In the third of a series of updates taken from the Guernsey Financial Services Commission’s annual report, Tom Bradshaw looks at investments INVESTMENT business has enjoyed another record year.

Ongoing economic and political uncertainty has proved no obstacle to the continued growth of the sector, as revealed in the Guernsey Financial Services Commission’s annual report for 2006.

While volatility in markets led to some countries tightening regulations, the commission reported that it was too early to say whether that would have any long-term effect on the demand for investment funds.

In the open-ended sector last year, a total of 48 new funds and 269 new classes of existing funds were authorised, compared with 40 and 155 respectively during 2005.

Director of investment business Peter Moffatt said: ‘We commented last year on the attractions of umbrella and protected cell structures as an efficient means of developing fund ranges and the remarkable growth in the number of new cells during 2006 reinforces that view.’

The total value of open-ended funds increased by 17%, from £48.2bn to £56.7bn. In the closed-ended sector, 127 new funds received consent, compared with 73 in 2005, with the total value increasing by 56% to £48.5bn.

Demand for new investment business licences also increased, with 94 granted compared with 74 in 2005. New promoters seeking to establish investment vehicles in the Bailiwick increased from 21 in 2005 to 80 in 2006.

The GFSC team conducted 31 monitoring and inspection visits over the year.

Two were follow-up visits to firms where it had earlier identified deficiencies, but no restrictions were imposed.

As part of the GFSC’s regulation of the sector, it keeps in mind the 30 principles of securities regulation set out by the International Organisation of Securities Commissions and the associated methodology for assessing compliance.

A significant programme of legislative development is now envisaged to enhance the GFSC’s power to obtain information and, subject to suitable safeguards, share it with regulatory counterparts.

The programme will also clarify its right to conduct inspection visits and will allow for a broader range of disciplinary action. Its existing powers to impose restrictive conditions on licences and, in extreme cases, annul them could be extended to include public censure, administrative penalties and discretionary fines. That legislative programme will run in parallel with the other changes recommended by the Finance Industry and Policy Working Party.