PROPOSED regulatory changes are expected to bolster Guernsey’s soaring fund industry. A report from a committee chaired by Advocate Peter Harwood recommends changes that will streamline existing directives.

It suggests creating a separate, ‘registered’ funds sector that does not require prior approval by the Guernsey Financial Services Commission, so quickening applications in the island.

It also proposes the abolishment of the Control of Borrowing Ordinances and their replacement with generic ‘prospectus’ legislation.

This means closed-ended funds – like open-ended funds – would require only minimum criteria to obtain regulatory approval.

GFSC director-general Peter Neville welcomed the proposals.

‘Streamlining authorisation and licensing processes will benefit both the investment sector by allowing faster responses and the commission by letting its dedicated staff extend their monitoring of licences rather than pre-vetting funds,’ he said.

The report also recommended the introduction of a dedicated funds law in place of the existing Protection of Investors law, which should itself be reviewed.

Ogier advocate William Simpson said the regulatory developments would give Guernsey a strong, competitive base.

‘These developments will be much welcomed by the industry and represent a focusing of the relevant regulation considerably more upon the service providers and less upon the investment funds themselves,’ he said.

‘The net result will be a higher quality regulation, coupled with a much quicker throughput in the establishment of new funds.’

Ernst & Young partner Peter Franks said the proposals would be of particular interest to institutional investors as it could lead to a cut in operating costs.

‘The more relaxed regime is especially of interest to institutional investors because they do all the due diligence around the service providers and promoters for the fund,’ he said.

‘They have a lot of information on which to make their judgement calls and the cost of having a regulator do that is not really of benefit to them.’

He also commended the prompt conclusion of the review as it gave out a clear message as to the direction that Guernsey’s regulation was taking.

‘Uncertainty can drive business away and we have now got our report issued and approved by the regulator and the government.

‘Coupled with the decision to have a zero rate of corporate tax here it is going to be a fundamental driver of new business into the island.’

Mr Franks said the timing of the new legal and regulatory regime would complement the Guernsey Investment Funds Association conference in London in September.

As a general point, the committee felt it was important to expand the island’s ‘intellectual capital’ to areas other than fund administration and said issues such as tax capping and reform of the existing housing licence system should be addressed.