions are issued under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 ("the POI Law").
Applicable rules
The Private Investment Fund Rules and Guidance (2), 2021.
Specific criteria and principles
The Private Investment Fund is a regulated product with a focus on strong corporate governance, including managing conflicts of interest.
APPLICABLE FUNDS
Closed-ended and open-ended schemes can apply as PIFs. The Private Investment Fund cannot entertain a structure whereby there are separate investment advisers acting in respect of individual cells. There must be one adviser to the entire structure.
APPLICATION ROUTES
The details of these Routes are set out in Schedule 1 of The Private Investment Fund Rules and Guidance (2), 2021 and may be summarised as follows:
POI Licensed Manager PIF – Route 1
Under this Route, the Private Investment Fund requires a licensed manager in the structure. No rules are applied against the licensed manager.
As part of the applications process, the proposed licensed manager provides declarations on the ability of the investors to assume loss. The philosophy of such a private fund is a close relationship between investors and management; therefore, this is not an unreasonable representation. The Commission will treat any failures in the process leading to the signing of such declarations extremely seriously.
This type of Private Investment Fund should contain no more than 50 legal or natural persons holding an ultimate economic interest in the Private Investment Fund save in the instance where the investment is made by an investment manager acting as agent for a wider group of stakeholders. This may be, for example (but not exhaustively): an investment manager acting as agent for investors in a collective investment scheme or equivalent, pension holders in an occupational pension scheme, or government funds – whether local or sovereign.
Excepting a period of one year commencing from the date of first subscription, there is a “rolling test” applied on a continuous basis. In the previous twelve months, the Private Investment Fund can add no more than 30 new ultimate investors. This test must be applied and evidenced by the licensed manager of the Private Investment Fund. The manager shall keep a record of such tests. No attempt has been made to limit the number of investors to whom such a private investment fund may be marketed.
Qualifying Private Investor PIF – Route 2
Under this Route, the Private Investment Fund is only open to Qualifying Private Investors, who are able to evaluate the risks and strategy of investing in the Private Investment Fund, and to bear the consequences of investment in the Private Investment Fund. There are no requirements for a licensed manager declaration in the Route 2 Private Investment Fund structure. A Qualified Private Investor must be a Professional Investor, Experienced Investor, or Knowledgeable Employee – definitions of which are outlined in Schedule 1 of The Private Investment Fund Rules and Guidance (2), 2021.
The number of investors must be no more than 50 legal or natural persons holding an ultimate economic interest in the Private Investment Fund. Any marketing must be specifically targeted to individual investors who have been identified as Qualifying Private Investors and the number of offers of units for subscription, sale or exchange must not exceed 200.
Family Relationship PIF – Route 3
Under this Route, all investors in the Private Investment Fund must share a family relationship or be an eligible employee of the family. The Private Investment Fund cannot be marketed outside the family group. There are no requirements for a licensed manager declaration in the Route 3 Private Investment Fund structure.
DECLARATIONS
Each PIF Application Form contains declarations given by the proposed Designated Administrator to the Commission and the Commission attaches great importance to these declarations. It expects Designated Administrators to be able to demonstrate that they have documentary evidence to support the declarations given, and to be able to produce that evidence immediately should the Commission request it. The Commission has published Guidance for Private Investment Fund Promoter due diligence. Designated Administrators who cannot substantiate their applications may find themselves excluded from participation in the Private Investment Fund regime.
Application pack
The application pack must contain:
APPLICATION FORM
A fully completed, signed and dated PIF FORM.
APPLICATION FEE
The fee is non-refundable.
CONTROLLERS, DIRECTORS AND SENIOR OFFICERS OF THE PROMOTER
Personnel who will exercise control or a significant function relating to the application must submit Online Personal Questionnaires through the Online PQ Portal.
ONLINE PERSONAL QUESTIONNAIRE (“OPQ”) AND ONLINE APPOINTMENT ("OA")
OPQs and/or OAs must be submitted through the Online PQ Portal for each natural person who is a beneficial owner, controller, partner, director, company secretary, money laundering reporting officer, money laundering compliance officer, compliance officer or manager of the Manager (if applicable) and for each natural person who is a Director of the Fund (if applicable).
BUSINESS RISK ASSESSMENT (“BRA”)
If the application includes a Licence application for a Manager, a BRA must be included in the application.
INFORMATION PARTICULARS
In instances where Information Particulars are prepared for an applicant, these must be provided as part of the application.
Additions of new cell/sub-fund/share class for PIFs
For Open ended PIFs notifications of a new cell/sub-fund/share class should be sent to [email protected] together with the relevant fee and if a Route 1 PIF a completed Form PIF Manager’s Declaration.
For Closed ended PIFs notifications of a new cell/sub-fund/share class should be sent to [email protected] together with, if a Route 1 PIF, a completed Form PIF Manager’s Declaration.
Application process
We will assess and review the application pack and inform the applicant, or its professional advisers, of any matters requiring expansion or clarification. Once all queries have been satisfied, the application will be referred to a decision-maker. A formal response will follow decision-making.
Timeframe
INDICATIVE TIMEFRAME
The Commission will declare the scheme registered in one business day following the receipt of a full PIF application. If the application pack is incomplete, the application clock will not commence until all documentation, information (including required Online Personal Questionnaires and Online Appointments) and relevant fees have been submitted.
APPLICATION QUALITY
Any minor queries resulting from the Commission's initial assessment of the application will be referred back to the prospective Guernsey administrator acting on behalf of the applicant with the aim that resolution of the issue can be achieved within the one-day period.
WRITTEN RESPONSE
We reserve the right to reset the application clock if the nature and number of issues requiring expansion and clarification are substantial.
Application conclusion
REGISTRATION
Successful applicants will be issued with registration by way of letter.
CONDITIONS AND DEROGATIONS
Any formal conditions to be imposed upon the registration of the schemes or any derogations from or modifications of the rules will be incorporated into the final registration letter.
ANNUAL FEE
Upon registration, the annual fee becomes due, which is reduced pro rata in the first year: an invoice will be sent with the registration letter.
Audit Requirements for Managers of Private Investment Funds
Where an entity licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (“the POI Law”) acts solely as the manager to one or more Private Investment Fund (“PIF”), and does not undertake any other Controlled Investment Business, then the Commission will dis-apply the Licensees (Conduct of Business) Rules and Guidance, 2021 in respect of that Licensee. Furthermore, and pursuant to Section 43(9) of the POI Law, the Commission exempts entities which are licenced under the POI Law who act solely as the manager to one or more PIFs from the application of Section 43(1) of the POI Law (being the requirement to appoint an auditor). Therefore, the Commission does not require a PIF Manager to appoint an auditor or to prepare and submit audited accounts to the Commission (for itself as a Licensee). Whilst the above relates solely to the Commission’s requirements, such Licensees and their Directors and Administrators should remain mindful of any obligations of the Licensee to other parties in respect of these matters (for example the requirements contained in their constitutive documents, or any other legislation to which they might be subject). For the avoidance of doubt, the above comments relate to PIF Managers. The PIF itself is still required to appoint an auditor and to prepare and submit audited accounts to the Commission in accordance with the Private Investment Fund Rules and Guidance (2), 2021.