The Guernsey Financial Services Commission has issued new rules for fund prospecti and registered collective investment schemes.

Both sets of rules will come into force on 6th October. In the regulator's own parlance, implementation may be achieved through the earlier of:

• a fund initiating an annual review at an appropriate time to identify the changes required to comply with the enhanced disclosures; or
• any change of circumstances requiring filing to the commission of a notification to investors, supplement or revised prospectus.

The prospectus rules do not apply to private investment funds. They also make it plain that revisions to a prospectus in a closed-ended fund may be in the form of a notification to investors. This will allow firms to disclose enough information to both investors and the regulator without incurring exceptional costs.

Types of authorised fund

Last June, according to Guernsey Finance, the Bailiwick's closed-ended sector was valued at £164.3 billion - up 9.8% on a year earlier. Guernsey-domiciled open-ended funds stood at £43.9 billion, up 8.9%. Non-Guernsey schemes – funds that are not domiciled in Guernsey but have some aspect of their management, administration or custody carried out on the island – had risen by 21.7% to £58.3 billion. Promoters of Guernsey retail funds include , Dominion, Insight, Investec, Old Mutual, RBC, Sarasin and Schroders.

In Guernsey there are two classes of open-ended funds for retail investor. Class A are UCITS equivalent schemes. They closely follow the rules for collective investment schemes authorised by the British Financial Conduct Authority and protect investors from sharp practice to a comparable degree. They can be registered for sale in Australia, Belgium, Holland, Hong Kong, Ireland, Japan, South Africa, Sweden, Switzerland and the UK. The presence of an investor compensation scheme provides real confidence. Class B funds can be strictly private funds or established as retail products and marketed to the public. These funds can have wide investment and borrowing powers as long as there is full disclosure. Class B schemes are often used as umbrella funds in protected cell companies.

Your friendly regulator

'Red herring' prospecti do not contain details of either price or number of shares being offered or the amount of issue. Issuers publish them as preliminary/draft documents only and, as long as they contain the appropriate disclaimers, the GFSC does not expect them to follow its prospectus rules.

As in nearly all offshore centres and in no onshore centres, the regulators are always prepared to meet managers, potential promoters or their professional advisors to discuss matters of policy and practice regarding these disclosure rules.

Details relating to offers

Each prospectus has to state the names, addresses and occuptions of the offerors/vendors and promoters; the terms that apply to the acqusition of the securities, interests or units and the details of payment; the opening and closing dates of the offer; the general particulars of any property to be acquired with the proceeds of the offer, including the trading history of any business that is to be acquired, and the details of repayment of monies if the offer falters.

In the case of a cell company, only the details of cell share capital of the particular cell or the incorporated cell share capital of the particular incorporated cell company which is subject to the offer must be disclosed. If a PCC or incorporated cell company is the subject of the offer, the prospectus must divulge all interests that its directors - and indeed all senior managers - have in it. It must also detail all inducements paid to directors to join.

Significant beneficial ownership

Each prospectus must also state the shareholdings of anyone who holds a significant beneficial ownership interest in the offeror at the date of its publication. With respect to tender offers and takeover bids, it must state "information necessary to make informed decision-making" - a rule that seems to be waiting to be misinterpreted - and (per rule 3.16(c)) the names of "those holding significant beneficial ownership in any person" in rules that pertain to general partners (in the case of limited partnerships), trustees (in the case of unit trusts), and administrators, custodians or trustees who are 'designated' (i.e. sanctioned) by the JFSC. This is an odd form of words but the meaning seems clear.

CIS rules

Registered investment schemes are registered under the Protection of Investors (Bailiwick of Guernsey) Law 1987 (as amended). The Registered CIS Rules are to apply in the case of an umbrella fund as if each reference to a registered investment scheme were a reference to each constituent part of the umbrella fund but subject to any modification set out in any particular rule. The old CIS rules of 2015 will be revoked on 6th October.