Alternative Investment Funds - Hedgeweek · the formation of alternative investment funds, having approximately 2,525 funds registered or recognised under the Securities and Investment

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Focus Report:BVI • Cayman Islands • Gibraltar • Guernsey • Ireland • Jersey • Luxembourg • Malta

June 2012

guide to setting up

Alternative Investment Funds

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Contents

Special Reports Editor: Simon Gray, [email protected]

News Editor: James Williams, [email protected]

Sales Managers: Simon Broch, [email protected];

Malcolm Dunn, [email protected]

Publisher & Editorial Director: Sunil Gopalan, [email protected]

Graphic Design: Siobhan Brownlow, [email protected]

Published by: GFM Limited, 1st Floor, Liberation Station, St Helier, Jersey JE2 3AS,

Channel Islands Tel: +44 (0)1534 719780

Website: www.globalfundmedia.com

©Copyright 2012 GFM Limited. All rights reserved. No part of this publication may

be reproduced, stored in a retrieval system, or transmitted, in any form or by any

means, electronic, mechanical, photocopying, recording or otherwise, without the

prior permission of the publisher.

Publisher

FOCUS REPORT Hedgeweek Guide to setting up Alternative Investment Funds Jul 2012

In this issue…03 IntroductionBy Sunil Gopalan, Global Fund Media

04 British Virgin Islands: Jurisdiction information

05 British Virgin Islands: OverviewBy Ross Munro, Harneys

09 Cayman Islands: Jurisdiction information

11 Cayman Islands: OverviewBy Marco Martins and Patrick Colegrave, Harneys

15 Gibraltar: Jurisdiction information

17 Gibraltar: OverviewBy James Lasry, Hassans

20 Guernsey: Jurisdiction information

22 Guernsey: OverviewBy Paul Wilkes, group partner, Collas Crill

25 Ireland: Jurisdiction information

28 Ireland: OverviewBy Dillon Eustace

35 Jersey: Jurisdiction information

37 Jersey: OverviewBy Ashley Le Feuvre, senior manager Funds/SPV Group, Volaw Trust & Corporate Services Limited

43 Luxembourg: Jurisdiction information

45 Luxembourg: OverviewBy Rémi Chevalier and Olivier Sciales, Chevalier & Sciales

54 Malta: Jurisdiction information

56 Malta: OverviewBy the Malta Financial Services Authority

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FOCUS REPORT Hedgeweek Guide to setting up Alternative Investment Funds Jul 2012 www.hedgeweek.com | 3

Introduct Ion

IntroductionThe Hedgeweek Guide to Setting up Alternative Investment Funds 2012 is the fifth edition of this unique online publication being made available to the 50,000-strong audience of investment managers, institutional investors and fund service providers that read Hedgeweek and its family of investment management newswires daily.

The focus of the Guide is to help managers, promoters and their advisers decide where best to list their alternative investment funds and complements the daily news, special reports and fund data delivered through our specialised investment management portals (see below for compete list).

This edition of the Guide draws together in one volume all the major current regulations covering the establishment of alternative investment funds in a comprehensive treatment of the subject covering the following major jurisdictions – BVI, Cayman Islands, Gibraltar, Guernsey, Ireland, Jersey, Luxembourg and Malta.

The Guide goes from strength to strength with the support of leading law firms and service providers and in this regard we would like to thank Hassans, Harneys, Volaw Trust & Corporate Services, Collas Crill, Chevalier & Sciales, Dillon Eustace, and Malta Financial Services Authority for their invaluable time and assistance in preparing a comprehensive overview of each jurisdiction in this edition.

We look forward to your feedback and participation in forthcoming editions of this Guide.

Sunil Gopalan Publisher GFM Limited globalfundmedia.com

Hedgeweek.com Institutionalassetmanager.co.uk Wealthadviser.co Privateequitywire.co.uk Propertyfundsworld.com Etfexpress.com Globalfunddata.com

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British Virgin IslandsFund legislationSecurities and Investment Business Act, 2010 (SIBA)

number oF FundsAs at 31 March 2012 (the latest available): ....................2525

number oF Funds by categoryAs at 31 March 2012:Private: .....................................................................................681Professional: ...........................................................................1668Public: ........................................................................................ 176

Only open ended funds are required to be registered or recognised under SIBA. No statistics are available for other types of funds.

There is currently no distinction in the licensing process between directly invested hedge funds and funds of hedge funds and so no official figures exist for the break down.domiciled and administered fund assets total:No figures currently available. domiciled and administered fund assets by category:No figures currently available.

regulatorFinancial Services Commission, Investment Business Division. Contact: Broderick Penn, Director of Investment Business Division; Tel: +1 284-494-1324 or + 1284-494-4190; Fax: +1 284-494-5016

Address: BVI Financial Services Commission, Pasea Estate, PO Box 418, Road Town, Tortola, VG 1110, BVI

service providersLaw firms: .......................................8 multi-jurisdictional firms; ....................... approximately 14 other BVI commercial firmsAdministrators: ..........................................................89 licensed

Authorised representatives: .....................45 license holdersInvestment managers: .................. 536 SIBA license holdersCustodians: ..................................................................6 licensedCorporate service providers: ...............................128 licensedAccountants/auditors: ............................7 international firmsTrustees: ...............................84 Class I Trust license holdersInsolvency Practitioners: ........................................22 licensedLocal stock exchange: NoLocal fund industry body:BVI Investment Funds Association, PO Box 71, Road Town, Tortola, VG 1110, BVIPromotion agency for funds/financial sector:BVI International Finance Centre, Haycraft Building, 1 Pasea Estate, Road Town, Tortola VG1120, BVI. Email: [email protected]; Tel: +1 284 468 4335; Fax: +1 284 468 1002

tax inFormation exchange agreementsAruba; Australia; China; Czech Republic; Denmark; Faroe Islands; Finland; France; Germany; Greenland; Iceland; India; Ireland; Netherlands; Netherlands Antilles; New Zealand; Norway; Portugal; Sweden; UK; USA

alternative Fund, manager and service provider inFormation

types oF alternative Fund vehicle Open-ended or closed-ended investment company (see below), limited partnership, unit trust, common contractual fund, umbrella fundtypes of corporate Vehicle:l Company Limited by Shares, including:

– Restricted Purposes Company– Segregated Portfolio Company (for recognised or

registered funds and licensed insurance companies only)

l Company Limited by Guarantee authorised to issue shares;

l Company Limited by Guarantee not authorised to issue shares;

l Unlimited Company authorised to issue shares; andl Unlimited Company not authorised to issue shares

types oF regulatory Fund categoryPublic; Private; Professional

audit requirementl Public Funds: Financial statements must be audited

by an auditor approved by the Financial Services Commission (no local sign off).

l Private and Professional Funds: Financial statements must be audited by an auditor meeting certain prescribed criteria unless the fund is exempted from the audit requirement by the Financial Services Commission (no local sign off).

Financial statement requirementsl Public funds: Financial statements for each financial

year must be prepared which comply with IFRS, US, UK or Canadian GAAP or such other accounting standards as may be approved by the Financial Services Commission on a case by case basis.

l Private and professional funds: Financial statements for each financial year must be prepared in

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Tortola

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accordance with one of the prescribed financial standards (UK, US or Canadian GAAP or IFRS) or internationally recognized and generally accepted accounting standards equivalent to such standards.

l All funds regulated under SIBA must also submit an annual return to the Financial Services Commission containing summary prudential and governance information.

cost oF regulatory Fees (by type oF Fund):Private and Professional: ........................................... US$1,000Public: ............................................................................. US$1,500

overall cost oF Fund establishmentPrivate and Professional: ..............................From US$12,000 Public: ...............................................................From US$20,000

regulatory approval timeFrom submission of complete application:Private and Professional Funds: .......... 2 - 5 business days Public Fund: ................................................................ 2-3 weeks

overall establishment timePrivate and Professional: .............................At least 2 weeks Public Fund: ..................................................At least 10 weeks

The British Virgin Islands is a leading jurisdiction for the formation of alternative investment funds, having approximately 2,525 funds registered or recognised under the Securities and Investment Business Act 2010 (SIBA). Funds recognised or registered under SIBA are regulated by the Financial Services Commission (the Commission), the financial regulator in the British Virgin Islands.

SIBA requires all investment funds falling within its definition of “fund” to be recognised or registered with the Commission. SIBA restricts the definition of “mutual fund” to open-ended funds that entitle investors to demand redemption of their fund interests immediately or within a period of notice. Accordingly only such funds are regulated under SIBA. Closed ended funds are not subject to specific regulation although BVI established managers and other BVI established functionaries of closed ended funds will in many circumstances require a licence under SIBA.

SIBA requires any person carrying on “investment business” in or from within the BVI to hold a licence. The activities constituting investment business include acting

as an investment manager, administrator, investment advisor or custodian with respect to a wide variety of financial instruments. It includes most functionaries of open and closed ended funds but the precise outcome depends on the services provided and the structure of the fund. It is important to note, however, that non-BVI functionaries of a BVI fund carrying on business from outside the BVI will not generally need to hold a license under SIBA.

Fund vehiclesSponsors and fund managers considering setting up investment funds in the British Virgin Islands may choose from the following range of possible vehicles:l BVI Business Companyl Limited Partnershipl Unit TrustThe vast majority of British Virgin Islands investment funds are established as companies limited by shares under the BVI Business Companies Act, 2004 or as limited partnerships formed under the Partnership Act, 1996.

The British Virgin IslandsBy ross Munro, harneys

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categories of fundThe three categories of regulated fund are as follows:l Private fund. Restricted to either (a) having no more

than 50 investors or (b) only making an invitation to subscribe for or purchase fund interests on a private basis.

l Professional fund. May only issue fund interests to “professional investors” and the initial investment for all investors, other than exempt investors (as defined), may not be less than US$100,000 or equivalent in another currency.

l Public fund. Greater regulation imposed as no restrictions on investors or minimum investment.

Private funds and public funds must be recognised or registered under SIBA before they commence business whereas professional funds may commence business for a period of up to 21 days without being recognised provided that they otherwise comply with the requirements of SIBA as if they were recognised and that an application is submitted to the Commission within 14 days.

A professional investor is a person either (a) whose ordinary business involves the acquisition or disposal of property of the same kind as the property or a substantial part of the property of the fund or (b) who has signed a declaration that he, whether individually or jointly with his spouse, has net worth in excess of US$1,000,000 and that he consents to be being treated as a professional investor.

Functionaries / service providersAll functionaries of funds regulated under SIBA must satisfy the Commission’s “fit and proper” criteria. Functionaries of a public fund require the prior approval of the Commission. Every public fund must have a manager, administrator and custodian and each must be independent or functionally independent of the fund and each other.

Private and professional funds must generally have a manager, administrator and custodian although an exemption from the requirement to appoint a manager and/or custodian is available upon application to the Commission.

Functionaries of funds established and located in the BVI or any of the following countries may be recognised and accepted by the Commission for the purposes of acting as a functionary of a BVI fund:

Argentina, Australia, Bahamas, Bermuda, Belgium, Brazil, Canada, Cayman Islands, Chile, China, Curacao, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Ireland, Isle of Man, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Panama, Portugal, Singapore, Spain, South Africa, Sweden, Switzerland, United Kingdom and United States of America.

The Commission may recognise and accept a functionary from outside the BVI and the above countries if it is satisfied that the country has a system for the effective regulation of investment business, including funds.

no restrictions on strategy, leverage or valuationThere are no restrictions on the strategy a fund may pursue, provided it is not otherwise in breach of the laws of the British Virgin Islands. There are no limits on leverage taken by the funds. There are currently no rules imposed on funds as to how they value their assets. The Public Funds Code came into effect on 31 March 2011 and only applies to registered public funds. It imposes additional disclosure and governance requirements on public funds (including provisions relating to valuation policy and disclosure).

Financial statements and auditPublic funds: Financial statements for each financial year must be prepared which comply with IFRS, US, UK or Canadian GAAP or such other accounting standards as may be approved by the Financial Services Commission on a case by case basis. The financial statements must be audited by an auditor approved by the Financial Services Commission. There is no local sign off.

Private and professional funds: Financial statements for each financial year must be prepared in accordance with one of the prescribed financial standards (UK, US or Canadian GAAP or IFRS) or internationally recognised and generally accepted accounting standards equivalent to such standards. The Financial statements must be audited by an auditor meeting certain prescribed criteria unless the fund is exempted from the audit requirement by the Financial Services Commission (no local sign off).

annual returnAll funds regulated under SIBA must submit a return to the Commission no later than 30 June in each year in respect of the calendar year ending on 31 December of the previous year. The return contains basic prudential and governance information and summary financial information. The return does not require any information on the identity of investors or the specific investments within the fund’s portfolio. Such information is confidential to the Commission and may only be publicly disclosed on an aggregated basis.

Fund documentation Public Funds: Public funds may not make an invitation to the public to subscribe for or purchase fund interests unless the offer is contained in a prospectus which has been approved by the fund’s governing body and the prospectus has been registered (i.e. approved) by the

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Commission. The prospectus is required to provide full and accurate disclosure of all information as investors would reasonably require and expect to find for the purpose of making an informed investment decision. Additional minimum disclosure requirements for a prospectus are to be contained in the Public Funds Code (currently in consultation).

Private / Professional Funds: A private or professional fund must submit a copy of its proposed offering document to the Commission upon application for recognition or provide an explanation as to why no offering document is to be issued. The prescribed investment warning must be included in a prominent place within an offering document (or if no offering document is issued, provided to each investor or potential investor in a separate document) but otherwise SIBA does not prescribe what should be included within the offering document. Copies of offering documents issued to investors or potential investors must be filed with the Commission. The constitutional documents of private and professional funds must contain prescribed statements referring to their status as private and professional funds respectively.

directors / authorised representativeSIBA requires that every fund established as a company have at least 2 directors. Corporate directors are permitted for private and professional funds provided that at least one director is an individual but are not permitted for public funds. There are no requirements for local directors. However, each fund must appoint an authorised representative unless the fund has a significant management presence in the BVI. The authorised representative itself must be a person located in the BVI holding a certificate from the Commission authorising it to act in such capacity.

ongoing requirementsRegulated funds are subject to a reasonable number of requirements to notify the Commission either before or after the occurrence of certain events such as appointment and resignation of directors and functionaries and changes to documents.

manager’s and administrator’s licensesA licence may be granted by the Commission to a person proposing to carry on business in or from within the BVI as the functionary of funds if the Commission is satisfied that, inter alia: a) the applicant, its directors and senior officers and

significant shareholders satisfy the Commission’s fit and proper criteria; and

b) the organisation, management and financial resources of the applicant are, adequate for the carrying on of the relevant investment business.

A holder of a licence under SIBA must comply with the requirements of SIBA and relevant sections of the Regulatory Code, 2009.

amlAll BVI funds, managers and administrators must comply with the Anti-Money Laundering Regulations, 2008 and the Anti-money Laundering and Terrorist Financing Code of Practice, 2008. However, BVI funds commonly outsource the majority of their obligations under such legislation to their administrators who are then required to comply with the AML laws of their home jurisdictions.

taxBVI funds and functionaries are exempt from BVI income tax. Furthermore, investors in BVI funds are not liable to any BVI income tax with respect to fund interests. There are no estate, inheritance, succession or gift taxes payable in the British Virgin Islands with respect to any interests in a fund.

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Cayman IslandsFund legislationMutual Funds Law (as amended) and the Mutual Funds (Amendment) Law, 2011 (together, the “MFL”) and the Securities Investment Business Law (2011 Revision, the “SIBL”).

number oF FundsAs at 31 March 2012 Registered ..............................................................................8,615Master Funds ..........................................................................837Administered ............................................................................ 419Licensed .....................................................................................119

Only open ended funds are required to be registered or recognised under the MFL. No statistics are available for other types of funds.

There is currently no distinction in the licensing process between directly invested hedge funds and funds of hedge funds and so no official figures exist for the break down.

domiciled and administered Fund assets totalNo figures currently available.

domiciled and administered Fund assets by categoryNo figures currently available.

regulatorCayman Islands Monetary Authority (“CIMA”), nvestments and Securities Division. Contact Details: E-mail: [email protected]: +1-345-244-1581Fax: +1-345-949-2532

service providersLaw Firms: please see www.judicial.ky/home/judicial-administration/law-firms-judicial-admin for up to date information on law firms operating in Cayman.Administrators: ..................................127 as at 31 March 2012Issued SIBL Licences (required for broker/dealers, securities (investment) managers, securities (investment) advisors, securities arrangers and market makers unless classified as an excluded person under the SIBL)..............................................31 as at 31 March 2012, broken down as follows (noting that an entity may have been issued a SIBL license with respect to one or more regulated activities):

Broker/dealers: ..................................................................... 16 Securities (investment) managers ................................... 19 Securities (investment) advisors ...................................... 19 Securities arrangers ............................................................ 10 Market makers .......................................................................3

Entities registered as excluded persons under the SIBL ..............................1,860 as at 31 March 2012Trust Companies ..............................148 as at 31 March 2012Companies Management Licensees (may include custodians) ...............191 as at 31 March 2012Bank & Trust License Holders (may include custodians ............... 233 as at 31 March 2012

local stocK exchangeThe Cayman Islands Stock Exchange (the “CSX”).

local Fund industry bodyAIMA Cayman

promotion agency For Funds/Financial sectorl Cayman Islands Governmentl CIMAl AIMA Cayman

double taxation treatiesNot applicable.

tax inFormation exchange agreementsMexico; Canada; Germany; Portugal; Aruba; Australia; Netherlands Antillies; France; New Zealand; Netherlands; Ireland; Denmark; Faroes; Finland; Greenland; Iceland; Norway; Sweden; and United States.

types oF alternative Fund vehicleInvariably either exempted companies, exempted limited partnerships or exempted unit trusts which may be structured as single investor, stand-alone, master-feeder, umbrella, open-ended or closed-ended funds with free range on strategy and no statutory or regulatory investment restrictions.

available types oF corporate vehiclel An exempted company, including: segregated portfolio

companies (“SPCs”); and limited duration companies, all of which may be limited by shares or guarantee or both.

l An ordinary non-resident company which may be limited by shares or guarantee or both.

l An ordinary company which may be limited by shares or guarantee or both.

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types oF regulatory Fund categoryl Licensed Fund (s4(1)(a) MFL);l Administered Fund (s4(1)(b) MFL);l Registered Fund (s4(3)(a)(i) MFL); l Master Fund (s4(3)(a)(iii) MFL)1; andl Exempt Fund (s4(4) MFL)2.

audit requirementLocal audit required for all licensed funds, administered funds and registered funds, licensed administrators and licensed managers.

Financial statement requirementsAll licensed funds, administered funds and registered funds must submit a fund annual return and audited financial statements to CIMA within 6 months of each financial year end. CIMA have no restrictions on the type of accounting standards chosen by funds provided they are in accordance with those specified in the offering documents of the fund and that CIMA is aware at all times of the accounting standards in use. However, CIMA has published guidelines on the authorisation of auditors which require Partners signing off on audit engagements, or any member of the firm with authority to sign off the audit, to possess an internationally recognised accounting qualification. For the purposes of this policy, the following are considered internationally recognised accounting bodies: The Institute of Chartered Accountants in England and Wales, The Institute of Chartered Accountants in Ireland, The Institute of Chartered Accountants of Scotland, The Canadian Institute of Chartered Accountants, The Association of Chartered Certified Accountants, The American Institute of Certified Public Accountants, or any other Professional Body or Institute approved by CIMA. In practice therefore, financial statements are generally prepared in accordance with IFRS, US, UK or Canadian GAAP.

cost oF regulatory FeesLicensed Fund .......................................US$3,660 per annum3

Administered Fund ...............................US$3,660 per annum4

Registered Fund ....................................US$3,660 per annum5

Master Fund ...........................................US$3,000 per annum6

overall cost oF regulated Fund establishment7

Exempted Company (not established as an SPC) ....................................US$6,9128

Exempted Company Master Fund .........................US$6,2529

Exempted Company (established as an SPC) ... US$7,82610

Exempted Limited Partnership ............................... US$7,33211

Exempted Limited Partnership Master Fund ......US$6,67212

Unit Trust ......................................................................US$5,49013

regulatory approval timeLicensed Fund .........................................................4 – 6 weeksAdministered Fund ...........................................................5 daysRegistered Fund ................................................................5 daysMaster Fund .......................................................................5 days

overall establishment timeLicensed Fund ......................... typically at least two monthsAdministered Fund ................... typically at least two weeksRegistered Fund ........................ typically at least two weeksMaster Fund ................typically at least two weeks running concurrently with the establishment of the feeder fund(s)

1. A Master fund is required to be registered with CIMA if it has one or more CIMA regulated feeder funds (being a CIMA regulated mutual fund that conducts more than 51% of its investing through another mutual fund).

2. An Exempted Fund is a category of fund provided for in the MFL which is not required to register with CIMA and as such is unregulated.

3. For Cayman SPCs there is an additional regulatory fee of US$305 per segregated portfolio (“SP”) up to a maximum of US$7622 (25 SPs).




7. Government disbursement costs only. Legal fees, legal disbursements and registered office fees will be a matter of negotiation with the service provider(s) concerned.

8. Includes a government tax undertaking costing US$1830 and assumes a share capital of US$50,000 with an express incorporation costing an additional US$500.

9. Includes a government tax undertaking costing US$1830 and assumes a share capital of US$50,000 with an express incorporation costing an additional US$500.

10. Includes a government tax undertaking costing US$1830 and assumes a share capital of US$50,000 with an express incorporation costing an additional US$500 and one initial segregated portfolio.

11. Includes a government tax undertaking costing US$1830 and assumes an express registration costing an additional US$500.

12. Includes a government tax undertaking costing US$1830 and assumes an express registration costing an additional US$500.

13. Includes a government tax undertaking costing US$1830.

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The Cayman Islands is the leading jurisdiction for the formation of alternative investment funds, having approximately 9,990 registered, administered and licensed funds under the Mutual Funds Law (as amended) of the Cayman Islands (the “MFL”) as at 31 March 2012.

The MFL requires all investment funds falling within its definition of a “mutual fund” to be registered, administered or licensed with CIMA, unless such mutual fund is an “excluded fund”, being a mutual fund that is not a master fund domiciled in the Cayman Islands and having 15 or less investors, the majority in number whom can appoint and remove the fund directors, general partner(s) and trustee(s). The MFL restricts the definition of “mutual fund” to open-ended funds that entitle investors to redeem or repurchase their equity interests at their option. Accordingly, only such funds are regulated under the MFL. Closed ended funds are not subject to specific regulation although Cayman Islands established or registered managers and other Cayman Islands established or registered functionaries of closed ended funds may in many circumstances require a license issued by CIMA under the relevant Cayman Islands legislation. For the purposes of this article, mutual funds will refer generically to investment funds when used in the context of the MFL and unless the context otherwise requires.

The Securities Investment Business Law (as amended) of the Cayman Islands (the “SIBL”) requires any person, as defined in the SIBL, carrying on or purporting to carry on “investment business” to hold a licence granted under the SIBL, unless such person is exempt from holding such a licence. The activities constituting investment business include dealing in securities, arranging deals in securities, managing securities and advising on securities, encompassing broker / dealers, investment managers, investment advisors, securities arrangers and market makers. SIBL provides an exemption from licensing where the foregoing qualify as “excluded persons” under the fourth schedule of the SIBL. In addition to SIBL, certain fund service providers may be required to hold a licence under the Companies Management Law (as amended) and the Banks and Trust Companies Law (as amended) of the Cayman Islands. Unless acting with, and in accordance with, the authorisation of CIMA, mutual fund administrators established or registered in the Cayman Islands are required to be licensed under the MFL. It is important to note, however, that non-Cayman Islands functionaries

of a Cayman Islands domiciled investment fund carrying on business from outside the Cayman Islands will not generally be required to hold any of the abovementioned licences. In addition, barring certain audit and registered office / resident agent requirements, a Cayman Islands domiciled fund is not required to have any service providers resident in the Cayman Islands.

Fund vehiclesSponsors and fund managers considering setting up investment funds in the Cayman Islands may choose from the following range of possible vehicles:l Exempted company (includes a segregated portfolio

company and a limited duration company);l Ordinary non-resident company;l Exempted limited partnership; andl Exempted unit trust.In practice, Cayman Islands investment funds are typically established as exempted companies limited by shares under the Companies Law (as amended) of the Cayman Islands, exempted limited partnerships under the Exempted Limited Partnership Law (as amended) of the Cayman Islands or as exempted unit trusts registered as such under the Trusts Law (as amended) of the Cayman Islands.

categories of fundMutual funds fall into 5 categories under the MFL (note the MFL does not cover closed-ended investment funds i.e. investment funds where investors have no voluntary redemption rights):l Licensed Mutual Funds – regulated by CIMA, no

minimum investment requirement. Mutual funds holding a Mutual Funds Licence under Section 4(1) of the MFL. All mutual funds are required to be licensed unless registered with CIMA in accordance with Section 4(3) of the MFL or exempted under Section 4(4) of the MFL or a licensed mutual fund administrator is providing principal office services to the mutual fund in the Cayman Islands in accordance with section 4(1)(b) of the MFL (such mutual fund being an “Administered Mutual Fund”);

l Administered Mutual Funds – regulated by CIMA, no minimum investment requirement. Mutual funds, the principal office of which is provided by a CIMA-licensed mutual fund administrator in the Cayman Islands;

cayMan IsLands

The Cayman IslandsBy Marco Martins and Patrick colegrave, harneys

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l Registered Mutual Funds – regulated by CIMA, if listed on a CIMA-recognised stock exchange no minimum investment requirement. Mutual funds registered under Section 4(3)(i) or (ii) of the MFL, being mutual funds in which the minimum aggregate interest purchasable by a prospective investor is US$100,000 (or its equivalent in any other currency, such amount referring to the initial investment made by a prospective investor) or the equity interests are listed on a CIMA-recognised stock exchange;

l Registered Master Funds – regulated by CIMA, the minimum investment requirement is the same as a Registered Mutual fund. Mutual funds registered in accordance with Section 4(3)(iii) of the MFL, being mutual funds incorporated or established in the Cayman Islands that hold investments and conduct trading activities and have one or more feeder funds regulated by CIMA; and

l Exempted Mutual Funds – not regulated by CIMA. Mutual funds that are exempt from licensing or registration under Section 4(4) of the MFL, being mutual funds that are not master funds and which have 15 or less investors, the majority in number of which can remove the directors, general partner(s) or trustee(s) of such mutual funds.

The vast majority of mutual funds regulated by CIMA are registered mutual funds or registered master funds. Requirements for registration include filing an offering document along with the prescribed registration form, incorporation / registration certificate, auditor and administrator consent letters and prescribed fee with CIMA. Mutual funds must be registered with CIMA before they commence business. Provided all requirements for registration are met, the registration of a mutual fund is dated the date that the application for registration is submitted to CIMA.

Functionaries / service providersThere are no pre-approval procedures required for the appointment of functionaries to regulated mutual funds, provided such functionaries are properly registered or licensed in the Cayman Islands, where required. A regulated mutual fund must have a registered office in the Cayman Islands.

The MFL requires that a person causing the preparation or distribution of the offering document of a licensed mutual fund (the “Promoter”) is of sound reputation. In addition, administration of a licensed mutual fund must be undertaken by persons with sufficient experience in fund administration with directors, managers or officers, as the case may be, who are fit and proper to be in their respective positions. CIMA also requires disclosure of the licensed mutual fund’s investment advisor / manager, auditor, administrator,

custodian and any sub-custodian, prime broker, legal advisers and any other persons having significant involvement in the affairs of the licensed mutual fund in the offering document of the licensed mutual fund.

An administered mutual fund is required to have a CIMA licensed administrator authorised to provide principal office services to the administered mutual fund within the Cayman Islands. The administrator must satisfy itself as to the sound reputation of the Promoter, as to the sound reputation and expertise of the person undertaking the administration of the administered mutual fund and that the business of the administered mutual fund and any offering of equity interests will be carried out in a proper way.

If established as an exempted limited partnership, at least one general partner must be resident in the Cayman Islands (either physically or by virtue of incorporation or registration). Local audit sign-off of annual financial statements is required for all regulated mutual funds.

As a matter of policy, CIMA requires that regulated mutual funds established as corporates have at least two directors, neither of which need to be resident in the Cayman Islands nor independent. Note however that given market practice it is typical to find independent directors sitting on the boards of such mutual funds and there is a well established and experienced independent director services industry in the Cayman Islands. Corporate directors are permissible, provided that they themselves have a board made up of at least two individual directors.

Regulated mutual funds are required to have an administrator but such administrator does not need to be resident in the Cayman Islands nor independent of the fund or other service providers, although market practice is trending towards independence of the administrator. For purposes of compliance with anti-money laundering Regulations (as defined below), if the AML obligations of a mutual fund are to be outsourced to an administrator, as they typically are, such administrator must located in one of the listed Schedule 3 Jurisdictions.

There are no statutory or regulatory requirements for regulated funds to have a prime broker or custodian, however this may be implied in the case of licensed mutual funds by virtue of the disclosure requirements for the offering document and in the case of other regulated mutual funds, lack of a prime broker or custodian may well raise queries from CIMA.

Aside from any requirement for the provision of principal office services, the need for a registered office, a resident general partner (if applicable) and local audit sign-off on annual financial statements, there is no requirement for regulated mutual funds to have local service providers.

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no restrictions on strategy, leverage or valuationThere are no restrictions on the strategy a fund may pursue, provided it is not otherwise in breach of the laws of the Cayman Islands. There are no limits on the leverage taken by funds or any required investment restrictions. There are currently no rules imposed on funds as to how they value their assets.

Financial statements audit and annual returnAll regulated mutual funds are required to prepare annual financial statements, such financial statements to be subject to local audit sign-off by an auditor approved by CIMA. Audited financial statements must be filed with CIMA within 6 months of the financial year end of a regulated mutual fund (unless an extension is granted by CIMA) and are filed electronically, accompanied by an annual return.

CIMA have no restrictions on the type of accounting standards chosen by funds provided they are in accordance with those specified in the offering documents of the fund and that CIMA is aware at all times of the accounting standards in use. However, CIMA has published guidelines on the authorisation of auditors which require Partners signing off on audit engagements, or any member of the firm with authority to sign off the audit, to possess an internationally recognised accounting qualification. For the purposes of this policy, the following are considered internationally recognised accounting bodies: The Institute of Chartered Accountants in England and Wales, The Institute of Chartered Accountants in Ireland, The Institute of Chartered Accountants of Scotland, The Canadian Institute of Chartered Accountants, The Association of Chartered Certified Accountants, The American Institute of Certified Public Accountants, or any other Professional Body or Institute approved by CIMA. In practice therefore, financial statements are generally prepared in accordance with IFRS, US, UK or Canadian GAAP or such other financial standards as may be approved by CIMA on a case by case basis.

The annual return contains basic prudential and governance information and summary financial information. The annual return does not require any information on the identity of investors or the specific investments within a regulated mutual fund’s portfolio. Such information is confidential to CIMA and may only be publically disclosed on an aggregated basis. Filing is typically done by the auditor.

Fund documentation All regulated mutual funds are required to have an offering document. Aside from licensed mutual funds, there are no stipulated contents for offering documents except that such offering documents must describe the

equity interests in al material respects and contain such other information as is necessary to enable a prospective investor in the mutual fund to make an informed decision as to whether or not to subscribe for or purchase the equity interests.

If established as an exempted company, exempted limited partnership or exempted unit trust, no offering may be made to the public in the Cayman Islands unless the securities of such entity are listed on the Cayman Stock Exchange. The prevailing view is that an exempted company, exempted limited partnership or exempted unit trust may invest in another exempted company, exempted limited partnership or exempted unit trust provided that such entity mainly conducts its business in the Cayman Islands, does not have its central management and control in the Cayman Islands and is not owned by Cayman Islands’ residents.

directors / registered officeAs mentioned previously, CIMA requires that every regulated mutual fund established as a corporate have at least two directors. Corporate directors are permitted, provided that they themselves have at least two individual directors. There are no requirements for local directors. Every entity domiciled in the Cayman Islands or a foreign company registered in the Cayman Islands must have a registered office or resident agent in the Cayman Islands.

ongoing requirementsRegulated mutual funds are subject to a reasonable number of requirements to notify CIMA after the occurrence of certain events such as appointment and resignation of directors and functionaries and changes to the offering document and to file either a revised offering document or a supplement thereto and, where appropriate, an amended and restated regulatory filing form with CIMA.

manager’s and administrator’s licensesInvestment managers are required to hold a licence granted under the SIBL, unless such persons are exempt from holding such a licence. Investment managers managing investment funds open to investment by high net worth or sophisticated persons only or to other investment funds which themselves are open to investment by high net worth or sophisticated persons only are exempt from having to hold a license granted under the SIBL, but do have to make an annual filing with CIMA along with a prescribed annual fee.

Unless acting with, and in accordance with, the authorisation of CIMA, mutual fund administrators established or registered in the Cayman Islands are required to be licensed under the MFL.

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amlAll Cayman Islands investment funds, managers and administrators must comply with the anti-money laundering regulations of the Cayman Islands as set out in the Proceeds of Crime Law (as amended) of the Cayman Islands and the Money Laundering Regulations (as amended) of the Cayman Islands (together the “Regulations”).

In the context of investment funds, compliance with the Regulations is the ultimate responsibility of the investment fund and the investment fund’s directors (or the general partner if the investment fund is an exempted limited partnership or the trustee if the investment fund is a trust). This includes designating an employee at managerial level to be a compliance officer, having in place procedures for identifying and reporting suspicious activity and identifying an appropriate person to receive internal suspicion reports. However, investment funds

commonly outsource their anti-money laundering obligations under the Regulations to their administrators who are then required to comply with the anti-money laundering rules of their home jurisdictions.

taxThere are no taxes in the nature of income tax, corporation tax, capital gains tax nor inheritance tax payable in the Cayman Islands.

Exempted companies, exempted unit trusts and exempted limited partnerships may apply for an undertaking from the Governor of the Cayman Islands that they will be exempt from local tax (should any be introduced) for up to 20 years (in the case of exempted companies) and for up to 50 years (in the case of exempted unit trusts and exempted limited partnerships). n

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GibraltarFund legislationl Financial Services (Collective Investment Schemes)

Act 2011l Financial Services (Collective Investment Schemes)

Regulations 2011l Financial Services (Experienced Investor Funds)

Regulations 2012

number oF FundsThe number of funds in Gibraltar currently stands at 96 Experienced Investor Funds (“EIFs”) and Non-UCITS Retail Funds. As there is no register of Private Funds, it is difficult to ascertain exact numbers. It is estimated that there are another 50-75 Private Funds. Many EIFs are protected cell companies which allow for the creation of sub-funds which are statutorily segregated from each other including the various cells in the PCCs there are about 191 fund strategies in Gibraltar.

number oF Funds by categoryInformation on the number of funds by category, i.e. hedge, private equity, property, other alternative, funds of alternative funds, retail/general public funds) etc is not readily available although the split is more or less equal between hedge funds and private equity / property funds with about 5% as funds of hedge funds.

The total fund assets for domiciled and administered fund in Gibraltar stands at $4.55 Billion as at 31 December 2011.

Information on domiciled and administered fund assets by category is not currently available.

regulatorThe Financial Services Commission (“FSC”)Contact: Financial Services Commission, PO Box 940,Suite 3, Ground Floor, Atlantic Suites, Europort Avenue, Gibraltar. Tel: +350 200 40283; Fax: +350 200 40282.Website: www.fsc.giGeneral e-mail: [email protected]

service providersGibraltar’s Service providers to alternative funds in the funds and investments community are categorised as:Law firms ......................................................................................5Administrators ..............................................................................9Custodians ....................................................................................8Accountants/auditors .............................................................. 15Brokers ..........................................................................................2Investment Advisers ................................................................. 19Trustees / prime brokers / placement agents ............. N/ALocal stock exchange: Gibraltar does not have a local stock exchange.Local fund industry body:Gibraltar Funds and Investments Association (“GFIA”). Contact: [email protected] agency for funds/financial sector:The Gibraltar Finance Centre including the funds industry as well as the Private Client, Insurance and Banking sectors are promoted by the Finance Centre which is a department within the Government Department of Trade and Industry. James Tipping is the Finance Centre Director and can be contacted as follows:

Finance Centre, Suite 761A EuroportTel: +350 20050011Email: [email protected]

double taxation treatiesGibraltar has no bilateral double taxation treaties although it is currently investigating the feasibility of their implementation. Gibraltar funds can make use of the European Parent Subsidiary Directive from many jurisdictions such as Luxembourg.

tax inFormation exchange agreementsTax information exchange agreements with Gibraltar are listed below by country, with date signed:The Netherlands – Gibraltar ................. signed 23 April 2010Norway – Gibraltar ....................... signed 16 December 2009Belgium – Gibraltar ...................... signed 16 December 2009Iceland – Gibraltar ........................ signed 16 December 2009Sweden – Gibraltar ...................... signed 16 December 2009Faroe Islands – Gibraltar ................ signed 20 October 2009Finland – Gibraltar............................ signed 20 October 2009Greenland – Gibraltar ...................... signed 20 October 2009Portugal – Gibraltar ...........................signed 14 October 2009France – Gibraltar .......................signed 22 September 2009Austria – Gibraltar ....................... signed 17 September 2009Denmark – Gibraltar .................... signed 2 September 2009United Kingdom – Gibraltar ............. signed 27 August 2009Australia – Gibraltar ........................... signed 25 August 2009New Zealand – Gibraltar .................. signed 13 August 2009Germany – Gibraltar .......................... signed 13 August 2009Ireland – Gibraltar ...................................signed 24 June 2009USA – Gibraltar .....................................signed 31 March 2009

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www.fsc.gi





types oF alternative Fund vehicleThe types of alternative fund vehicles in Gibraltar are closed-ended and open-ended investment companies, limited partnerships, unit trusts and protected cell companies which can act as umbrella funds.

available types oF corporate vehicle There are three types of corporate vehicles in Gibraltar:l Private Limited Companyl Public Limited Companyl Protected Cell Company (Private or Public)

types oF regulatory Fund categoryl Private Fundsl Experienced Investor Fundsl Non UCITS Retail Fundsl UCITS Funds

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Private fund EIF Non UCITS retail fund UCITS fund

Audit required Recommended Yes Yes Yes

Local audit No Yes Yes Yes

Financial statement requirement

Recommended Annual Bi-annual Bi-annual

Cost of regulatory fees

Zero Application fee – £2.5k /Annual fee of £800

Application fee – £3.5k /Annual fee of £3,905

Application fee – £12k /Annual fee of £13,335

Overall cost of fund establishment

£12k – £20k From £15k plus above regulatory fees

From £20k plus above regulatory fees

From £25k plus above regulatory fees

Regulatory approval time

None None – the fund can trade on the basis of a local legal opinion provided that fund documentation is submitted to the Regulator within 10 business days of launch

3-4 months 3-4 months

Overall establishment time

2-4 weeks 2-4 weeks 4 weeks plus above 4 weeks plus above

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Since 2005 with advent of the Financial Services (Experienced Investor Funds) Regulations 2005, recently updated to Financial Services (Experienced Investor Funds) Regulations 2012 (“EIF Regs”) Gibraltar’s funds industry has experienced positive and qualitative growth. As the majority of Gibraltar’s funds are Experienced Investor Funds (“EIFs”) this article will focus primarily on that regime.

investor restrictionsThe investors who are eligible to invest in EIFs include investors who:1. Have EUR1million in assets besides the value of their

residential home; or2. In their ordinary employment activity are investment

professionals; or3. Invest an aggregate of EUR100,000 in one or more

EIFs.The EIF Regulations were recently amended to add to the following non-cumulative categories4. Investors who are classed as professional investors

under MiFID; or5. Investors who invest EUR50,000 in an EIF and are

advised to do so by an investment adviser that is regulated to European standards.

There is no minimum or maximum amount of investors or investment necessary for EIFs. Gibraltar EIFs can trade as private companies but are not restricted to a maximum number of investors. Although it is possible to set up an EIF as a PLC it is generally no longer necessary to do this. Gibraltar EIFs do not have any legislative restrictions on accepting US investors provided that the fund and its manager adhere to the relevant US securities laws.

Since Gibraltar funds can trade as private companies, they are eligible under US law to do a “check the box” election and thus be treated, for US tax purposes, as a partnership. In some cases this obviates the need to set up a US feeder fund structure for US investors.

promoter / investment manager / custody requirementsThere are no promoter requirements in Gibraltar beyond the ordinary due diligence and KYC requirements. A fund can be self-managed (by its board of directors) or it can be managed by a third party investment manager or by

the directors on advice from an investment adviser. The investment manager must comply with the legislation from the jurisdiction where it acts. If the advisor or manager is in Gibraltar or another European jurisdiction, it will generally require a MiFID license. If it is in any other jurisdiction, such as Switzerland or the Caribbean jurisdictions, it is sufficient from a Gibraltar perspective that it comply with the legislation in those jurisdictions. There is no requirement for a Gibraltar based investment manager or adviser.

At present, there is no legislative requirement for a Gibraltar based custodian or prime broker. This is likely to change in July 2013 when the Alternative Investment Fund Manager Directive is enacted into local legislation, with respect to funds to which the Directive applies (i.e. larger than EUR100million or EUR500million for Private Equity Funds or smaller funds that wish to opt in to the benefits of the Directive). Smaller funds that are exempt from the provisions of the Directive will therefore be able to continue to use custodians from any jurisdiction that is considered acceptable to the Gibraltar Regulator.

directors and offering documentsA key element of the new EIF Regulations is the requirement for 2 directors who are resident in Gibraltar and who are licensed by the Financial Services Commission to act as EIF directors. There need not be a majority of authorised directors on the board of the fund. Other directors may be resident in any other jurisdiction subject to fiscal considerations. The presence of the authorised directors allows for the flexible EIF regime as they, in essence, act as the Regulator’s “eyes and ears” on the board of every fund thus ensuring the proper management and operation of each fund.

Each fund must produce an offering document that outlines the service providers, investments, risks, exit strategies, and such general information as is standard in this industry. The offering document is the document which lists the information that an investor would reasonably expect to have before making an informed investment decision.

authorisation and regulationThe authorisation process for EIFs is probably the EIF regime’s most attractive element. Gibraltar is possibly the only jurisdiction in the European Union that allows for

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GibraltarBy James Lasry, hassans

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a fund to be launched on the basis of a legal opinion, provided that the fund’s documentation is submitted to the Regulator within 10 business days of the fund’s launch. There is also an optional pre-approval channel of authorisation whereby the documents can be submitted to the Regulator before launch and the Regulator has 10 business days to respond. The majority of Gibraltar’s funds, however, still opt for the pre-authorisation launch with the caveat that any unexpected or unusual structures or elements are generally discussed with the Regulator beforehand. Going forward, the fund must submit its audited accounts to the Regulator within 6 months of its financial year end along with a form containing general compliance and statistical information.

An EIF has an obligation to notify the Regulator of any material changes within 20 business days. There is an obligation to notify the Regulator of any breaches to regulations immediately.

The fund administrator plays a central role in the ongoing communication with the Regulator. Indeed they are often the primary interface with the Regulator. There is a requirement under the EIF Regs to use a Gibraltar based fund administrator. This was recently relaxed under the new Regulations to allow non-Gibraltar based fund administrators who are approved by the FSC and by the Minister with responsibility for Financial Services. It is anticipated that the larger internationally recognised fund administrators will be permitted to administer Gibraltar based EIFs. It is important to note that this is not an authorisation procedure but a much shorter approval process by the local authorities. In such cases the foreign administrator would have to appoint a local agent for service of documents as it is not otherwise required to maintain any presence in Gibraltar.

It is important to note that when a fund is established outside of Gibraltar and redomiciles to Gibraltar it may retain its foreign administrator. This will be of particular benefit to funds wishing to redomicile to the European Union and yet have legitimate concerns about retaining continuity with their service providers. Investors in funds in jurisdictions that have similar although not identical experienced investor regimes will, with approval of the Regulator either on a fund by fund or jurisdiction by jurisdiction basis, be deemed to be experienced investors under the EIF Regs.

Since EIFs are targeted to experienced investors, there are no statutory investment or borrowing restrictions save that the fund must state in its offering memorandum what its policy is with respect these issues.

taxationGibraltar funds are generally structured to be tax neutral. This can be achieved in two possible ways. The first is by obtaining a certificate from the Commissioner of

Income Tax on the basis that the fund is a Collective Investment Scheme. Under this certificate the fund is not subject to corporate tax on investment income. There is no capital gains tax in Gibraltar. The other option is that the fund may elect to be taxed under Gibraltar’s 10% territorially based corporate tax regime. This latter option is often used for Real Estate or Private Equity funds that wish to avail themselves of the European Parent Subsidiary Directive and which need to demonstrate that they are taxable in order to gain the benefits of that directive. These funds are nevertheless unlikely to be liable to any Gibraltar corporate tax as Gibraltar’s territorial corporate tax regime only taxes profits of a trade which are accrued in or derived from Gibraltar sourced assets. Unless a fund invests in physical assets located in Gibraltar it is unlikely it will produce any taxable income in Gibraltar.

Investment Managers on the other hand are taxable, if established as a limited company, at a rate of 10% of profits, subject to all the usual deductions. When the principals of the investment manager or adviser are expatriates to Gibraltar and have elected to be taxed under a tax regime such as that known as Higher Executives Possessing Specialist Skills (“HEPSS”), their personal employment and dividend income tax is capped at under £30,000. In order to be considered under the HEPSS scheme, applicants must possess skills (such as fund management) which are not readily available in Gibraltar, earn more £100,000 from their employment and they must own or rent a residence in Gibraltar that is suitable to their family’s needs and that is approved for such categories of residents.

valuation rulesA fund must state its policy on valuation in its offering memorandum. Funds in Gibraltar must be audited to internationally accepted accounting standards such as UK or US GAAP or IFRS.

conclusionGibraltar EIFs are probably the most user friendly fund vehicles within the European Union. They certainly have the quickest time to market within the EU as it is possible to launch a Gibraltar EIF before getting approval from the Regulator. The Gibraltar Regulator on the other hand has a plethora of powers in order to regulate such funds and to protect the interests of the investors. This, along with the generally closely-knit investment community in Gibraltar allows for a quick, efficient and safe funds jurisdiction within the European Union. n

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The development of the fund industry in Gibraltar has witnessed a tremendous growth with many funds being domiciled in this rock-solid and well-regulated offshore environment. Hassans has been at the forefront acting as advisers to both the Gibraltar Government and Fund Managers.

Hassans can be your perfect partner in setting up funds whether Private, Experienced Investor Funds, Non-UCITS Retail Funds, UCITS Funds or Protected Cell Companies. You could say we’re fundamental to any fund being set-up in Gibraltar.

Hassans – International Lawyers

Whatever or wherever the challenge,we can provide the solutions.

EUROPEan fUnds.fUndamEntaL PRIncIPLEs.

tax planning • corporate & commercial • Financial SerViceS • fUnds • litigation • proPertY • truStS

www.gibraltarlaw.com 57/63 Line Wall Road, PO Box 199, Gibraltar · Tel (+350) 200 79000 · Fax (+350) 200 71966 · Email [email protected]

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GuernseyFund legislationThe Protection of Investors (Bailiwick of Guernsey) Law 1987

number oF FundsDomiciled ..................................................................................860

number oF Funds by categoryAs at end of March 2012*Note that some schemes have more than one categoryopen ended schemesMoney market/cash: ................................................................ 21Managed currency ................................................................... 10Debt ..............................................................................................39Equity/securities ........................................................................92Derivatives ..................................................................................24Real property ..............................................................................29Private equity ...............................................................................4Venture capital .............................................................................1Infrastructure ................................................................................0Hedge fund.................................................................................22Fund of hedge fund .................................................................68Emerging markets .................................................................... 14Balanced ..................................................................................... 10Other ............................................................................................ 31Total ................................................................. 365closed ended schemesMoney market/cash: ..................................................................2Managed currency ..................................................................... 0Debt ..............................................................................................48Equity/securities ........................................................................69Derivatives .................................................................................. 16Real property ............................................................................122Private equity ...........................................................................308Venture capital ...........................................................................36

Infrastructure ..............................................................................23Hedge fund...................................................................................8Fund of hedge fund ................................................................. 17Emerging markets .................................................................... 11Balanced .......................................................................................2Other ............................................................................................ 51Total .................................................................. 713domiciled and administered fund assets total: £179.7 billiondomiciled and administered fund assets by category:Closed-ended .................................................................£123.9bnOpen-ended .....................................................................£55.8bn

regulatorGuernsey Financial Services Commission, PO Box 128, Glategny Court, Glategny Esplanade, St Peter Port, Guernsey GY1 3HQ

service providersGuernsey has high quality legal, accounting, valuation, registrar, company secretarial and audit services for the structuring, launch and administration of funds. The Island also has a high level of choice and competition in terms of administrators and custodians.Local stock exchange: The Channel Islands Stock Exchange, 1 Lefebvre Street, St Peter Port, Guernsey GY1 4PJLocal fund industry body: GIFA – Guernsey Investment Fund Association and GIBA – Guernsey International Business AssociationPromotion agency for funds/financial sector: Guernsey Finance, Guernsey Information Centre, North Plantation, St Peter Port, Guernsey GY1 3PN

double taxation treaties 13: Australia, Denmark, Faroe Islands, Finland, Greenland, Iceland, Ireland, Jersey, Malta, New Zealand, Norway, Sweden and United Kingdom.

tax inFormation exchange agreements35: Argentina, Australia, Bahamas, Canada, Cayman Islands, China, Czech Republic, Denmark, Faroe Islands, Finland, France, Germany, Greece, Greenland, Iceland, India, Indonesia, Ireland, Japan, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, San Marino, Seychelles, South Africa, Slovenia, St Kitts and Nevis, Sweden, Turkey, United Kingdom and the United States of America.

types oF alternative Fund vehiclel Open-ended or closed-ended investment companyl Open-ended or closed-ended PCCl Open-ended or closed-ended ICCl Limited partnershipl Open-ended or closed-ended unit trust

available types oF corporate vehicleGuernsey funds may be structured in the traditional way as companies, unit trusts or limited partnerships.

The jurisdiction also offers the potential to structure the fund as a protected cell company (PCC), being a single legal entity with distinct cells, the assets and liabilities of each cell being segregated by law from the assets and liabilities of each other cell.

guernsey

St. Peter Port

St Helier

GUERNSEY

JERSEY

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guernsey

The fund may also be structured as an incorporated cell company (similar to a PCC except that each cell is a separate legal entity, effectively a company within a company).

types oF regulatory Fund categoryl Open or closed ended authorised funds (including QIF)

– Class A (open ended) – Class B (open ended) – Class Q (open ended) – Closed ended authorisedl Open or closed ended registered fund

audit requirementGuernsey funds must be audited. Local auditors are required.

Financial statement requirementsAudited Financial Statements: Class A funds must submit the audited financial statements 4 months after the end of the annual accounting period and the half-yearly financial statements 2 months after the half-yearly accounting period.

All other funds must submit audited financial statements to the Commission 6 months after the end of the annual accounting period.

cost oF regulatory Feesopen-ended collective investment schemesAnnual fees:Scheme ................................................................................ £3,100Per additional class ..............................................................£200Application fees:Scheme ................................................................................ £3,100New class of umbrella/multi class scheme ..................£650non-guernsey collective investment schemesAnnual fee ..............................................................................£500Application fee ....................................................................£1,000closed-ended collective investment schemesAnnual fee ........................................................................... £3,100Application fee .................................................................... £3,100

LicenseesAnnual fees:Designated persons of authorised or registered open-ended collective investment schemes ............. £3,000Designated persons of authorised or registered closed-ended collective investment schemes .......... £3,000Principal manager of authorised or registered open-ended collective investment schemes ..............£1,500Manager of authorised or registered closed-ended collective investment schemes ......................................£1,500Other licensees ................................................................. £3,000Application fee:Licensees ............................................................................. £2,100Form eX notificationAnnual fee ..............................................................................£500Application fee ....................................................................£1,000

regulatory approval timel Authorised funds – approximately 8 weeks from

applying for outline authorisation to launch date. l Registered fund and QIF – approximately 5 weeks from

beginning of preparation of all documents required for formal authorisation to launch date.

l CISX listing (application to list of CISX runs concurrent with fund establishment) – approximately 5 weeks from preparation of documents for CISX listing application to the fund being listed on the CISX.

Timescales may vary due to the levels of regulatory comment and the ability of the parties to finalise documentation. Where funds are, for example, a further cell of a PCC approved previously by the GFSC and/or CISX timescales may be substantially quicker. It is possible to fast track licence applications (for example, if a new manager is to be established to manage the funds) with responses within 10 days where applications are connected with QIF or Registered Fund applications. .

overall establishment timeAs above.

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introductionCollective investment funds have been operating in Guernsey for four decades, and Guernsey-based funds are promoted and sponsored by leading institutions in over 38 countries. As a result, there is a healthy choice of experienced fund service providers such as administrators, custodians, auditors, tax and legal advisors.

The main advantages of establishing a fund in Guernsey are:l Flexibility of structure and regulationl Experienced service providersl Stability of government and internationally compliant

standardsl Access to the Channel Islands Stock Exchange (CISX)l Taxation

legal structuresGuernsey funds may be structured in the traditional way as companies, unit trusts or limited partnerships. Guernsey also offers the potential to structure the relevant legal entity as an incorporated cell company (ICC) or a protected cell company (PCC). A PCC is a single legal entity with distinct cells, the assets and liabilities of each cell being segregated by law from the assets and liabilities of the other cells. An ICC is similar to a PCC except that each cell is a separate legal entity, effectively a company within a company.

Choice of structure will generally depend on the needs of the investors. Relevant factors include tax treatment in investors’ home jurisdiction of income and capital distributions from the fund.

cisx listingFunds may be listed on the CISX regardless of whether they are companies, unit trusts or limited partnerships.

regulation of fundsFunds are regulated by the Guernsey Financial Services Commission (GFSC) under The Protection of Investors (Bailiwick of Guernsey) Law, 1987 (POI Law).

The POI Law characterises funds (be they open-ended or closed-ended) into two categories for regulatory purposes: authorised funds and registered funds.

Authorised funds are regulated and subject to continuing supervision by the GFSC. Within this category, open-ended funds are classified as A, B or Q funds and

are subject to the Class A, B or Q Rules respectively. Authorised closed-ended funds are subject to The Authorised Closed-Ended Investment Schemes Rules 2008.

Registered funds are subject to ongoing supervision by the GFSC. Open-ended and closed-ended registered funds are subject to The Registered Collective Investment Scheme Rules 2008. These rules are generally regarded as being less onerous than those applicable to authorised funds.

The Prospectus Rules 2008 apply to all registered funds and set out the requirements for disclosure in the offer documents of the fund.

Registered funds cannot be sold to the public in Guernsey except by or through a Guernsey regulated entity.

regulation of service providersThe GFSC also regulates the licensing of fund service providers, such as administrators, custodians and investment managers/advisers (if based in Guernsey). The POI Law requires any person who carries out “controlled investment business” in or from within the Bailiwick of Guernsey to obtain a licence from the GFSC. Controlled investment business includes activities such as investment management or advice, administration and custody. In addition, the manager of a Guernsey fund, or general partner (if the fund is established as a limited partnership) will generally require a POI licence.

An open-ended fund must have a Guernsey resident administrator (called the designated manager) and custodian trustee (the designated trustee).

The designated trustee must be independent of the investment manager and the designated manager. Each of the designated manager and designated trustee must be licensed by the GFSC.

A closed-ended fund will require a designated manager. In the absence of a formal custodian, the GFSC must be advised as to the provisions for custody of the fund’s assets.

There is no requirement for a Guernsey fund to have a separate investment manager.

However, in practice, an investment manager may still be put in place for commercial and risk management purposes. Typically, the manager will be a special purpose vehicle, formed as a subsidiary of the promoter.

Where the fund has a separate investment manager

guernsey

GuernseyBy Paul Wilkes, group partner, collas crill

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guernsey

(or advisor), these need not be resident or licensed in Guernsey, provided the services are performed outside of Guernsey.

process for authorisation / registrationauthorised fundsThere is a three-stage process:1. Outline consent – GFSC is provided with outline details

of the fund together with information in response to the new promoter’s checklist (if the promoter is not already known to the GFSC).

2. Interim consent – GFSC is provided with a near final draft of the scheme particulars and the appropriate application form confirming compliance with applicable rules, plus the application fee.

3. Final consent – certified copies of final versions of scheme particulars and signed agreements with service providers must be submitted to GFSC. Final consent is usually obtained within 2-3 days. The other stages take longer, and the overall process can take 6-8 weeks for a new promoter.

Qualifying Investor Funds (QIFs)Alternatively there is a streamlined approval process available for authorised funds, known as the QIF regime. A fund that uses this procedure can only be targeted at certain professional or experienced investors. The administrator of a QIF is responsible for collecting due diligence on the fund promoter and must make certain warranties to the GFSC as to their fitness and propriety. The GFSC will grant authorisation for a QIF within 3 working days of submission of a completed application.

registered fundsAs with the QIF regime, the administrator of the fund must make certain warranties to the GFSC as to the fitness and propriety of the promoter.

Upon submission of a registration application, which must include the warranties from the administrator, certified copies of final versions of scheme particulars and signed agreements with service providers, the GFSC will issue a declaration of registration within 3 working days.

obtaining a poi licenceThe process for obtaining a POI licence for a Guernsey-based manager or general partner of a fund is run concurrently with the process for authorisation or registration of the fund. In respect of QIF or registered fund applications there is the option to use a fast track POI licensing procedure, which will ensure a 10 working-day turn-around time. Again, the fund’s administrator must provide certain warranties to the GFSC as to the fitness and propriety of the persons behind the manager or general partner.

taxationThere are no capital, value added or inheritance taxes in Guernsey, nor any stamp or document duties except in respect of Guernsey real property.

With the exception of certain businesses, companies (including funds) now pay a standard rate of 0% income tax on profits. Funds still have the option to apply for exempt company status (on payment of an annual fee of £600).

ucits iiiThe GFSC has issued rules for Class A funds in line with the UCITS III regime. The rules are awaiting confirmation from the FSA and Treasury that they will be designated in the UK. Thereafter it will be possible to passport Guernsey Class A funds into the UK. n

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IrelandFund legislation l UCITS: European Communities (Undertakings for

Collective Investment in Transferable Securities) Regulations, 2011

l Non-UCITS investment companies: Part XIII of the Companies Act, 1990

l Non-UCITS unit trust: Unit Trusts Act, 1990l Investment Limited Partnerships (non-UCITS):

Investment Limited Partnerships Act, 1994l Non-UCITS common contractual funds: Investment

Funds, Companies and Miscellaneous Provisions Act, 2005

number oF Fundsl 5,077 Irish regulated funds as of April 30, 2012

(including sub-funds) (source: Central Bank of Ireland)l 7,248 non-Irish funds administered in Ireland as

of March 31, 2012 (source: Irish Funds Industry Association)

number oF Funds by categoryAll data as of 30 April 2012 and includes sub-funds (source: Central Bank)UCITS .......................................................................................3,101Non-UCITS ............................................................................. 1,976Retail Non-UCITS ....................................................................380Professional Investor Non-UCITS ....................................... 181Qualifying Investor Non-UCITS ..........................................1,412domiciled and administered fund assets total:The latest available data is as of March 31, 2012 shows that there were E908 billion in total net assets in non-Irish domiciled funds administered in Ireland (source; Irish Funds Industry Association) and E1,116 billion in total net assets in funds domiciled in Ireland. The figure for Irish

domiciled funds was made up of E871 billion of UCITS net assets and E245 billion of non-UCITS net assets (source: Central Bank of Ireland).domiciled and administered fund assets by category:All data as of 31 December 2011 (source: Central Bank of Ireland)Money Market: ........................................................ E345 billionBonds: .........................................................................E169 billionEquities: ..................................................................... E265 billionHedge: ..........................................................................E58 billionOther: .......................................................................... E116 billionThe numbers of Irish registered funds by regulatory category are provided above. The variation between the Central Bank of Ireland aggregate total assets figure and the total net asset value figure of the Central Bank as stated above is due to rounding and other factors.

There are no up-to-date official statistics available on the categories of non-Irish funds administered in Ireland as such.

regulatorThe Central Bank of Ireland (commonly known as the “Central Bank”).

Address: Funds Authorisation and Supervision Divisions, Central Bank of Ireland, Block D Iveagh Court, Harcourt Road, Dublin 2, Ireland

service providersThere are a large number of law-firms which provide legal services to the alternative investment funds industry here, both the leading commercial firms and smaller niche practices.

All of the main accountancy firms have large operations in Ireland.

There are approximately 50 fund administrators active in Ireland, many of which have affiliated custodian operations in Ireland, the majority of which would have alternative investment fund servicing capabilities.

There are no available statistics on Irish corporate service providers as generally these entities are required to be regulated in Ireland. Generally, fund administrators or specialised transfer agency companies would provide those services normally provided by corporate services provides, excluding company secretarial services which are also provided by corporate secretarial affiliates of the law-firms and certain independent firms.

Investment banks involved in prime brokerage do not typically provide this service out of Ireland. Over 431 fund promoters have Irish domiciled funds as part of their distribution strategy (source Lipper Ireland Funds Encyclopaedia June 2011).

There are no official statistics on the number of placement agents in Ireland.Local stock exchange: The Irish Stock Exchange LimitedLocal fund industry body: Irish Funds Industry AssociationPromotion agency for funds/financial sector: Industrial Development Agency and Irish Funds Industry Association

double taxation treaties Ireland has signed comprehensive double taxation treaties with 66 countries, of which 59 are currently in effect. The double taxation agreements which are currently in effect and having force of law cover the

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following countries: Albania, Australia, Austria, Bahrain, Belarus, Belgium, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Israel, Italy, Japan, Republic of Korea, Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Moldova, Montenegro, Netherlands, New Zealand, Norway, Pakistan, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Republic of Turkey, United Arab Emirates, United Kingdom, United States, Vietnam and Zambia.

Ireland has also signed double taxation treaties with the following countries and the legal procedures to give these agreements force of law are at various stages: Armenia, Bosnia & Herzegovina, Egypt, Kuwait, Morocco, Panama and Saudi Arabia.

Negotiations for new agreements with Qatar, Thailand, Ukraine and Uzbekistan have been concluded and are expected to be signed shortly. In addition negotiations for new agreements with the following countries are at various stages: Argentina, Azerbaijan, and Tunisia. It is also planned to initiate negotiations for new agreements with other countries in the course of 2012.

tax inFormation exchange agreements Ireland has concluded Tax Information Exchange Agreements (TIEAs) and Agreements for affording relief from double taxation with respect to certain income of individuals and establishing mutual agreement procedures in connection with the adjustment of profits of associated enterprises with Guernsey, the Isle of Man and Jersey.

Ireland has also concluded Tax Information Exchange Agreements (TIEAs) with Anguilla, Antigua and Barbuda, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Cook Islands, Gibraltar, Grenada, Liechtenstein, the Marshall Islands, Samoa, St Lucia, St. Vincent & the Grenadines and, the Turks & Caicos Islands and Vanuatu.

In addition, Ireland has been designated by the Cayman Islands as a country that may make requests for tax information under Part IV of the Tax Information Authority Law. This allows the Revenue Commissioners to request information relevant to a tax investigation (including bank and entity ownership information) from the Cayman Islands authorities without the necessity of a bilateral TIEA. This applies for taxable periods beginning on or after 1 May 2009.

european union – taxation oF savings income directiveUnder the European Savings Directive, all European Member States and a number of associated and dependant territories are required to exchange certain information and/or impose a withholding tax on particular types of payments made to certain individuals. Andorra, Liechtenstein, Monaco, San Marino and Switzerland are not participating in automatic exchange of information but are exchanging information on a request basis. Their participation is confined to imposing a withholding tax. The other associated or dependant territories that are participating are Anguilla, Aruba, British Virgin Islands, Cayman Island, Guernsey, Isle of Man, Jersey, Montserrat, Netherlands Antilles and Turks and Caicos Islands.

types oF alternative Fund vehiclel Open-ended, hybrid or closed-ended investment

company with fixed or variable capitall Open-ended, hybrid or closed-ended unit trustl Open-ended, hybrid or closed-ended common

contractual fundsl Open-ended, hybrid or closed-ended investment limited

partnershipsEach of the above may be established as single or multi-portfolio funds and with one or multiple classes of shares. Investment companies and common contractual fund sub-funds have statutory ring-fencing of their assets and liabilities.available types of corporate vehiclel Single portfolio company l Segregated portfolio (umbrella) companyl Variable or fixed capital company

types oF regulatory Fund categoryl UCITS (no minimum initial subscription requirement);l Retail Non-UCITS (no minimum initial subscription

requirement except for private equity funds, in respect of which it is E12,500);

l Professional Investor Non-UCITS (minimum initial subscription of E100,000);

l Qualifying Investor Non-UCITS (minimum initial subscription of E100,000, investor wealth tests and risk acknowledgement).

There are certain other categories which are not widely used. For example, non-designated collective investor funds (which are available to life assurance companies, pension funds and other collective investors; tax exempt, do not have to be sold publicly) are not widely used due to their narrow investor requirements.

audit requirement Yes, annual, local.

Financial statement requirements Yes, all semi-annual unaudited and annual audited. Corporate Qualifying Investor Funds do not have to prepare semi-annual unaudited accounts.

cost oF regulatory FeesE2,025 per year for each fund plus E475 per sub-fund up to a maximum of E4,400 (source: Central Bank of Ireland: A Guide to Industry Funding Regulations, 2011). This is reviewed on an annual basis by the Central Bank of Ireland.

overall cost oF Fund establishmentLegal costs will vary from law-firm to law-firm and depending on the type of fund and other factors. There is no up-front regulatory fee. There is a small government levy for incorporating corporate funds and other initial statutory filings.

regulatory approval timeQualifying Investor Funds: 24 hours following filing of prospectus, constitutive document, principal service agreements, application request, completed regulatory application forms including a fund summary, and various confirmations assuming promoter, investment manager,

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administrator, custodian and directors have already been approved by the Central Bank and the application is within normal prescribed parameters and any required derogations have been obtained in advance.Professional Investor non-ucIts: If promoter approval is required, this must be obtained generally before the fund application is submitted to the Central Bank. The promoter approval will generally take approximately two weeks. Once promoter approval is obtained, and the fund application is submitted, the Central Bank endeavours to respond to the initial application within two weeks and subsequent responses from the fund each time within approximately one week. Normally, two to three sets of comments can be expected, depending on the nature of the fund, resulting in the application spending approximately four to five weeks in total with the Central Bank. The total time taken to have the fund authorised then depends on the speed at which the promoter responds to the Central Bank’s comments.retail non-ucIts: Similar to Professional Investor Fund above.

ucIts: Similar to Retail Non-UCITS, however, the policies and procedures regarding the overall management and governance of the UCITS (whether by the Board of the UCITS or a separate Irish management company (in the case of common contractual funds and unit trusts a management company is compulsory) must be pre-approved by the Central Bank prior to the submission of the UCITS application for authorisation. This pre-approval process can generally take two to four weeks.

overall establishment timeIn each case from a standing start (i.e. fund promoter, investment manager and directors have not been previously approved by the Central Bank, but fund service providers have been chosen) to fund authorisation:UCITS ........................ tends to take approximately 3 monthsnon-ucItsRetail ................................................... approximately 2 monthsProfessional Investor Funds ......... approximately 2 monthsQualifying Investor Fund .................. approximately 1 month

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1. What if any are the investor restrictionsIrish Funds are not required to have a minimum number of investors, however, certain Irish regulated funds must, depending on the category of fund, and the specific wording of the legislation, invest capital raised from “the public” (UCITS), raise capital by providing facilities for “direct or indirect participation by the public” (Non-UCITS investment companies) or must constitute an arrangement made for the purpose, or having the effect, of providing facilities for the participation by “the public” (non-UCITS unit trusts).

There are certain other categories which are not widely used. For example, non-designated collective investor funds (which are available to life assurance companies, pension funds and other collective investors), are not required to facilitate direct or indirect public participation). These are not widely used due to the fact that their income and gains are taxable in Ireland.

2. What if any are the investor restrictionsUCITS must be offered in European Economic Area, but may also, but not alternatively, be offered elsewhere. UCITS and Non-UCITS established as common contractual funds may not be offered to natural person investors. Apart from that, and outside of normal matters of contractual capacity, there are no substantive Irish restrictions in relation to the nature or quality of UCITS investors.

There are no minimum investments imposed by the Central Bank in relation to Irish non-UCITS retail funds other than that non-UCITS retail funds which are authorised by the Central Bank as venture capital or private equity funds must impose a minimum initial subscription requirement of E12,500 on each investor. Non-UCITS Professional Investor Funds (“PIFs”) are required to impose a minimum initial subscription requirement of E100,000 otherwise there are no Irish restrictions. Non-UCITS funds that can be offered solely to Qualifying Investors (“QIFs”) are required to apply a minimum initial subscription requirement of E100,000 and may be sold only to investors who are professional clients within the meaning of Annex II of Directive 2004/39/EC (Markets in Financial Instruments Directive); or investors who receive an appraisal from an EU credit institution, a MiFID firm or a UCITS management company that the investor has the appropriate expertise, experience and knowledge to adequately understand

the investment in the QIF; or investors who certify that they are an informed investor by providing either (i) a confirmation (in writing) that the investor has such knowledge of and experience in financial and business matters as would enable the investor to properly evaluate the merits and risks of the prospective investment; or (ii) a confirmation (in writing) that the investor’s business involves, whether for its own account or the account of others, the management, acquisition or disposal of property of the same kind as the property of the QIF.

In relation to PIFs and QIFs, an exemption from the minimum initial subscription requirement and, in the case of QIFs, the investor criteria, is available to directors of the fund, the investment management company, directors of the investment management company, the fund promoter (i.e. sponsor) and its affiliates, and employees of the investment management company who are directly involved in the fund’s management or are senior employees with experience in the provision of investment management services.

All QIF investors must certify in writing to the fund that they meet the minimum criteria listed above and that they are aware of the risk involved in the proposed investment and of the fact that inherent in such investments is the potential to lose the entire sum invested.

Please see “1” above in relation to non-designated collective investor funds.

3. is there a requirement for an irish fund’s sponsor (promoter) to be approved by the irish regulator?Before the Central Bank of Ireland (the “Central Bank”) will accept an application for the authorisation of an Irish investment fund, the Central Bank must be satisfied regarding the promoter’s expertise, integrity, adequacy of financial resources and that it or its key management have a relevant track-record in collective investment schemes. With limited exceptions, the promoter is required to be regulated by a supervisory authority recognised by the Central Bank and generally speaking any OECD member state national regulator will be acceptable. Promoters are required to have audited net shareholder funds or partners capital of not less than E635,000 on an ongoing basis. The requirements are essentially the same for all categories of Irish fund though for retail funds, experience in the distribution of

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retail funds or access to a retail distribution network will be an additional consideration.

4. is there a requirement for the investment manager of an irish fund to be approved by the irish regulator?Before the Central Bank will accept an application for the authorisation of an Irish investment fund, the proposed discretionary investment management company(ies) of the fund must be cleared in advance. Acceptable investment management firms include those which are regulated under the Markets in Financial Instruments Directive (MiFID) (Directive 2004/39/EC) and non-EU firms regulated by a supervisory authority recognised by the Central Bank.

In relation to Irish UCITS, the investment managers must be authorised or registered for the purpose of asset management and must be subject to prudential supervision. In addition, where a non-EU investment manager is proposed to be appointed, there must be a form of co-operation agreement in place between the Central Bank and the supervisory authority of the third country that regulated the investment manager.

5. What are the custodian/depositary bank requirements for an irish fund?The assets of Irish regulated funds must be entrusted to a depositary for safe-keeping. The depositary must be a credit institution authorised in Ireland, an Irish branch of an EU credit institution or an Irish incorporated company which is wholly owned by an EU credit institution (or equivalent from a non-EU jurisdiction) provided that the liabilities of the Irish company are guaranteed by its parent.

The prescribed role of the depositary is to ensure, as a general rule, legal separation of non-cash assets and to ensure that certain core aspects of the management of the fund are carried out in accordance with applicable legislation, Central Bank conditions and the fund’s constitutive documents, for example, valuation, sale, issue, repurchase and cancellation of fund units. In addition, the depositary must enquire into the conduct of the management company, investment company or general partner in each annual accounting period and reporting thereon to the fund’s unitholders.

6. What are the local director requirements?Both UCITS and non-UCITS investment companies are required to have a minimum of two Irish resident Directors on their boards. Common contractual funds and unit trusts are required to have an Irish management company and such management companies are required to have at least two Irish resident Directors on their boards. Investment limited partnerships are required to have an Irish General Partner and such entity is required

to have at least two Irish resident Directors on its board. The board of Directors of a fund or its management company/general partner cannot have Directors in common with the depositary of the fund. All Directors appointed to such entities must be approved in advance by the Central Bank pursuant to a fitness and probity regime applicable to all regulated financial services sectors in Ireland on the basis that the Central Bank is satisfied that each has appropriate expertise and integrity and is of good repute. The names and biographies of the directors must appear in the fund’s Prospectus. Resignations of Directors from the Boards of Irish funds or their management companies/general partners must be notified immediately to the Central Bank.

It is an Irish legislative requirement (Section 21 of the Central Bank Reform Act 2010) that each Irish fund and, if applicable, its management company satisfies itself on reasonable grounds that a person appointed to a so-called “pre approval controlled function” (“PCF”) complies with the Central Bank’s 2011 Fitness and Probity Standards (the “Standards”). Directors are considered to be PCFs. It is also a legislative requirement that the PCF agree to abide by the Standards. Where a PCF does not comply with the Standards, the Irish entity cannot permit that person to act as a PCF (this applies to new appointments and existing appointments). In complying with the Standards, the Central Bank expects the Irish entity to consider the specific competencies and level of probity that should be expected of a PCF of the relevant entity of the particular kind in question. The Standards set out specific minimum due diligence that the Central Bank expects would be undertaken by the Irish entity.

7. What are the prospectus/offering document/constitutive document requirements?All UCITS and Non-UCITS must issue a prospectus, which must be dated, and the essential features of which must be kept up to date. Investors must be offered a copy of the Prospectus, free of charge, prior to subscribing for units in the relevant fund. Any changes to the Prospectus must be made by prior approval of the Central Bank or, in the case of Qualifying Investor Funds prior notification to the Central Bank. Any material changes to the Prospectus must be notified to investors in the fund’s subsequent periodic reports. The overriding Central Bank consideration is that the Prospectus should contain sufficient information to enable investors to make an informed decision whether to invest in the fund. In particular, the investment objectives and policies of a fund must be clearly described in the Prospectus with sufficient information to enable investors to be fully aware of the risks they are entering into. Separate Prospectuses may be issued by funds established as umbrella funds in respect of each of their sub-funds, though the Central Bank discourages this

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practice for UCITS. Separate prospectuses may not be issued in respect of separate share classes, except in the context of Qualifying Investor Funds provided that the Prospectuses are consistent with the other Prospectus(es) for the fund/sub-fund of an umbrella fund (except in relation to that information which is class specific). UCITS must also issue a “key investor information document” which contains the essential characteristics of the UCITS in concise and non-technical language.

8. are irish funds required to be licensed?Broadly speaking, units of Irish investment funds that are available for public participation may not be sold or purchased nor may sales or purchases be solicited without the fund having sought and obtained authorisation of the Central Bank under the relevant Irish funds legislation.

9. What are the central bank requirements before an irish fund can launch?Before an Irish investment fund can launch, the fund must be in possession of a written authorisation from the Central Bank pursuant to the relevant Irish legislation. There are no minimum capitalisation requirements except in the case of UCITS investment companies which have not appointed Irish management companies, which must have a minimum capital of E300,000 prior to authorisation by the Central Bank.

10. What ongoing central bank requirements apply to irish funds?The ongoing core Central Bank requirements can be broken down into:

disclosurePlease see “7” above in relation to the Prospectus.

Each fund must issue annual audited financial statements and (other than in the case of corporate Qualifying Investor Funds, which are exempt from this requirement) semi-annual unaudited financial statements, comprising a balance sheet, income statement (in the case of the annual audited financial statements only), a portfolio statement and statement of changes in the composition of the portfolio during the period and any significant information which will enable investors to make an informed judgement on the development of the fund and its results.

Valuation and pricingFund assets must be valued on the basis of market prices where available or, where unavailable, generally at probable realisation value calculated by the Directors of the fund/management company/general partner or by a competent third party appointed by the Directors of the fund/management company/general partner, the

appointment of which is approved by the depositary. The valuation rules must be set out in the fund’s Prospectus and must be set out, or referred to, in the fund’s constitutive document. The final checking of the fund’s net asset value must be carried out in Ireland by staff located in Ireland, in the absence of a derogation from the Central Bank. Valuation rules must be applied consistently throughout the life of a fund. The valuation policy is ultimately the responsibility of the board of Directors of the fund/management company/general partner.

client asset protection: independent custody of assetsThe applicable rules are outlined in “5” above.

depositary as fiduciary of investorsThe applicable rules are outlined in “5” above.

Portfolio regulationThe Central Bank imposes diversification requirement and concentration requirements on Irish UCITS, non-UCITS retail funds and Professional Investor Funds.

UCITS are permitted to invest principally in transferable securities which are listed or traded on a regulated exchange or other market, money market instruments, other UCITS and UCITS equivalent funds, cash deposits, listed or OTC derivatives which are sufficiently liquid (and the underlying assets of which are eligible for direct investment by the UCITS or are permitted financial indices, interest rates or exchange rates). UCITS are subject to significant diversification, concentration, counterparty and global exposure requirements including a 10% of net asset value per issuer restriction (subject to a 40% limit on issuers making up more than 5% of net asset value counterparty restriction (which is raised to 10% for credit institution counterparties).

A retail Non-UCITS’ general investment restrictions prohibit it from investing more than 10% of its net asset value in securities which are not listed or traded on a recognised and regulated market, more than 10% of net asset value in the securities of any one issuer and more than 10% of its net asset value in any class of security issued by a single issuer. The net maximum potential exposure that the fund can achieve through efficient portfolio management techniques and borrowings cannot exceed 25% of net asset value.

There are exceptions and specific restrictions for retail Non-UCITS funds of funds including funds of unregulated funds, feeder funds, real estate funds, private equity funds and managed futures funds.

In the case of Professional Investor Funds, the standard investment and borrowing restrictions applicable to retail Non-UCITS can be disapplied to the extent agreed with the Central Bank. As a general rule of thumb, the quantitative limits are doubled.

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The Central Bank disapplies all but a small number of policy driven investment restrictions in relation to Qualifying Investor Funds.

duty to act in investors’ best interest and to avoid conflicts of interestThe fund’s prospectus must contain a description of the potential conflicts of interest which could arise between the management of the fund and the fund, with details, where applicable, of how these are going to be resolved.

Any transaction carried out with a fund by a promoter, manager, depositary, investment adviser and/or associated or group companies of these must be carried out as if effected on normal commercial terms negotiated at arms length and transactions must be in the best interests of the investors.

regulatory reportingThe fund/management company/general partner must submit a monthly report within ten days of its effective date, setting out the fund’s net asset value, net asset value per unit and net subscription and redemptions in the fund’s units during the month. The annual audited financial statements of the fund and semi-annual unaudited financial statements of the fund (where required) must be submitted to the Central Bank within four and two months respectively of the balance sheet date. The fund/management company/general partner must submit monthly returns to the statistics department of the Central Bank.

reporting to investorsThe annual audited financial statements and semi-annual unaudited financial statements (where required) must be made available to investors free of charge upon request and must be available for inspection at a specified location. Qualifying Investor Funds in the form of investment companies are not required to produce semi-annual unaudited financial statements.

changes to the fundAny change to the Prospectus or any material service agreement of the fund is subject to prior approval by, or, in the case of Qualifying Investor Funds, prior notification to, the Central Bank. Material changes to the investment policy of the fund of the fund as disclosed in the Prospectus or any change to the fund’s investment objective are subject to prior investor approval. Any such changes must be notified in advance to investors enabling them to redeem their units in the fund prior to the implementation of the change.

enforcementThe Central Bank has independent statutory powers of enforcement that are not dependant on judicial action.

The Central Bank employs a risk based supervisory approach known as PRISM (Probability Risk Impact SysteM). This focuses the most resources on firms considered to have a potentially high systemic impact on the financial system and a high risk to the consumer. The Central Bank enforces on the basis of periodic reporting requirements, a requirement for the Directors/management company/general partner and depositary to deal with the Central Bank in an open and co-operative manner and inspections, the frequency of which is based on risk assessment or on complaint. While PRISM is intended to result in a common basic approach to regulation across all financial sectors, it is also intended to identify where risk is concentrated most highly within the financial system. Furthermore it differentiates between types and degrees of risk in different financial sectors and so avoids an investment fund being regulated to the same degree as a bank or insurance company for example. The Central Bank’s enforcement strategy is to engage in “pre-defined enforcement” which concentrates on high impact areas such as market conduct, consumer protection and financial crime, focussing on firms with significant market share, and “reactive enforcement” which is event or report based, and to operate in a proportionate, consistent, targeted and transparent manner.

11. What are the regulatory requirements applicable to service providers to irish funds?All Irish investment funds are required to appoint an Irish fund administrator (or a suitably licensed Irish management company) which will perform certain minimum activities in Ireland such as the final checking of the net asset value of the fund prior to its release and the maintenance of the fund’s shareholder register. Irish fund administrators are subject to regulation under the Irish Investment Intermediaries Act, 1995, the European Communities (Markets in Financial Instruments) Regulations, 2007 or the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011 (in the case of UCITS management companies providing fund administration services).

Irish investment funds are also required to appoint a depositary. The depositary must have its registered office within Ireland or have established a place of business in Ireland if its registered office is in another Member State of the European Union. The depositary fiduciary duties may not be delegated to a third party and must be performed by the depositary appointed in Ireland. The custody functions may however be delegated to a custodian located inside or outside of Ireland. Irish depositaries are subject either to the requirements of Irish banking law (in the case of domestic banks), foreign

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banking law and certain Irish conduct of business rules (in the case of the Irish branches of foreign banks) or the European Communities (Markets in Financial Instruments) Regulations, 2007 (in the case of wholly owned Irish non-banking subsidiaries of foreign banks).

All Irish funds are required to appoint an investment manager (or Irish management company) that will be responsible for the investment management of the Irish fund’s assets. The conditions applicable such companies’ clearance to act by the Central Bank as described in “4” above.

Irish Professional Investor Funds and Qualifying Investor Funds are entitled to appoint prime brokers. Prime brokers must be regulated to provide prime brokerage services and each prime broker or its parent company must have financial resources of not less than E200 million and a short term credit rating of not less than A1 or equivalent.

12. What is the regulatory procedure in getting an irish fund licensed?All fund authorisations must be obtained pre-launch. Post-authorisation changes to fund documentation require the approval of the Central Bank or, in the case of Qualifying Investor Funds, prior notification to the Central Bank.

To obtain this authorisation, the fund, or in the case of a unit trust, its management company and depositary or in the case of a common contractual fund or limited partnership, its management company or general partner, must apply to the Central Bank in writing. In the case of UCITS and Non-UCITS retail and Professional Investor Funds, this application is initially made in draft form. In the case of Qualifying Investor Funds, a formal application is made on the business day prior to the proposed date of authorisation, with accompanying final, executed documentation and no formal review of the documentation is undertaken by the Central Bank.

In all cases, before making an application, the proposed promoter of the fund must have been cleared by the Central Bank, as must the proposed investment manager. Non-discretionary investment advisers are not required to be cleared by the Central Bank. The Directors of the proposed fund/management company/general partner must be approved in advance by the Central Bank. Any management company or general partner being appointed must be approved in advance by the Central Bank. In the case of a UCITS, the policies and procedures regarding the overall management and governance of the UCITS (whether by the Board of the UCITS or a separate Irish management company (in the case of common contractual funds and unit trusts a management company is compulsory) must be pre-approved by the Central Bank prior to the submission of

the UCITS application for authorisation. The proposed Administrator and depositary of the Fund must be in possession of the relevant license from the Central Bank. Any derogations from the Central Bank’s requirements that a fund requires must be obtained in advance of submitting the formal application for authorisation.

13. What is the role of the service providers in authorisation/ongoing regulation?authorisation:UCITS, retail Non-UCITS and Professional Investor Funds are authorised by application from the fund, or in the case of a unit trust, its management company and depositary or in the case of a common contractual fund or limited partnership, its management company or general partner as appropriate. The depositary and fund administrator will be required to make certain certifications to the Central Bank as part of the authorisation process.

In the case of Qualifying Investor Funds, which are authorised by means of a self-certification process, the fund/management company/general partner and, in the case of unit trusts, the depositary, makes the formal application, which is undertaken by its Irish legal advisers and the depositary certifies that the information contained in the application, as it relates to the depositary, is accurate.

ongoing:The Irish Administrator/management company will be generally be responsible for carrying out the minimum activities referred to in “11” above and for preparing the regulatory reporting and financial statements referred to at “10” above.

The Custodian will prepare the report referred to in “5” above for inclusion in the fund’s annual audited financial statements.

The Administrator, Custodian and management company are each expected to deal in an open and co-operative manner with the Central Bank and to participate in such meetings as the Central Bank considers necessary to review the fund’s operations and its business developments.

14. What leverage restrictions apply to irish funds?UCITS: UCITS may not borrow except for temporary purposes subject to a limit of 10% of net asset value and have a “global exposure” limit that is applicable to the UCITS’ use of derivatives. In calculating their global exposure, UCITS currently have the choice whether to use the so-called commitment approach, a simple but conservative method of calculating global exposure which calculates exposure based on the marked to market value of the underlying assets to which the derivative

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contracts refer, or an advanced risk measurement methodology such as Value-at-Risk (“VaR”). VaR measures maximum expected loss at a given confidence level over a specific time period. VaR may be calculated using an acceptable proprietary or commercially available model. The commitment approach methodology is normally used by UCITS that use a limited number of non-complex derivatives and the latter by more sophisticated users of derivatives. It is the responsibility of the UCITS to ensure that the method selected is appropriate, taking into account the investment strategy of the UCITS, the types and complexities of the derivatives used and the proportion of the UCITS portfolio which comprises derivatives. A UCITS must use an advanced risk measurement methodology such as the VaR approach to calculate global exposure where: (i) the UCITS engages in complex investment strategies which represent more than a negligible part of the UCITS investment policy; and/or (ii) the UCITS has more than a negligible exposure to exotic derivatives; and/or (iii) the commitment approach does not adequately capture the market risk of the UCITS portfolio. The UCITS’ global exposure as measured using the commitment approach may not represent more than 100% of the net asset value of the UCITS (in other words, a UCITS total exposure may be 210% of the net asset value of the UCITS (including temporary borrowing)). If VaR is used, the UCITS may not have an exposure greater than 20% of the net asset value (known as “absolute VaR”) based on a confidence level of 99% and a holding period of twenty days, all of which limits may be scaled down proportionately, or the UCITS may not have a VaR greater than twice the VaR of a relevant benchmark or a corresponding, derivative-free portfolio (known as “relative VaR”). The degree of exposure that a UCITS has may be reduced by the use of allowable position netting and hedging positions.

Retail Non-UCITS: such a fund’s net maximum potential exposure is limited to 25% of net asset value and includes borrowing and exposures arising through the use of derivatives. In the case of leveraged managed futures funds, there is no such leverage limit though such funds effectively have a margin to equity ratio restriction of 50%.

Professional Investor Funds: such a fund’s net maximum potential exposure is limited to 100% of net asset value including borrowing and derivatives exposures.

Qualifying Investor Funds: unlimited leverage, subject to only to Prospectus disclosure.

15. What is the tax status of irish funds in ireland?A fund that is authorised in Ireland is not subject to Irish tax on its income (profits) or gains. While dividends, interest and capital gains that a fund receives with

respect to its investments may be subject to taxes, including withholding taxes, in the countries in which the issuers of investments are located, these foreign withholding taxes may, nevertheless, be reduced or eliminated under Ireland’s network of tax treaties to the extent applicable (see “Treaty Access“ below).

Furthermore, there are no Irish withholding taxes on distributions to investors provided the investors have made the appropriate tax declaration of non-Irish residence to the fund or the fund has satisfied and availed of certain prescribed equivalent measures. Furthermore, there are no Irish withholding taxes on distributions made to certain categories of Irish investors (which would include approved pension schemes, charities, other investment funds, etc). There is no stamp duty or subscription tax is payable in Ireland on the issue, transfer, repurchase or redemption of units in a fund. Many of the key services provided to Irish funds (fund administration, investment management, etc) are exempt from Irish VAT.

treaty accessWhere treaty access is important, non-UCITS funds may use wholly owned trading vehicles for treat access whereby the fund finances the trading vehicle in return for the issuance to the fund of a taxable profit stripping participating debt instrument by the vehicle. Irish trading vehicles are fully taxable in Ireland which typically removes one of the obstacles to tax-exempt regulated funds obtaining treaty benefits, namely the requirement to be “liable to tax”. Through this profit stripping mechanism, such vehicles’ taxable profits can be managed to a desired level which can be zero if so desired.

Ireland has signed comprehensive double taxation treaties with 66 countries, 59 are currently in effect with negotiations at various stages on 7 other.

16. What tax applies to irish investment managers?Generally 12.5% on fee income derived from investment management services.

The Irish tax authorities impose a 20% withholding tax on dividends and other profit distributions. However there are significant exemptions under domestic law from this withholding tax in relation to (i) payments made to persons resident in EU Member States and tax treaty countries and (ii) payments made to companies resident outside the EU or a non-tax treaty country provided more than 50% of the recipient company is ultimately controlled by persons resident in a treaty country or EU member state (other than Ireland), once certain declarations are put in place.

17. What are the asset valuation rules applicable to irish funds?These are described in “10” above. n

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JerseyFund legislationl Collective Investment Funds (Jersey) Law, 1988l Control of Borrowing (Jersey) Order, 1958l Financial Services (Jersey) Law, 1988There is further, subordinate legislation covering differing regulatory options, prospectus issuance consent and similar.

number oF Funds As of 31 March 2012 there were over 1,400 funds registered under the Collective Investment Funds (Jersey) Law, 1988 and Control of Borrowing (Jersey) Order, 1958 laws, comprising nearly 2,500 separate asset pools. It should be noted that these statistics do not include those funds established as “Unregulated Funds” or very private structures (i.e. with fewer than fifteen investors).

number oF Funds by categoryDuring the first quarter of 2012 the total number of regulated funds increased by 20 from 1,392 to 1,412. The data does not include funds established under the Unregulated Funds Regime, of which there were 166 by the end of the period.

domiciled and administered Fund assets totalDuring the first quarter of 2012 the net asset value of funds increased by £6.8bn from £189.4bn to £196.2bn.

domiciled and administered Fund assets by categoryAt 31 March 2012 there were 1,205 Single Class Funds and 1,264 Umbrella Sub-Funds with a total NAV of £196.2bn.

regulatorJersey Financial Services Commission, PO Box 267, 14-18 Castle Street, St Helier, Jersey, JE4 8TP, Channel Islands. Tel: +44 (0)1534 822000; Email: [email protected]; www.jerseyfsc.org.

service providers l Five first tier law firms, plus over twenty further law

firmsl Each of the big four accountancy firms have

operations in Jersey and there are several second tier firms present also.

l There are well in excess of 150 corporate service providers/administrators.

l There were 40 banks registered in Jersey as at 31 March 2012. There are not really prime brokerage operations located in Jersey as such, but access to UK operations can be established through local offices; for example ABN, Deutsche Bank, JPM, Citibank, UBS and RBC each have operations in Jersey.

Local stock exchange: The Channel Islands Stock Exchange, LBGPO Box 623, One Lefebvre Street, St Peter Port, Guernsey GY1 4PJ, Channel Islandswww.cisx.comLocal fund industry body: The Jersey Funds Association, www.jerseyfunds.orgPromotion agency for funds/financial sector: Jersey Finance Ltd, 4th Floor, Sir Walter Raleigh House, 48-50 Esplanade, Jersey JE2 3QB, Channel Islands. Email: [email protected] www.jerseyfinance.je

double taxation treatiesFull agreements: Estonia, Guernsey, Hong Kong, Malta, Qatar, UK.

Partial agreements: These are more limited than full agreements and generally provide for the avoidance of double taxation on certain income of individuals and income derived from the operation of ships and aircraft – Australia, Denmark, Faroe Islands, Finland, France, Germany, Greenland, Iceland, New Zealand, Norway, Poland, Sweden.

Further information on tax treaties may be found at: www.gov.je/taxesmoney/internationaltaxagreements/doubletaxation/pages/index.aspx.

tax inFormation exchange agreementsArgentina , Australia, Canada, China, Czech Republic, Denmark, France, Finland, France, Germany, Greenland, Iceland, India, Indonesia, Ireland, Italy, Japan, Mexico, Netherlands, New Zealand, Norway, Poland , Portugal, South Africa, Sweden, Turkey, UK, USA.

Updates can be obtained from the States of Jersey web site as detailed above.

types oF alternative Fund vehicle Funds in Jersey may be established as open or closed-ended vehicles, although certain of the lighter touch regulatory options are limited to closed-ended vehicles only. It is possible to establish funds in Jersey as companies, including protected cell and incorporated cell companies, as well as limited partnerships, including

Jersey

St. Peter Port

St Helier

GUERNSEY

JERSEY

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www.gov.je/taxesmoney/internationaltaxagreements/doubletaxation/pages/index.aspx

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Jersey

incorporated limited partnerships and separate limited partnerships, as well as unit trusts.

available types oF corporate vehicle The types of corporate vehicle in Jersey are a standard limited company, as well as protected cell and incorporated cell companies.

types oF regulatory Fund categoryJersey has a wide range of regulatory options available for funds, from recognised funds, which are rarely used and heavily regulated, retail type funds to private placement funds, with a much lighter touch regulation, as well as “Unregulated Funds” and very private structures (i.e. with fewer than fifteen investors). Depending on the likely number of investors alternative funds would tend to be established as expert funds or where they are more specialised and have fewer investors, private placement funds or very private funds.

See the attached table from Jersey Finance for a comparison of the various options.

audit requirementAll private Jersey companies (i.e. those with greater than 30 shareholders) with must appoint an auditor and the Jersey Financial Services Commission provides a list of approved auditors.

Financial statement requirementsAll Jersey companies are required by law to produce annual financial statements but only the financial statements of public companies need to be filed with the Companies Registry. There will be regulatory filing requirements though for those funds that have received a regulatory license.

cost oF regulatory FeesThe comparison table attached details regulatory fees.

overall cost oF Fund establishmentThis really depends on the amount of legal work involved in preparation of fund documentation and also the regulatory application.

regulatory approval timeThe Jersey Financial Services Commission’s stated response time for a regulatory application for an Expert Fund is 3 working days from receipt of a complete application. A fund seeking consent under Control of Borrowing (Jersey) Order, 1958 takes longer with 10 working days for an in-principle approval and twenty working days in total for full approval. An important consideration here is that the regulator requires the principals of funds (i.e. directors, compliance officers and similar) to complete and submit a personal questionnaire. The response time for consideration of a questionnaire (if it is the applicant’s first submission) is 30 working days, so the timing of submission needs to be carefully managed.

overall establishment timeA Jersey company can be established on fast-tracked basis in 24 hours, so from a regulatory point of view a vehicle can be established and operational very quickly. However, the overall establishment time will depend on the time that it takes to complete documentation, agree terms with service providers etc.

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Jersey is an international finance centre for a range of financial services including fund administration. Businesses are attracted to Jersey by the Island’s stable government, its proximity to both the UK and continental Europe, the significant expertise developed by the industry in a wide range of financial services and a competitive, co-operative and well-regulated tax environment. Jersey is a parliamentary democracy that is a dependency of the British Crown. It is a British Island, but is not part of the United Kingdom, nor is it a colony.

Under Protocol 3 to the United Kingdom’s treaty of Accession to the European Economic Community, the Island is part of the customs territory of the European Community. Jersey is not, however part of the single market in financial services and as a result, is not required to implement EU Directives on such matters as movement of capital, company law or money laundering. However, Jersey will emulate such measures where appropriate having particular regard to the Island’s commitment to meeting international standards of financial regulation and countering money laundering and terrorist financing.

Jersey has been a key player in the international investment funds market for over forty years and has over the years adapted its regulatory regime to facilitate the establishment and administration of alternative investment funds. Expert Funds were introduced in 2004, which provided a streamlined regulated product for funds targeting expert investors. The Unregulated Fund product was launched in February 2008, whilst in November 2007 changes were made to the regulation of Jersey fund functionaries (local entities providing services to funds, for example, administrators and custodians) to improve the efficiency of interaction between the Jersey Financial Services Commission (the “JFSC”) and functionaries. More recently, in January 2012 the Jersey Private Placement Fund Guide was issued by the JFSC.

Fund structureThe establishment and operation of investment funds in Jersey is governed principally by two pieces of legislation, namely, the Control of Borrowing (Jersey) Law, 1947 as amended, (the “Borrowing Law”) and

the Collective Investment Funds (Jersey) Law, 1988 as amended, (the “CIF Law”). Together the two statutes provide the framework for appropriate investor protection whilst retaining the flexibility to adapt quickly to changing market conditions.

A fund’s promoter and advisers will need to examine the constituent parts of the fund structure, namely its target investors, expected investments, the fund itself and functionaries to the fund. Each of these will have an impact on the preferred fund structure and regulatory consent required.

Codes of Practice were recently introduced by the JFSC covering those funds licensed under the CIF Law, for the purpose of establishing sound principles and providing practical guidance in respect of such funds.

investorsInvestors will generally fall into three categories: (i) high net worth individuals, (ii) institutions, and (iii) fund-of-funds. To one extreme, fund structures can target private arrangements where very few investors exist and are identified from the outset. Alternatively, promoters may wish to market a fund to the public and therefore require an offering document and possible third party assistance in sourcing investors. The number of “offers” made to potential investors and the number of actual subscriptions made by investors has an impact on whether a fund is a private or public arrangement, and also the regulatory fund categories that can be applied. Further, the promoter should consider what (if any) minimum investment will be applied as this is a prerequisite of certain regulatory categories and is also a requirement for potential exemptions for the regulation of an investment manager/adviser. Finally, the domicile and residency of investors is an important consideration and the JFSC’s list of approved countries may also have an impact on the structure due to investor considerations.

investmentsInvestment funds generally focus on investing in property, private equity, equities, derivatives and fund-of-fund investments, although more diverse investments such as art, film and carbon credits have also emerged. The

JerseyBy ashley Le Feuvre, senior Manager Funds/sPV group,

Volaw trust & corporate services Limited

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Jersey

income and expenses of the fund will vary depending on the investments held, which in turn may have taxation considerations.

It is essential that the fund promoter has clearly considered the investment strategy of the fund, based on a realistic assessment of the market. A promoter should be able to forecast the expected costs and revenues from a strategy to ensure that sufficient returns will be achieved to attract investors. A strategy will generally focus on capital growth and/or income, which is important as an investor may be taxed differently depending on how a fund distributes monies back to investors.

It is common for the promoter to provide investment management and/or advisory expertise to the fund. The regulator may require this functionary to be regulated.

the fund’s characteristicsAn open-ended fund will generally require periodic valuations and dealing days whereby new investors can be received and existing investors can redeem their holdings. As a result, administrative costs will vary depending on the frequency and complexity of such valuation and dealing procedures. Fund promoters should consider the basis for valuing fund assets, ensuring independent valuations are available at dealing and reporting dates.

A fund may also generate periodic net income, which can be re-invested, accumulated, or distributed back to investors. The promoter should identify the preferred treatment for such income balances in conjunction with appropriate tax advice. Whilst individual investors are encouraged to obtain their own tax advice in assessing the appropriateness of the fund, if the promoter is clear on what investors are being targeted, it should be simpler to pre-empt the tax considerations of the investors and organise the fund’s distribution policy accordingly. The fund itself should generally be tax neutral.

FunctionariesThe fund will require the services of certain third party functionaries. These could include an administrator, auditor, custodian and advisory committee. A regulated administrator or custodian may be required in some circumstances and certain categories of fund may require an annual audit.

Functionaries with a presence in Jersey, who provide services to both Jersey and non-Jersey domiciled investment funds are regulated by the Financial Services (Jersey) Law, 1998 (the “FSJ Law”). Under the law a fund services business must be registered to provide one or more classes of Fund Services Business. Codes of Practice set out the principles and standards of conduct expected of persons registered under the FSJ Law for carrying on Fund Services Business activities.

types of vehicleDifferent structures are available to be used as investment funds in Jersey and a combination of structures may also be permitted.

companiesThe principal piece of legislation governing Jersey companies is the Companies (Jersey) Law, 1991 (the “Law”), which is a comprehensive, modern statute governing all aspects of the regulation of the formation and administration of private companies in Jersey. Share capital can be denominated in any currency and issued in various classes, including redeemable shares. The ability to incorporate “no par value” companies has added yet more flexibility.

The Articles of Association registered upon incorporation can include any entity specific provisions such as classes of shares, rights attaching to shares, dividend and voting rights, rights to winding up or return of capital, appointment and removal of directors and pre-emption rights.

Incorporated cell companies (“Iccs”) and Protected cell companies (“Pccs”)In 2006, the Law was amended to introduce the concept of incorporated and protected cell companies. Both forms of Cell Company are vehicles that can create individual segregated cells. Segregated Cells in both PCCs and ICCs will have their own assets and liabilities, distinct and “ring fenced” from those of other Cells and the Cell Company itself. The key legal principle of both PCCs and ICCs is that assets of each individual Cell will not be available to the creditors of any other Cell.

A PCC is a separate legal entity, but individual protected cells do not have legal personality independent of the PCC. ICCs are similar to PCCs, however, each incorporated cell is a separate corporate entity with the ability to appoint separate boards of directors. Administratively, once a Cell Company is created, repeat transactions can be established on a much-reduced timescale. Hence, Cell Companies have advantages for funds and securitisations structures where initial documentation can be complex but may potentially be replicated in future offerings.

unit trusts In contrast to an investment company, a unit trust is not a separate legal entity as such, but a trust arrangement whereby legal ownership of the fund’s assets is vested in a trustee who holds the assets of the fund on trust for the benefit of the unit-holders.

The unit trust will generally be constituted by means of a trust instrument made between a trustee company and an independent manager. Typically the manager will promote, manage and administer the scheme.

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Subscription proceeds will be paid to the trustee which will act as custodian of the investment assets of the fund. In addition, the trustee will generally supervise compliance by the manager with its obligations under the trust instrument.

The trust instrument will generally contain provisions regulating the issue, redemption and valuation of units, the appointment and removal of the trustee and the manager, their duties and remuneration, borrowing powers, investment restrictions and for the winding-up of the trust. For most practical purposes a unit trust scheme will operate and be regulated in the same manner as a corporate investment fund.

Limited Partnerships A limited partnership may be an appropriate structure for a number of different purposes. A principle use is to provide an additional form of investment vehicle, in particular for the venture capital industry. A limited partnership can also be an attractive structure for various tax planning purposes as the partnership is generally treated as being fiscally transparent.

There is no maximum or minimum imposed on the number of limited partners. The general partner will manage the business of the partnership and have unlimited liability for its debts. The liability of investors taking interests as limited partners (and who do not participate in the management of the business) will be limited generally to the amount of their investment.

The introduction in 2011 of Incorporated Limited Partnerships and Separate Limited Partnerships has further increased flexibility and options available.

regulatory optionsThe range of regulatory categories that may be applied to fund structures by the JFSC is summarised below:

unregulated FundsThis regime allows eligible funds merely to notify the Jersey Financial Services Commission of their establishment, rather than going through a full authorisation process. Two forms of unregulated fund have been introduced; an Unregulated Eligible Investor Fund and an Unregulated Exchange Traded Fund.

An Unregulated Eligible Investor Fund is available to investors injecting a minimum of USD1,000,000 each into the fund, or to a sophisticated investor. The investors will be required to acknowledge in writing their acceptance of the risks involved in a prescribed form. In addition, the fund must take steps to ensure that its investors meet the legal requirements to invest in the fund. The fund may be open-ended or closed-ended and may take the form of a company (or cell company), unit trust or limited partnership. There is no requirement for an

Unregulated Eligible Investor Fund to have a Jersey-based administrator or custodian, nor for it to have any Jersey resident directors. There is also no need for Jersey-based auditors to be appointed to the fund. The fund may only list on a stock exchange, such as The Channel Islands Stock Exchange (the “CISX”), which permits restrictions upon transfers of interests within the fund. This is in order to ensure that only eligible investors are allowed to invest in the fund.

An Unregulated Exchange Traded Fund is not regulated by the Jersey Financial Services Commission on the basis that it is already complies with the listing requirements of an approved stock exchange. There is a prescribed list of stock exchanges for which funds listed on them may classify as Unregulated Exchange Traded Funds.

An Unregulated Exchange Traded Fund may only take the form of a closed-ended fund, but may be established as a company (or cell company), unit trust or limited partnership. As with an Unregulated Eligible Investor Fund, there is no need for Jersey-based auditors to be appointed to the fund.

Very Private and coBo-only FundsVery Private investment funds (whether in corporate form, limited partnership, or as a special purpose unit trust) can be tailored for a single individual, a strictly limited number of investors or structured as a closely held joint venture investment vehicle. These Very Private Funds will require very little regulatory supervision and can be formed very quickly. Very Private Funds are usually established to meet the requirements of a single investor or a corporate group (up to a maximum of 15 investors). The fund’s constitutional documents will usually state that there is a specific restriction on the nature of the investor. Thereafter little more is required than the disclosure of the beneficial ownership to the JFSC. Hence the fund may be structured to suit particular needs or circumstances.

Where a promoter seeks to make a number of “offers” to potential investors to invest in a proposed structure, there will be additional regulation by the JFSC. “COBO Only Funds” are those where the number of such offers is less than 50 and where the fund is not listed.

Consent will be required from the JFSC under the Control of Borrowing (Jersey) Order, 1958. Prior to the issue of a COBO consent, the JFSC will perform a preliminary review of the promoter behind the scheme as well as a review of the private placement memorandum. In considering a promoter, the JFSC will analyse its track record, reputation and experience as well as such issues as spread of ownership and financial resources. The JFSC will also have an ongoing regulatory role and the COBO consent will set out various conditions, which the fund will need to comply with.

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Exemptions are available under the FSJ Law whereby flexibility in the regulation and appointment of service providers (i.e. for investment management / advisory services) can be achieved. These exemptions are normally dependent on the investors being considered professional investors, or if the minimum investment per investor is £250,000 or more, and where all investors have acknowledged a prescribed investment warning.

Private Placement FundsThe Jersey Private Placement Fund Guide (the “Guide”) was issued by the JFSC on 26 January 2012. A Private Placement Fund satisfying the Guide’s conditions brings a number of advantages – it removes the Commission’s traditional “promoter test” (which sets out detailed criteria against which the Commission vets new promoters of funds), making it much simpler for new and existing promoters to establish funds in Jersey; it offers a streamlined 72-hour authorisation process for the approval of funds which meet the Guide’s criteria, and it provides certainty in relation to the contents of the offering document requirements. It is anticipated that the new regime will be of particular interest to promoters of specialised and alternative investment funds aimed at sophisticated and professional investors, including private equity, mezzanine, infrastructure and property funds and is expected to enhance Jersey’s position as a leading jurisdiction for the servicing of alternative investment funds.

A Private Placement Fund is a closed-ended investment. Participation can be offered to no more than 50 potential investors, who must be either Professional Investors or Sophisticated Investors, as defined in the Guide. Annual accounts and an auditor’s report must be provided to all investors.

A Private Placement Fund can be structured as a company, a unit trust, or one or more forms of limited partnership. It may be a fund established in Jersey or elsewhere but a fund established outside Jersey must be managed in Jersey by a Designated Service Provider as defined in the Guide.

In most cases, it should be possible to structure the PPF in such a way as to ensure that the general partner, trustee or manager falls outside the licensing regime for fund services businesses pursuant to the FSJ Law.

expert FundsExpert Funds can use any fund vehicle type and are established for sophisticated, high net worth, professional and institutional investors. Expert Funds can be set up as open or closed ended funds and have no restrictions on the number of investors.

Existing authorised Jersey Fund Administrators are able to progress the launch of Expert Funds by self-

certifying that the fund meets the criteria expected of an Expert Fund. In particular, a Jersey Administrator is required to certify that any offering documentation contains appropriate disclosures and information on the fund’s investment and borrowing strategies. The appropriate criteria for an Expert Fund are contained in the Jersey Expert Fund Guide issued by the JFSC and available from their website.

Each Expert Fund will require its investors to confirm in writing that they have received and accepted an investment warning acknowledging that the fund is suitable only for expert investors and confirm their awareness that the fund involves special risks and that only limited regulatory oversight applies. An investor will also have to confirm that he is either: a) investing USD100,000 in the fund; or b) is a “professional investor”; or c) is a “high net worth individual”. The applicable definition of a “high net worth individual” is USD1,000,000 of assets (excluding the principal residence). Such assets can be jointly held with a spouse. The definition of a “professional investor” is “a person, partnership or other unincorporated association or body corporate, whose ordinary business or professional activity includes, or it is reasonable to expect that it includes, acquiring, underwriting, managing, holding or disposing of investments whether as principal or agent, or the giving of advice on investments.”

Due to their nature, most Expert Funds will probably rely on the professional investor exemption or the minimum subscription of USD100,000. However, circumstances will, of course, make the “high net worth individual threshold” extremely relevant in smaller private client / family type of fund arrangements. In addition those involved in establishing and providing services to an Expert Fund are able to invest in the fund. The JFSC have confirmed that any application to extend the definition of “Expert Investor” in respect of types of “carried interest” investors is likely to be treated sympathetically.

A fund that is established for expert investors can have considerable flexibility in both its structure and operation.

Listed FundsThe Jersey Listed Funds Guide provides certainty and guidance to those wishing to establish such funds in a quick and cost-effective manner, and is a response to an increased market demand for Listed Funds. Listed Funds are established on certification by the fund administrator that the fund complies with the criteria set out in the Guide. The JFSC issues the relevant permits on receipt of the certification.

A Listed Fund can only be listed on an exchange approved by the JFSC. The number of approved exchanges is extensive, global in scope and includes all exchanges upon which listings are ordinarily sought.

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The investment manager of a Listed Fund must be of good standing, established and regulated (if appropriate – the JFSC recognises that some investment managers may not be regulated) in an OECD member state or a jurisdiction with which the JFSC has a memorandum of understanding.

A small number of key structural requirements are imposed on such funds including that the fund must be closed-ended (meaning that it is not normally open for subscriptions and redemptions at the option of investors) and that the fund’s offering document must carry a clear investment warning and contain all information necessary for potential investors to make an informed decision.

There are no investment or borrowing restrictions imposed on Listed Funds and no limit on the number or type of investors in such funds.

Public Funds: unclassified FundsThese funds are authorised under the CIF Law. They may be open-ended or closed-ended and may have a corporate structure, be a unit trust or a limited partnership. Typically, they will have a lower minimum investment requirement than Expert Funds.

The JFSC’s policy is that each Unclassified Fund is regulated to an extent and in a manner considered

to be appropriate to the nature of the particular fund. This involves negotiations with the promoter and/or his professional adviser, following scrutiny of all the documentation and other information associated with the Unclassified Fund. The JFSC’s Promoter Policy applies to Unclassified Funds and describes certain criteria with which The JFSC will expect a promoter to comply.

Public Funds: recognised FundsA Jersey fund that has been registered as a “Recognised Fund” may be marketed freely to the public in the UK due to the granting of “Designated Territory Status” under Section 87 of the UK’s Financial Services Act 1986 (now Section 270 of the Financial Services and Markets Act 2000). “Designated Territory Status” also helps a Recognised Fund to be marketed to other European Union jurisdictions.

To qualify as a “Recognised Fund”, a fund must adopt constitutional documents, restrictions on investments and protection of investors equivalent to those of a conventional UK authorised unit trust. Recognised Funds are the most highly regulated and are subject to a compensation scheme for the protection of investors. Many types of equity, bond and money market funds have been established in Jersey as Recognised Funds. n

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Luxembourgmajor Fund legislation and circularsl Law of December 17, 2010 (2010 law) on undertakings

for collective investment.l Law of March 26, 2012 (2012 law) on Specialised

Investment Funds, amending law of February 13, 2007 (SIF or 2007 law).

l Grand-ducal regulation of February 8, 2008, concerning certain definitions of the law of December 20, 2002 on undertakings for collective investment (as amended) and transposing Commission Directive 2007/16/CE on UCITS eligible assets.

l Grand-ducal regulation of July 14, 2010, concerning exception from subscription tax of UCITS, Part II Funds and SIFs investing in microfinance institutions.

l CSSF regulations 10-04 and 10-05 transposing Commission directives 2010/43/EU and 2010/44/EU respectively of July 1, 2010 implementing UCITS IV Level 2 measures.

l CSSF Circular 02/80 relating to funds pursuing alternative investment strategies.

l CSSF Circular 91/75 on undertakings for collective investment.

l CSSF circular 11/512 presenting the main regulatory changes in risk management following publication of CSSF Regulation 10-4 and ESMA clarifications.

l CSSF Circular 11/508 on management companies under the 2010 law.

l CSSF Circular 11/509 on cross-border marketing of UCITS under the 2010 law.

number oF Funds As of 31 May 2012Overall .....................................................................................3,874By legal form Total FCPs ............................................................................. 1,929Total Sicavs ........................................................................... 1,909Others ..........................................................................................362010 Law, Part IFCP ........................................................................................... 1,121 Sicav ...........................................................................................738Others ............................................................................................0Total ......................................................................................... 1,8592010 Law, Part IIFCP .............................................................................................286Sicav ...........................................................................................291Others ............................................................................................5Total ............................................................................................582sIFsFCP .............................................................................................522Sicav ...........................................................................................880Others .......................................................................................... 31Total ......................................................................................... 1,433

administered Fund assets As of 31 May 2012 (EUR million)Overall ..............................................................................2,212,027By legal formTotal FCPs ......................................................................... 631,335Total Sicavs ....................................................................1,569,393Others ....................................................................................11,2292010 Law, Part IFCP ..................................................................................... 440,428Sicav ................................................................................. 1,310,294Others ............................................................................................0Total ..................................................................................1,750,7222010 Law, Part IIFCP ....................................................................................... 79,955Sicav ................................................................................... 122,757Others ..................................................................................... 1,003Total .....................................................................................203,715sIFsFCP ...................................................................................... 110,952Sicav ....................................................................................136,342Others ...................................................................................10,296Total .....................................................................................357,590

regulatorFinancial Sector Supervisory Commission (CSSF), 110 route d’Arlon, L-2991 Luxembourg.

double taxation treatiesWith 64 countries (as of April 2011): Armenia; Austria; Azerbaijan; Bahrain; Barbados, Belgium; Brazil; Bulgaria; Canada; China; Czech Republic; Denmark; Estonia; Finland; France; Georgia; Germany; Greece; Hong Kong; Hungary; Iceland; India; Indonesia; Ireland; Israel; Italy; Japan; Latvia; Liechtenstein; Lithuania; Malaysia; Malta; Mauritius; Mexico; Moldova; Monaco; Mongolia; Morocco; Netherlands; Norway; Panama; Poland; Portugal; Qatar; Romania; Russia; San Marino; Singapore; Slovakia; Slovenia; South Africa; South Korea; Spain; Sweden; Switzerland; Thailand; Trinidad & Tobago; Tunisia; Turkey; United Arab Emirates; United Kingdom; United States; Uzbekistan; Vietnam.

LuXeMBourg

Luxembourg

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Double taxation treaties are currently under negotiation or awaiting approval by Luxembourg’s parliament with a further 21 countries: Albania; Argentina; Cyprus; Croatia, Egypt; Kazakhstan; Kuwait; Kyrghizstan; Lebanon; Macedonia; New Zealand; Oman; Pakistan; Saudi Arabia; Serbia and Montenegro; Seychelles; Sri Lanka; Syria; Tajikistan; Ukraine; Uruguay.

types oF alternative Fund vehicle open-ended investment companyl Investment company with variable capital (société

d’investissement à capital variable or Sicav)close-ended investment companyl Investment company with fixed capital (société

d’investissement à capital fixe or Sicaf).common contractual Fund (similar to unit trust in uK law)l Common contractual fund (fonds commun de

placement or FCP)

available types oF corporate vehicleSicavs under the 2010 law must be set up as a public limited company (SA). Under the SIF law Sicavs and Sicafs may be set up as a:l Public limited company (SA)l Partnership limited by shares (SCA)l Private limited liability company (S.àr.l)l Co-operative organised as an SA

audit requirement l Audit requirements governed by Article 154 of the 2010

Law and various circulars.l Luxembourg regulation requires that all Luxembourg

funds be audited at least annually (for certain funds semi-annually) by a Luxembourg auditor approved by the CSSF and a member of the Luxembourg Institute of Auditors.

Financial statement requirements2010 Lawl Audited annual financial statement must be published

within four months of the financial year-end, and be available 15 days prior to the annual general meeting

l Unaudited semi-annual financial statements must be

published and sent to the CSSF within two months of the end of the period to which they relate

sIF Law l Audited annual financial statement must be available

to investors within six months of the end of the financial year

overall cost oF Fund establishment cssF regulatory fees:Funds set up under the 2010 law, Sicar law and SIF Law:One-off fees of EUR2,650 for a single-compartment fund or EUR5,000 for an umbrella fund on submission of an application for regulatory approval and annual regulatory fees of the same amount.Luxembourg and eu-domiciled ucIsl Listing fee: EUR1,250l Visa fee (for funds domiciled in EU countries other

than Luxembourg): EUR1,250l Maintenance fee: EUR1,875 for first listing EUR1,250 for second listing EUR875 for third listing and EUR500 for fourth and subsequent listings non eu-domiciled ucIsl Listing fee: EUR2,500l Visa fee: EUR2,500l Maintenance fee EUR2,500 for first listing EUR1,875 for second listing EUR1,250 for third listing and EUR625 for fourth and subsequent listings

regulatory approval time (by the cssF) Funds set up under the 2010 Law:4-16 weeksFunds set up under the sIF Law:3-12 weeks

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S.�r


i. Why luxembourg?The establishment of the European Union’s single market has enabled the Grand Duchy of Luxembourg to become one of the leading global domiciles and service centres for both traditional and increasingly alternative investment funds and related vehicles, ranked as the world’s second-largest fund centre measured by assets under management after the United States. From the establishment of Luxembourg’s first fund in 1959 and a total of 805 at the end of 1990, the industry number has grown to 3,874 funds, comprising a total of 13,412 separate investment portfolios, at the end of May 2012.

The fund industry has benefited from the open-arms welcome of the Luxembourg authorities toward foreign businesses, capital and investment, as well as the country’s location in the heart of western Europe, close to the continent’s principal investment fund markets, its highly qualified and polyglot workforce, and its political, economic and social stability. The grand duchy’s competitiveness has been strengthened by a business-friendly tax regime favouring the establishment of funds, and a comprehensive legislative framework designed for both traditional and alternative investments.

The authorities and industry representative pay close attention to changes in the regional and worldwide operating and market environment for investment funds and the country’s legislation has been refined and updated in a timely manner, coupled with the practice of becoming one of the first member states to adopt EU directives into national law. Today, despite the unfavourable global economic climate and continuing uncertainty over the creditworthiness of both private and sovereign debtors, Luxembourg has not only maintained its position as an international fund distribution hub but has seen the net assets under management of domiciled funds reach EUR2.212trn (about USD2.79trn) in May 2012.

ii. legal and regulatory frameworkThe law of February 13, 2007 established Specialised Investment Funds as a vehicle designed for alternative investments and other funds aimed at sophisticated investors. It was amended by the law of March 26, 2012, to take account of new and impending EU legislation including the Ucits IV directive and the Alternative Investment Fund Managers Directive, which will come into effect on July 22, 2013, as well as the increased experience of Luxembourg’s financial regulator, the Financial Sector

Supervisory Commission (usually known by its French acronym, CSSF), in overseeing alternative funds. The revised SIF law came into force on April 1, 2012.

The law brings the SIF legislation into line with AIFM Directive rules in areas including delegation, risk management and the handling of conflicts of interest. In parallel with the December 2010 funds legislation that transposed the Ucits IV directive into Luxembourg law, it allows sub-funds of a SIF umbrella structure to invest in other compartments of the same structure in the same way that Ucits funds can do.

Article 5 of the revised law abolishes a peculiarity of the SIF regime that allowed fund promoters to wait until up to a month after the launch of a fund to submit it to the CSSF for approval. Henceforth funds must be authorised by the regulator before they can be launched, like funds created under the 2010 legislation. In practice, this provision was rarely used because of the risks of having to revise a structure after it had been launched.

The legislation is relatively short, consisting of just 18 articles. The first article states that the activity of management of a SIF must comprise at least management of the investment portfolio, excluding passive funds that seek to create value solely by the long-term holding of assets and creates a distinction between SIFs and private wealth management companies created under Luxembourg’s law of May 11, 2007, but it does not exclude private equity or real estate funds.

Article 3 allows SIFs created as open-ended investment companies (Sicavs) to benefit from measures in the 2010 law under which fund articles of association drawn up in English no longer need to be translated into French or German, nor do they need to send shareholders physical (as opposed to electronic) copies of their annual reports except on request. It also sets rules for voting rights and what constitute a quorum at shareholder AGMs.

The legislation now requires SIFs to put in place systems to detect, measure, manage and monitor the investment risk of its individual positions and their contribution to the portfolio’s overall risk profile. SIFs must also be structured and organised to minimise the risk of conflicts of interest, and draw up rules to manage any conflicts that do arise without causing harm to investors.

Article 7 sets down that where SIFs delegate tasks and functions to third-party providers, the CSSF must be informed in advance and delegation should not affect oversight of the fund. Individuals or legal entities to which

LuXeMBourg

LuxembourgBy rémi chevalier and olivier sciales, chevalier & sciales

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portfolio management is delegated must be appropriately authorised or licensed and regulated, except by express permission from the CSSF.

A SIF’s managers must be able to determine that the delegated provider is qualified and capable, and they must retain ultimate control over the fund’s activities and the ability to revoke the delegation. Delegation should not create conflicts of interest – so, for instance, investment management may not be delegated to the fund’s custodian – and the delegation of functions must be revealed in the fund’s offering documents.

Article 13 states that funds are not prohibited from deviating from their investment policy for the purposes of liquidity management, hedging or efficient portfolio management. Article 15 allows the CSSF to withdraw authorisation for one or more sub-funds of a SIF while maintaining the authorisation for other sub-funds of the same structure.

Article 16 of the law follows the 2010 legislation in allowing one sub-fund of a SIF to invest in another. This article clarifies that the rules regarding a company’s investment in its own shares set out in Luxembourg’s 1915 company law do not apply to SIFs. Sub-funds of the same SIF may not cross-invest in each other, and voting rights of shares held by one sub-fund in another are suspended.

Article 17 stipulates that SIFs established before the date of entry into force of the amendment law, April 1, 2012, have a transitional period up to June 30, 2013 to comply with the new rules on the delegation of functions (Article 42ter).

The law of December 17, 2010 incorporated into Luxembourg’s legislation the Ucits IV directive, the latest iteration of the EU’s regime for cross-border distribution of investment funds to retail investors, dating back to 1985. The law differentiates between Undertakings For Collective Investment In Transferable Securities (Ucits, regulated largely by Part I of the 2010 law) and other Undertakings For Collective Investment (UCIs or Part II funds, so called after Part II of the 2010 law which governs them).

Other recent regulatory developments include the issue of CSSF Circular 11/512 presenting the main regulatory changes in risk management following the publication of CSSF Regulation 10-4 and clarifications by the European Securities and Markets Authority (Esma) as well as the CSSF Circular 11/509 regarding the new notification procedure for Luxembourg Ucits seeking to market their shares or units in other EU member states, and for Ucits from other member states seeking to market in the grand duchy.

Luxembourg funds, both Ucits and SIFs, can benefit from a fast-track procedure under which in principle (although this is not guaranteed) the CSSF aims to transmit its comments and observations to the applicant within as little as 10 working days. In practice authorisation

is likely to take a minimum of three weeks for SIFs and four weeks for Ucits, and in some cases longer. The CSSF provides a five-step approval process for the establishment of a Luxembourg fund:

1. Initial submission of the questionnaire requesting authorisationAn application file consisting of the completed application questionnaire and appended documents, should be submitted together by electronic means, through the CSSF’s e-file programme or e-mail, once all constituents of the project are completely settled.

2. acknowledgement of receipt of the application fileThe CSSF will acknowledge receipt of the application file within two working days and will inform the applicant about the staff member in charge of examining the application through the e-file programme or e-mail.

3. transmission of cssF feedback and further requests of informationThe CSSF aims (but does not guarantee) to contact the applicant or a contact person designated in the questionnaire with feedback within 10 working days following receipt of the file. The applicant may be asked for further information and/or supporting documents, or to explain specific aspects of the application.

4. completion of examination phase and invitation to submit final version of documentsThe CSSF will inform the applicant when the examination phase of the application is completed. From this point, applicants may not change the scope of the application or alter the final versions of the constitutive documents on the basis of which the examination has been completed, otherwise the examination will have to begin again at stage 2. Confirmation of a satisfactory completion of the examination phase mean the applicant may submit the final clean version of any compulsory documents required to finalise the approval process of the fund.

5. entry of the fund on the official listFormal accreditation and entry on the official list is contingent on the submission of all required documents in a finalised form, a prospectus under the terms of Circular CSSF 08/371, and the management regulations, articles of incorporation and agreements in signed form. Upon satisfactory receipt of the prospectus and other required documents, the CSSF will register the fund on the official list. The regulator will also will issue official accreditation letters, related attestations and identification codes, register the documentation and return a visa-stamped version of the full prospectus within five working days following receipt of the required documents.

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Luxembourg investment funds are divided into three categories:l UCIs or Part II funds (582 as of the end of May 2012).l Ucits (1,859 in May 2012).l SIFs (1,433 in May 2012).

i) ucitsUcits are designed for retail investors, and benefit from the so-called EU ‘passport’ that allows them to be marketed freely throughout all 27 EU member states as well as other countries belonging to the European Economic Area with a minimum of notification requirements. Transferable securities are defined in Article 1 of the 2010 law as shares in companies or other equivalent securities, bonds and other forms of securitised debt, and any other negotiable securities, including certain types of derivative instrument, that carry the right to acquire transferable securities by subscription or exchange.

Four categories of fund investing in transferable securities fall outside Part I of the 2010 law:l Closed-ended funds.l Funds that raise capital without promoting the sale of

their shares or units to the public within the EU.l Funds whose management regulations or

constitutional documents stipulate that they may be sold only to the public in countries that are not EU member states.

l Categories of funds determined by the Luxembourg financial regulator, the CSSF, for which the investment policy rules laid down in Chapter 5 of the 2010 law are inappropriate in view of their investment and borrowing policies.

ii) Part II fundsBy contrast, UCIs established under Part II of the 2010 law may only market their shares or units in other EU countries or elsewhere if they comply with the individual conditions laid down by the authorities in the country concerned. The criterion determining whether a fund is subject to Part I or Part II of the 2010 law is its planned investment objective; Part I of the 2010 law applies only to funds whose the sole objective is investment in transferable securities, whereas a Part II fund may invest in other types of asset, making them suitable as the legal form for the establishment of alternative investment vehicles including hedge, venture capital and real estate funds.

iii) sIFsThe SIF law of 2007 replaced the legal framework previously applicable to institutional funds through a law of 1991 by establishing a statutory regime specifically designed for investment funds aimed at sophisticated investors, and it was amended by the law of March 26,

2012. The SIF is a lightly regulated and tax-efficient fund offering promoters an onshore alternative to traditional offshore jurisdictions such as the Cayman Islands or British Virgin Islands when deciding on the jurisdiction in which to set up a fund and type of vehicle to use. Like Part II funds, investment funds created under the SIF law are subject to the individual distribution rules of each country where they are marketed.

iv) regulatory bodyThe CSSF authorises and oversees all Luxembourg registered funds. Its annual regulatory fees for funds under the 2010 law and SIFs are EUR2,650 for a single compartment fund and EUR5,000 for a multiple compartment fund.

v) Future regulatory changesNon-Ucits funds established in Luxembourg and other EU member states, as well as managers domiciled within EU countries, will be subject from July 22, 2013 to the provisions of the Directive on Alternative Investment Fund Managers, which will provide a harmonised regulatory framework for the distribution across the EU of funds aimed at sophisticated investors.

The directive was formally agreed on June 8, 2011 and it formally entered into force on July 21, 2011, but member states have two years to transpose its measures into national law. Detailed ‘Level 2’ implementation measures are expected to be enacted in the form of a regulation from the European Commission in the second half of 2012. The regulation, which will have direct application in member states and will not have to be adopted into national law, is based on advice from the European Securities and Markets Authority (Esma), delivered to the Commission on November 16, 2011 following consultation with industry members and representative organisations. The Commission is not obliged to follow all of Esma’s recommendations and is not expected to do so.

Luxembourg is expected to pass legislation transposing the AIFM Directive into national law before the end of 2012. This may be accompanied by other legislation affecting the fund industry including the establishment of a partnership structure effectively replicating limited liability partnerships in common law jurisdictions.

A draft text of the next iteration of the Ucits directive, dubbed Ucits V, was published by the European Commission at the beginning of July 2012. Its main purpose is to bring the Ucits rules on remuneration of fund managers and depositary requirements into line with those enacted in the AIFM Directive.

iii. constitution of a fund and legal structuresInvestment funds may take the form of an open-

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ended investment company (known as a Sicav after its French acronym), of which there were 1,909 at the end of May 2012, a closed-ended investment company or Sicaf, of which there were 31 in May 2012, or a common contractual fund (FCP) with a management company (1,929 in May 2012). Any of these entities may be established as an ‘umbrella’ structure with multiple compartments or sub-funds with different investment policies. In this case each compartment is treated as a segregated entity whose assets belong to and may be claimed by only investors in that particular sub-fund; creditors of or investor in other sub-funds have no claim against the assets.

i) sicavs and sicafsA Sicav is a open-ended investment company whose capital is always equal to its net assets, and for which no formalities are required for increases and reductions in capital through investments in or redemptions of its shares at investors’ request at a price equal to the net asset value per share. By contrast, a Sicaf is a closed-ended investment company whose investors do not have the right to redeem their shares at their request before any expiry of the fund’s term.

ii) FcPsAn FCP is a common contractual fund, the liability of whose joint owners is limited to the amount they have invested. It should be noted that an FCP has no legal personality and therefore must be managed by a Luxembourg management company, whereas a Sicav or Sicaf can be managed by its board of directors. Ucits in the form of FCPs are managed by management companies under the conditions laid down in Chapter 15 of the 2010 law, whereas Chapter 16 of the 2010 law lays down the conditions under which management companies manage Part II funds.

iii) choosing a legal structureThe choice of whether to create a fund as an FCP or as an investment company (Sicav or Sicaf) is mainly based on tax considerations. An FCP is tax transparent, a concept guaranteed in the Luxembourg tax legislation. Marketing and operational considerations are also relevant to the choice of this vehicle since a Luxembourg-domiciled FCP benefits from the high service standards provided by management companies in the grand duchy.

The cultural background of different countries appears to influence the choice of promoters whether to create a fund as an FCP or as an investment company. For example, FCPs are traditionally widely used in Germany, while in France investors are more familiar with investment in Sicavs.

iv) Fund establishment expensesAccording to the latest regulation regarding regulatory charges, issued on April 1, 2010, formation expenses comprise a fixed capital duty amounting to EUR75 for all funds, notary’s fees, legal fees, and a CSSF filing duty of EUR2,650 for a single-portfolio fund or EUR5,000 for an umbrella fund, whether the fund is established under the law of December 17, 2010 or is a Sicar or SIF. The formation expenses may also comprise a Stock Exchange visa fee of EUR1,250 for a Luxembourg or EU fund, or EUR2,500 for a non-EU fund.

v) Minimum capitalisationThe minimum capitalisation of EUR1.25m required under both the 2007 and 2010 laws must be reached within 12 months following approval by the CSSF in the case of a SIF, compared with six months for a fund set up under the 2010 law.

vi) regulatory controlFunds set up as SIFs now require regulatory approval prior to incorporation, in the same way as funds set up under the 2010 law. While funds established under the SIF law are not required to have a promoter, the SIF’s directors are subject to approval by the CSSF; they must enjoy a good reputation and be able to demonstrate the experience necessary to manage the type of alternative investment fund in question. Article 5 of the 2012 law says the persons responsible for management of the SIF’s investment portfolio, and any changes, must be notified to the CSSF, which must certify that they are of good reputation and have the experience necessary to manage the type of alternative investment fund in question.

In complying with the establishment requirements, fund promoters can benefit from the overall financial infrastructure in Luxembourg, which included 143 banks as of the end of May 2012.

iv. investors’ eligibilityInvestment funds set up under the 2010 law are authorised for public distribution and there is no restriction on the eligibility of investors, whereas by contrast the SIF law incorporates restrictions on qualifying investors. SIFs are reserved for “well-informed investors” able to understand and assess the risks associated with investments in such a fund. Well-informed investors are defined as institutional investors, professional investors, or any other investors who have declared in writing that they are well-informed investors and either invest a minimum of EUR125,000 or are certified by a bank, investment firm or management company as having the appropriate expertise, experience and knowledge to understand investment in the fund adequately. Article 2

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of the 2012 law requires SIFs to have in place procedures to verify that its investors qualify as sophisticated rather than retail clients.

v. investment restrictionsWithin the broad principle of risk spreading, different types of fund are subject to varying rules governing the scope of their investment policy. The rules are significantly restrictive in the case of Ucits, lighter for Part II funds and substantially lighter for SIFs.

i) ucitsThe 2010 law imposes a range of restrictions upon investments by Ucits that have been clarified by recent statements from the regulator:l The grand-ducal regulation of February 8, 2008 clarifies

the notion of Ucits as provided in the 2002 and 2010 laws, in light of the Commission Directive 2007/16/EC.

l Circular CSSF 08/339 (as amended by Circular 08/380) implements the guidelines of the Committee of European Securities Regulators (Cesr, which became Esma on January 1, 2011) in relation to eligible assets for investment by Ucits, and provides additional clarifications relating to the eligible asset rules of the successive Ucits directives, which has been expanded to include not only transferable securities and money market instruments but bank deposits, funds of funds, derivatives and funds tracking recognised financial indices.

ii) non-ucits Part II FundsWhile there are no restrictions on eligible assets in which a Part II fund may invest, its investment policy is subject to approval by the CSSF, and certain rules are laid down in Circular IML 91/75 (as amended by Circular CSSF 05/177), while others are specifically applicable to funds pursuing alternative investment strategies. These rules are laid down in Circular CSSF 02/80, which states that:l Aggregate commitments in terms of short selling may

not exceed 50 per cent of assets, and no more than 10 per cent of securities of the same type issued by the same issuer may be sold short.

l Borrowings must not exceed 200 per cent of net assets.

l Counterparty risk, defined as the difference between the value of assets given as guarantee and the amount borrowed, may not represent more than 20 per cent of the fund’s assets per lender.

iii) sIFsSpecialised investment funds set up under the law of February 13, 2007, as amended by the law of March 26, 2012, are not required to comply with any detailed investment restrictions or leverage rules. The legislation

merely states that a SIF should apply the principle of risk diversification under which the collective investment of funds must be made in assets “in order to spread the investment risks”. The CSSF clarified in Circular 07/309 that:l A SIF may not invest more than 30 per cent of its

assets or commitments in securities of the same type issued by the same issuer.

l Short sales may not result in the SIF holding a short position in securities of the same type issued by the same issuer representing more than 30 per cent of its assets.

l When using derivatives, the SIF must ensure a similar level of risk-spreading via appropriate diversification of the underlying assets.

However, the CSSF may, if it deems the circumstances appropriate, grant exemptions to these rules on a case-by-case basis.

vi. reporting and audit requirementsi) ProspectusFunds are obliged to issue a prospectus containing a presentation as well as economic and commercial information on the fund and its management company. The law of July 10, 2005 on prospectuses for securities specified that closed-ended funds falling outside Part I of Luxembourg’s fund legislation were exempt from the obligation to publish a full prospectus, although such funds were still obliged to publish a simplified prospectus. This was also obligatory for Ucits funds up to July 1, 2011, when the law of 2010 replaced the simplified prospectus for new funds by the Key Investor Information Document. Under the 2010 law, the prospectus must include the information necessary for investors to make an informed judgment about the proposed investment in the fund, and especially of the risks involved; it must be updated whenever necessary for this purpose and at least annually.

Under Article 12 of the 2012 law, the CSSF’s approval is required for any substantial change made to the SIF’s offering documents, such as the name of the fund or of sub-funds, the replacement of the custodian, administrator, auditor or manager, the creation of new sub-funds or a significant change in investment policy.

Ucits funds must comply with the Esma guidelines 10-788 of July 28, 2010, which require inclusion in the prospectus of information relating to risk management. This includes the method used to calculate global exposure by differentiating between the commitment approach, relative Value at Risk approach and absolute VaR approach; for Ucits adopting the VaR approach, the expected level of leverage and any possibility of higher leverage levels; and information on the reference portfolio when Ucits use the relative VaR approach.

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ii) Issuing documentAs part of the lighter regulatory regime than that for Part II funds governed by the 2010 law, SIFs are required only to produce an ‘issuing document’ comprising the information necessary for investors to make an informed judgment investment in the fund, although the 2007 law does not specify any minimum content. The issuing documents and any subsequent changes to it must be communicated to the CSSF.

iii) Financial statementLuxembourg funds (or their management companies in the case of common contractual funds) are required to publish at least an annual report and, in the case of investment companies and FCPs governed by the 2010 law, also a half-yearly report covering the first six months of the fund’s financial year. The annual report must include audited accounts and a report on the fund’s business, as well as any other information necessary for investors to make an informed judgement about the fund. The audit must be conducted by an authorised independent auditor who is qualified and a member of the Luxembourg Institute of Auditors (IRE). The auditor must report promptly to the CSSF if any information provided to investors does not truthfully describe the financial situation of the fund, or if the auditor becomes aware during the audit that any fact or decision is liable to constitute a material breach of the law or regulations, or to affect the ongoing functioning of the fund.

It should be noted that unlike a fund established under the 2010 law, a SIF is not obliged to disclose details of its portfolio as part of the information necessary for investors to make an informed judgment about the fund, nor is it required to publish the net asset value per share of the fund, as is the case for Ucits and Part II funds.

iv) Key Investor Information documentUntil July 2011 Ucits funds were also required to produce a simplified prospectus, providing a summary of the main prospectus. Under the Ucits IV directive, implemented into Luxembourg’s domestic legislation by the law of December 17, 2010, this is replaced by the Key Investor Information Document (KIID for short), designed to provide full but concise information on the fund’s main features, written in plain, non-technical language and produced in a standard format, usually on two A4 pages.

Designed to provide investors with a more easily understandable picture of the fund’s activities than was provided by the simplified prospectus, the KIID seeks to describe in straightforward terms the fund’s investment strategy, the risks involved, the service providers used by the fund, the charges levied against the fund’s assets for investment management and other services, and its recent performance where this is applicable. A separate

KIID must be produced for each Ucits fund or sub-fund, and may also be produced for different classes of shares or units in the same fund of sub-fund where there may be significant differences in performance between them. The KIID should enable investors to make an informed choice about investing in a fund without reading the full prospectus, and it should enable them to compare one fund with another easily.

Since July 1, 2012, all Ucits funds are required to have a KIID. Any significant changes to the fund, such as in its risk/reward profile or its management, require the issue of an amended KIID, and it must be updated at the end of each year. It must be published in at least one of the official languages, or another language approved by the local regulator, of any EU country in which the fund is to be marketed.

vii. taxation of fundsLuxembourg Ucits, Part II funds and SIFs do not pay income and capital gains taxes in the grand duchy, nor is stamp duty payable on share issues or transfers.

There is a fixed capital duty of EUR75 to be paid upon incorporation. In addition, some funds are also subject to an annual subscription tax. Under the SIF law this annual subscription tax is levied at 0.01 per cent of the fund’s net assets, compared with a standard rate 0.05 per cent for funds under the 2010 law. However, the rate is 0.01 per cent for funds whose exclusive policy is investment in money market instruments or bank deposits. Other funds, such as certain institutional cash funds and pension pooling funds, are exempted from the subscription tax, no matter under which law they are set up. The 2010 law extended or confirmed this exemption for exchange-traded funds and funds whose primary aim is investment in microfinance institutions. It should be noted that investors may invest in a SIF by means of equity or debt in order to benefit from effective tax optimisation, and that SIFs do not have to respect any particular debt-equity ratio.

Luxembourg has signed double taxation treaties with 64 countries, and 21 others are under negotiation or awaiting approval from Luxembourg’s parliament or the legislature of the other country. These agreements seek to eliminate or reduce withholding taxes on foreign income or capital gains. However, only 36 of these treaties are applicable to Sicavs, whether in the form of a Ucits, Part II fund or SIF.

viii. stock exchange listingLuxembourg funds in the form of Ucits, Part II funds and SIFs as well as foreign funds may be listed on the Luxembourg Stock Exchange. Various conditions must be met by foreign funds seeking a listing on the exchange, notably that the fund promoter is of good reputation and

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has adequate and appropriate professional experience.The annual Luxembourg Stock Exchange listing fee

for Luxembourg and EU funds is currently EUR1,875 for a first line of quotation, EUR1,250 for a second, EUR875 for a third and EUR500 for a fourth and any additional lines of quotation. The fees for non-EU funds are EUR2,500 for a first line of quotation, EUR1,875 for a second, EUR1,250 for a third and EUR875 for a fourth and any subsequent listings.

x. conclusionThe Luxembourg investment fund industry, as part of a leading international financial centre, is now a recognised label for funds throughout Europe and in other parts of the world, including East Asia, the Middle East and South America. The country continues to benefit from the political consensus in favour of maintaining the competitiveness of the fund industry and the financial sector as a whole, reflected in the proactive approach of the authorities to the adoption of EU legislation and the regular revision of national fund regimes to take into

Ucits funds (Part I of the 2010 Law)

Part II funds (Part II of the 2010 Law)

SIFs (2007 Law, revised 2012)

CSSF approval required prior to incorporation

Yes Yes Yes

Supervised by CSSF Yes Yes Yes

EU Passport Yes No No

Eligible assets – Transferable securities– Bank deposits– Money market instruments– Fund of funds– Financial derivatives– Index tracking funds

Unrestricted but subject to CSSF approval

Unrestricted

Eligible investors Unrestricted Unrestricted Well-informed investors– Institutional investors– Professional investors– Investors declaring that they are well

informed and either invest a minimum of EUR125,000 or are certified by a bank, investment firm or management company as capable of making an informed decision on investment in the fund

Need for a promoter Yes, although this may change in the future

Yes, although this may change in the future

No

Investment restrictions

– Provisions of the 2010 Law– Provisions of Circular CSSF

08/339, investment possible in:• Transferable securities• Deposits• Money market instruments• Liquid financial assets• Other undertakings for

collective investment

– Provisions of the 2010 Law– Circular IML 91/75 (as

amended by Circular CSSF 05/177)

– For Part II funds pursuing alternative investment strategies, Circular CSSF 02/80, relating to short sales, borrowing and investment restrictions

Compliance with risk diversification rules:– SIF may not invest more than 30% of

assets or commitments in securities of the same type from the same issuer

– Short position in securities of the same type from the same issuer may not exceed 30% of SIF’s assets

– When using derivatives, SIF must ensure similar level of risk-spreading via diversification of underlying assets

Tax treatment – No income tax– Annual subscription tax of

0.05% of NAV (exchange-traded funds exempt)

– Fixed capital duty of EUR75– No withholding tax on

dividend distributions and interest payments

– No income tax– Annual subscription

tax of 0.05% of NAV (exchange-traded funds and microfinance funds exempt)

– Fixed capital duty of EUR75– No withholding tax on

dividend distribution and interest payments

– No income tax– Annual subscription tax of 0.01% of the

NAV (microfinance funds exempt)– Fixed capital duty of EUR75– No withholding tax on dividend

distributions and interest payments

Issue and redemption of shares or units

For Sicav or FCP, issue, redemption or repurchase price must be based on NAV

For Sicav or FCP, issue, redemption and repurchase price must be based on NAV

– No requirement that issue, redemption or repurchase price be based on NAV

– Can issue shares at a pre-determined fixed price

– Can repurchase shares below NAV

Disclosure of portfolio

Yes Yes No

ix. at-a-glance guide to luxembourg funds

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account the needs and preferences of global standard-setters, investment managers, fund service providers and investors. These efforts have contributed significantly to the creation of a stable and protective environment for the fund industry and the strengthening to Luxembourg’s global reputation and market position.

The pragmatism of the Luxembourg authorities is also reflected in the regulatory approach of the CSSF to industry members, its readiness to engage in dialogue with market participants, and its careful calibration of the appropriate balance of the interests between industry members and investors, especially important in view of the ongoing global market turbulence that continues to impact the fund industry.

Luxembourg’s long-standing dominance in Europe’s cross-border retail fund industry has provided it with broad awareness of the need for industry transparency and effective protection of investors, a feature that has helped to consolidate its market position during periods of turbulence and instability.

The next challenge is the EU’s Alternative Investment Fund Managers Directive, which was finalised in June 2011 and will come into effect on July 22 next year. The directive will introduce a harmonised regulatory framework for alternative fund managers seeking to market products within the EU that will include greater disclosure levels than the industry has typically adhered to in the past, and that will give Luxembourg fresh opportunities to meet the needs of managers and investors. n

chevalier & scialesLaw firm (Luxembourg)51 Route de ThionvilleL-2611 Luxembourgwww.cs-avocats.luTel: +352 26 25 90 30Fax: +352 26 25 83 88

Main contacts:Rémi Chevalier (founding partner) Tel: +352 26 25 90 30 Mobile: +352 621 50 46 35Email: [email protected]

Olivier Sciales (founding partner)Tel: +352 26 25 90 30Mobile: +352 621 53 11 46Email: [email protected]

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MaltaFund legislation: l Investment Services Act, (Cap. 370 – Laws of Malta)l Companies Act, (Cap. 386 – Laws of Malta)l Trusts and Trustees Act (Cap. 331 – Laws of Malta)l Income Tax Act (Cap. 123 – Laws of Malta)

number oF FundsAs at end December 2011Retail Ucits ..................................................................................59Retail Non-Ucits ......................................................................... 31Non-Ucits Foreign .....................................................................22Professional Investor Funds (PIFs) .................................. 442domiciled and administered fund assets total: Net Asset Value of Locally Based CISs in 2011: E8.3 billiondomiciled and administered fund assets by category:Professional Investor Funds (PIFs): .....................E5.8 billion Retail Ucits ................................................................E1.65 billionNon-Ucits ................................................................. E0.85 billion

regulatorMalta Financial Services Authority (MFSA), Notabile Road, Attard BKR 3000, Malta. Tel: (+356) 2144 1155; Email: [email protected]

service providersrecognised Fund administratorsThere are 25 firms in possession of a recognised fund administrator certificate:l Abacus Fund Administration Limitedl Alpha Value Management Limitedl Alter Domus Services Malta Limitedl Amicorp Fund Services Malta Limitedl Apex Fund Services (Malta) Limitedl Benchmark Advisory Limited

l Blue Planet Investment Management Limitedl Calamatta Cuschieri Fund Services Limitedl Custom House Global Fund Servicesl Folio-ITL Fund Service Limitedl Global Capital Financial Management Limitedl Helevetic Fund Administration (Malta) Limitedl Heritage International Fund Managers Limitedl HSBC Global Asset Management (Malta) Limitedl HSBC Securities Services (Malta) Limitedl IDS Fund Services (Malta) Limitedl Praxis Fund Services (Malta) Limitedl SGGG Fexco Fund Services (Malta) Limitedl Somerset Management (Malta) Limitedl TMF FundAdministrators (Malta) Limitedl TMF FundServices (Malta) Limitedl Trident Fund Services (Malta) Limitedl Tromino Financial Services (Malta) Limitedl Valletta Fund Management Limitedl Valletta Fund Services Limitedcustodians/trustees of collective Investment schemesl Bank of Valletta plcl Custom House Global Fund Servicesl Deutsche Bank Malta Limitedl HSBC Bank (Malta) plcl Mediterranean Bank plcl Sparkasse Bank Malta plcLawyers, accountants and auditorsThere are over 50 law firms in Malta (although only around 15 undertake fund work). A directory of law firms as well as sole practitioners can be found at www.avukati.org.

There are around 40 accountancy firms, including the “big four”. For a detailed list of the accountants and auditors practicing in Malta please refer to www.miamalta.org. trusteesReference should be made to the MFSA website www.mfsa.com.mt (Trusts & Trustees/Licence Holders)Local stock exchange: Malta Stock Exchange, Garrison Chapel, Castille Place, Valletta VLT 1063, Malta: CEO: Mr Mark GuillaumierLocal fund industry body: Malta Funds Industry Association (MFIA) c/o Level 6, The Mall Offices, The Mall, Floriana, VLT 16, Malta. Promotional bodies for funds/financial sector:Malta Funds Industry Association (MFIA) c/o Level 6, The Mall Offices, The Mall, Floriana, VLT 16, Malta, and FinanceMalta, Garrison Chapel, Castille Place, Valletta VLT 1063, Malta

double taxation treatiesMalta has an extensive double taxation treaty network. The following are the agreements currently in force with the respective countries:

Albania, Australia, Austria, Bahrain Barbados, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Georgia, Greece, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Jordan, Korea, Kuwait, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Malaysia, Morocco, Netherlands, Norway, Pakistan, Poland, Portugal, Qatar, Romania, San Marino, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Syria, Tunisia, U.A.E., United Kingdom, USA.

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Valetta

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tax inFormation exchange agreements Tax information exchange provisions are included in the Double Tax Treaties themselves.Memoranda of understanding with other regulators:Malta has over 30 bilateral or multilateral Memoranda of Understanding or other agreements with other regulatory authorities. These MoUs cover regulatory co-operation and exchange of regulatory information in a number of sectors. A full list of these agreements may be found on www.mfsa.com.mt (Memoranda of Understanding).

director requirementsThe Companies Act provides that the director of a company is bound to act honestly and in good faith in the best interests of the company. Furthermore, the directors must promote the well-being of the company and shall be responsible for:a) the general governance of the company and its proper

administration and management; and b) the general supervision of its affairs.In particular, the directors of a company shall be obliged to exercise the degree of care, diligence and skill which would be exercised by a reasonably diligent person having both the knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by said director in relation to the company; and the knowledge, skill and experience that the director has. The directors must not make secret or personal profits from their position without the consent of the company, nor make personal gain from confidential company information and must avoid situations which could give rise to conflicts of interest. Lastly, the Act provides that the directors must not use any property, information or opportunity of the company for their own or anyone else’s benefit, nor obtain benefit in any other way in connection with the exercise of their powers, except with the consent of the company in general meeting or except as permitted by the company’s memorandum or articles of association.

Every public company is bound by law to have at least 2 directors whereas private companies must have at least 1 director.

taxation oF FundsAs a general rule, collective investment schemes are exempt from tax on income and capital gains, so long as these are not investing in immovable property situated in Malta.

Certain Malta-based funds, with a value of specified assets situated in Malta amounting to at least 85% of the value of the total assets of the fund, may be taxed on their investment income at the rate of 35%.

In the case of Value Added Tax, the activities of a CIS are considered exempt without credit for VAT purposes.

taxation oF investment managers All companies (including investment management companies) pay 35% on profits. Under Malta’s tax system the shareholder is entitled to a refund of tax upon distribution of dividends. The amount of the tax refund is set at 6/7ths of the tax paid by the company on the underlying profit (5/7ths in the case of passive interest and royalties).

valuation rulesUsually valuation rules are dealt with in the offering prospectus.

types oF alternative Fund vehiclel Unit trustl Open-ended investment company (SICAV)l Close-ended investment company (INVCO)l Mutual fundl Limited liability partnershipavailable types of corporate vehicle:Segregated fund or cell, and portfolio structures are available under the Companies Act.types of regulatory fund category: l Retail fundsl Professional Investor Funds – 3 Categories: (i)

Experienced Investor Funds, (ii) Qualifying Investor Funds, (iii) and Extraordinary Investor Funds

l Maltese Ucits1 Schemes; l Maltese Non-Ucits Schemes;l Overseas Non-Ucits Schemes.

audit requirementYes

Financial statement requirementsDirectors are required by law to prepare financial statements for each financial period. These financial statements must give a true and fair view of the financial position of the fund as at the end of the financial period and of the profit or loss for that period in accordance with the IFRS (International Financial Reporting Standard) requirements.

regulatory Feescollective Investment schemes (Maltese ucits schemes, Maltese non-ucits schemes and overseas Based non-ucits schemes) Application Fee Annual FeeScheme ............................................................ E2,000 .....E2,500Up to fifteen sub-funds (per sub-fund) ........ E450 ........E400Sixteen sub-funds and over (per sub-fund) E250 ........E150Sub-fund in the form of an IC .................... E2,000 .....E2,500

european ucIts schemes Application Fee Annual FeeScheme ............................................................ E2,000 .....E2,500Up to fifteen sub-funds (per sub-fund) ........ E450 ........E450Sixteen sub-funds and over (per sub-fund) E250 ........E250

Professional Investor Funds Application Fee Annual FeePreliminary indication of acceptability Of a fund ............................................................. E600 ............ NilScheme .............................................................E1,500 ..... E1,500Additional sub-funds (per sub-fund) ..........E1,000 ........E500Sub-fund in the form of an IC .....................E1,500 ..... E1,500

Footnote:1. Undertakings for Collective Investment in Transferable Securities.

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investment services regulationThe Investment Services Act provides for the authorisation of investment services licence holders and collective investment schemes operating in or from Malta.

When considering whether to grant or refuse a Licence, the MFSA will, in particular, have regard to: a. the protection of investors and the general public; b. the protection to the reputation of Malta taking into

account Malta’s international commitments; c. the promotion of competition and choice; and d. (in the case of a scheme) the reputation and suitability

of the applicant and all other parties connected with the Scheme.

The Act also provides for the recognition and supervision of persons who provide administrative services in or from Malta which do not themselves constitute licensable activity under the ISA to licence holders in Malta, or to equivalent authorised persons and schemes overseas.

Once licensed, an entity is subject to ongoing supervisory requirements. The Scheme shall submit half-yearly and annual reports to the MFSA and such other information, returns and reports as the MFSA may from time to time request. The accounting information provided in the annual report shall be audited by a qualified auditor approved by the MFSA. The auditor’s report, including any qualifications thereto shall be reproduced in full in the annual report. The half-yearly and annual reports shall be published and submitted to the MFSA within two and four months respectively of the end of the period concerned.

Funds regulationProspectus/offering document/Moa requirementsRetail Collective Investment SchemesAll collective investment schemes are required to draw up a Prospectus which includes the prescribed information. These schemes are also required to comply with the requirements outlined in the Investment Services Act (Prospectus of Collective Investment Schemes) Regulations, 2005.

As from July 2012 Maltese UCITS will also be required to draw up a key investor information document (KIID). The KIID shall include appropriate information about the essential characteristics of the Maltese UCITS such as to reasonably enable the investors to understand the nature and the risks of the Scheme that is being offered to them and, consequently to take investment decisions on an informed basis.

Professional Investor FundsA Professional Investor Fund promoted to Experienced or Qualifying Investors is required to draw up an Offering Document which should at least include the prescribed information. The Offering Document should be provided to prospective investors free of charge.

A Professional Investor Fund targeting Extraordinary Investors may either draw up an Offering Document or a Marketing Document which should at least include a list of Service Providers including the Directors, General Partner(s) or Trustee (as applicable), and their respective contact details; a definition of Extraordinary Investor; a risk warnings section describing in brief at least the principal risks associated with investing in the PIF; the investment objectives, policies and restrictions of the PIF or where applicable its sub-funds; details of the fee structure; details of the classes/ units on offer (whether these constitute a distinct sub-fund or not); an overview of the safekeeping arrangements (where a custodian/ prime broker is not appointed); a prescribed statement in the case where the PIF has issued “Voting Shares” to the promoters and “non Voting Shares” to prospective Investors; the Extraordinary Investor Declaration Form and the Subscription Form together with the text prescribed at law.

The Marketing Document should also include as an Annex, either the most recent version of the Constitutional Document of the PIF or a summary thereof. In the latter case, the Marketing Document should provide that a copy of the PIF’s Constitutional Document will be provided to prospective investors upon request. The Marketing Document or where applicable the Offering Document, should be provided to prospective investors free of charge.

Investor restrictionsProfessional Investor Funds (PIFs) are alternative investment funds for high net worth individuals and institutions.

The Investment Services Rules for Professional Investor Funds classify these funds into three types, depending on the experience and sophistication of the end investor and the level of protection required. These are the: l “Experienced Investor” – being a person having the

expertise, experience and knowledge to be in a position to make his own investment decisions and understand the risks involved. An experienced investor is requested to confirm certain qualities such as experience and

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track record in making investments and to provide other relevant information. Before an Experienced Investor Fund may accept any investment, it should obtain a completed “Experienced Investor Declaration Form” in which the investor confirms that he/she has read and understood the mandatory risk warnings and describes why he/she is an “Experienced Investor”.

l “Qualifying Investor” – being an individual whose net worth or joint net worth with the investor’s spouse exceeds EUR 750,000. Prior to accepting any investment the PIF should be in receipt of a completed “Qualifying Investor Declaration Form” in which the investor confirms that he/she has read and understood the mandatory risk warnings and describes why he/she is a “Qualifying Investor”.

l “Extraordinary Investor” – being an investor whose net worth must exceed EUR 7.5 million. Prior to accepting any investment the PIF should be in receipt of a completed “Extraordinary Investor Declaration Form” in which the investor confirms that he/she has read and understood the mandatory risk warnings and describes why he/she is an “Extraordinary Investor”.

Proformas of the aforementioned forms are available on the MFSA website.

In the case of retail collective investment schemes, the Rules do not provide for any investor restrictions.

Minimum initial investmentIn the case of Professional Investor Funds promoted to Experienced Investors, the Rules provide that the minimum investment threshold must amount to EUR 10,000 and that the total amount invested may not fall below this threshold unless this is the result of a fall in the net asset value of the PIF. The minimum investment threshold applies to each individual “Experienced Investor”.

In the case of Professional Investor Funds promoted to Qualifying Investors the minimum initial investment must amount to EUR 75,000 and the total amount invested may not fall below this threshold unless this is the result of a fall in the net asset value. As long as the minimum threshold is satisfied, additional investments – of any size – may be made. The minimum investment threshold applies to each individual “Qualifying Investor”.

In the case of Professional Investor Funds promoted to Extraordinary Investors, the minimum initial investment must amount to EUR 750,000. The total amount invested may not fall below this threshold unless this is the result of a fall in the net asset value. Provided that the minimum threshold is satisfied, additional investments – of any size – may be made.

In the case of joint holders, the abovementioned minimum investment limit remains that set for each investor. In the case of an umbrella fund comprising of sub-funds each of which is set up as a Professional Investor Fund,

the minimum investment threshold may be applicable on a per scheme basis rather than on a per sub-fund basis.

In the case of retail collective investment schemes, the Rules do not provide for any minimum initial investment thresholds.

Investment restrictionsAll schemes have to follow the risk spreading principle as specified under the Investment Services Act. Article 2 of the ISA however permits the licensing of Schemes that are not restricted by the risk spreading requirement subject to certain conditions prescribed therein. Professional Investor Funds promoted to “Qualifying” or “Extraordinary” investors are not subject to risk diversification requirements.

Leverage restrictionsIn the case of Professional Investor Funds promoted to Experienced Investors borrowing for investment purposes or leverage via the use of derivatives is restricted to 100% of NAV.

Professional Investor Funds promoted to Qualifying Investors are not subject to any investment or borrowing (including leverage) restrictions other than those which may be specified in their Offering Document.

Professional Investor Funds promoted to Extraordinary Investors are not subject to any investment or borrowing (including leverage) restrictions other than those which may be specified in their Offering Document/ Marketing Document.

service provider regulationThe Investment Services Act prescribes that any person wishing to carry out an investment service in Malta needs a licence in terms of the Act. The Authority expects all services providers to be ‘fit and proper’ that is to be able to show high degrees of competence, integrity and solvency. Service Providers of collective investment schemes generally include, amongst others, a Manager, a Custodian, an Administrator and an Investment Adviser.

Professional Investor Funds may have either Maltese or Foreign Services Providers. Foreign Service Providers, when accepted by the MFSA as Service Providers of a collective investment scheme should be established and regulated in a Recognised Jurisdiction. Recognised Jurisdictions include EU and EEA Members and other countries, to be approved on a case by case basis, that are considered as having EU equivalent rules.

The MFSA may, in the following scenarios, also accept Service Providers which may not be established and regulated in a Recognised Jurisdiction:i. where the Service Provider is the subsidiary of a firm

that is regulated in a Recognised Jurisdiction, that retains control of its subsidiary and undertakes to provide all the necessary information to the MFSA; or

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ii. where the MFSA considers that the Service Provider is subject to regulation to an equal or comparable level in the jurisdiction concerned.

Where one or more of the proposed Service Providers is not based in a Recognised Jurisdiction or does not fall under (i) above, it is recommended that prior to the submission of an Application for a PIF Licence, the promoters submit an application for preliminary indication of acceptability of a PIF.

Promoter requirements There is no mandatory requirement to have a promoter though this role may be fulfilled either by the service provider or the administrator introducing the fund in Malta.

Investment advisorThe role of the investment advisor is that of providing financial advice to the scheme/fund or its Manager with regards to the investment and re-investment of the assets of the Scheme/Fund. The Investment Advisor will not have any discretion with respect to the investment and re-investment of the assets of the Scheme/Fund.Retail Collective Investment Schemes:Maltese UCITS Schemes and Maltese Non-UCITS Schemes are generally not required to appoint an Investment Adviser and where appointed, the proposed Investment Adviser need not be established and regulated in Malta.

Where the Investment Adviser is appointed by the Manager, rather than by the Scheme, such Investment Adviser is subject to MFSA’s approval. Where the proposal includes the appointment of an Investment Adviser that is established in Malta, the Adviser should be in possession of a Category 1A, 1B, 2 or 3 Investment Services Licence issued in terms of Article 6 of the Investment Services Act, 1994 and should be duly authorised by the MFSA to provide investment advice to collective investment schemes.Professional Investor Funds:Professional Investor Funds are generally not required to appoint a third party Investment Adviser. Moreover, the proposed Investment Adviser need not be established and regulated in Malta.

Where the Investment Adviser is appointed directly by the Manager, rather than by the PIF such Investment Adviser is not subject to MFSA’s approval and no eligibility criteria apply.

Where the proposal includes the appointment – directly by the PIF – of a third party Investment Adviser, and the proposed Investment Adviser is established in Malta, the

Adviser should be in possession of a Category 1A, 1B, 2 or 3 Investment Services Licence issued in terms of Article 6 of the Act and should be duly licensed and authorised by the MFSA to provide investment advice to collective investment schemes.

Fund managerRetail Collective Investment SchemesA Maltese UCITS Scheme which is not self-managed shall appoint a Maltese or European management company.

A Maltese management company appointed by a Maltese UCITS Scheme must fulfil three criteria namely:1) the fund manager should be established in Malta;2) the fund manager must hold a Category 2 Investment

Services Licence issued in terms of Article 6 of the Investment Services Act, 1994 and

3) must qualify as a Maltese Management Company in terms of the UCITS Regulations.

The UCITS IV Directive offers UCITS Fund Managers the opportunity to exercise a management passport. The UCITS IV management company passport permits the remote establishment and cross border management of UCITS funds within the EU.

A European management company may be appointed as long as it complies with Regulations 9 and 10 of the Investment Services Act (UCITS Management Company Passport) Regulations, 2011 and Part CII of the Investment Services Rules for Investment Services Providers.

Where a Maltese Non-UCITS Scheme proposes to appoint a third party Manager and the proposed Manager is established in Malta, it should be in possession of a Category 2 Investment Services Licence issued in terms of Article 6 of the Investment Services Act, 1994 and authorised to provide fund management services.Professional Investor FundsIn the case of Professional Investor Funds, where a third party Manager is to be appointed and the proposed Manager is established in Malta, the Manager should be in possession of a Category 2 Investment Services Licence issued in terms of Article 6 of the Act and should be duly licensed and authorised by the MFSA to provide management services to collective investment schemes.

The MFSA expects the Manager to exercise care and diligence in the selection of a Sub-Manager and to assume responsibility for the acts of the Sub-Manager

custodian requirements The main role of the custodian is that of safe-keeping of the assets of the scheme and ensuring that the fund manager is acting within the powers granted through the prospectus or marketing document and in accordance with the Standards Licence Conditions and the Constitutional Document. Retail Collective Investment Schemes The Rules provide as follows:a. The Custodian should be based in Malta and in

possession of a Category 4 Investment Services Licence issued by the MFSA. The custodian can be either a credit institution licensed under the laws of

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Malta, or such other body corporate, unincorporated body or association acceptable to the MFSA, providing the services of a Custodian.

b. The Custodian shall have sufficient financial resources and liquidity at its disposal to enable it to conduct its business effectively and to meet its liabilities. The Custodian shall also have the business organisation, systems, experience and expertise deemed necessary by the MFSA for it to act as Custodian. The Scheme shall be required to satisfy the MFSA that the proposed Custodian meets the above requirements.

c. The MFSA shall be entitled to be satisfied, on a continuing basis that the Custodian has the appropriate expertise and experience to carry out its functions.

d. The appointment and/or the replacement of any party who is to be the Custodian of the Scheme, the terms of that appointment, and the contents of the agreement to which the appointment is subject, shall be agreed in advance with the MFSA. The MFSA shall have the right to require the replacement of the Custodian of the Scheme.

e. The Custodian shall be separate and independent from the Manager and shall act independently and solely in the interests of the unit holders. Any facts, relationships, arrangements, or circumstances which may at any stage bring that independence into question shall be declared to the MFSA as soon as the Scheme becomes aware of any such matter.

• Professional Investor FundsWhere the PIF wishes to appoint a Custodian established in Malta, the Custodian should be in possession of a Category 4 Investment Services Licence issued in terms of Article 6 of the Act.

A Professional Investor Fund promoted to Extraordinary Investors is required to appoint a third party Custodian responsible for the safe keeping of the assets of the PIF and for undertaking monitoring duties over the PIF’s Manager as more fully detailed in the relevant standard licence conditions. The Custodian shall be:i. an entity providing the services of Custodian in Malta

in terms of a Category 4 Investment Services Licence issued under the Investment Services Act, 1994; or

ii. an entity constituted in a Member State or EEA State and operating from a Member State or EEA State other than Malta, providing the services of Custodian to collective investment schemes; or

iii. an entity constituted outside Malta and operating from outside Malta providing the services of a Custodian to collective investment schemes where the MFSA is satisfied that such entity is of sufficient standing and repute and having the business organisation, systems, experience and expertise deemed necessary for it to act as Custodian.

The Scheme shall obtain the written consent of the MFSA before the appointment or replacement of any party to act in the capacity of Custodian to the Scheme. The MFSA reserves the right to object to the proposed replacement or appointment and to require such additional information it considers appropriate.

The Custodian shall be separate and independent from the Manager and shall act independently and solely in the interests of the unit holders. Any facts, relationships, arrangements, or circumstances which may at any stage bring that independence into question shall be declared to the MFSA as soon as the Scheme becomes aware of any such matter.

The Scheme shall notify the MFSA before the appointment or replacement of any party to act in the capacity of Custodian or Prime Broker to the Scheme at least ten business days in advance of the appointment or replacement. Such notification shall be accompanied by a confirmation from the Board of Directors/ General Partner(s)/ Manager as the case may be that the proposed Custodian or Prime Broker is authorised to provide these services by its home state regulator; and evidence of the authorisation of the Custodian or Prime Broker.

Where no Custodian is appointed, responsibility for the establishment of proper arrangements for the safe keeping of the PIF’s assets remains with the Directors/ General Partner(s)/ Trustee and officers of the PIF. The applicant will be required to outline – as part of the application process – the arrangements that will be put in place to ensure adequate safekeeping of the assets of the PIF.

Category 4 deals with licence holders authorised to act as trustees or custodians of Collective Investment Schemes. The law provides that their Minimum Initial Capital Requirement amounts to EUR 125,000.

start-up PIFs – Ics of rIccs with common service providersA Recognised Incorporated Cell Company (RICC) may provide administrative services under a standardised set-up to one or more start-up funds formed as incorporated cells (ICs). Each IC can be either third party managed or self-managed. In the case where an IC is third-party managed, it will be required to appoint an investment manager, approved by the RICC. An IC should, unless otherwise authorised in writing by the MFSA, appoint the service providers selected for it by its RICC. RICCs and their ICs are regulated by the Companies Act (Recognised Incorporated Cell Companies) Regulations, 2012 and supplementing investment services rules.

regulatory procedure PIFs – Preliminary indication of acceptability The promoter of a Professional Investor Fund may apply for a preliminary indication of acceptability on the

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basis of the proposed structure of the PIF and service providers. This application must be submitted in respect of a prospective PIF having one or more of its Service Providers is not the subsidiary of a firm that is regulated in a Recognised Jurisdiction, which retains control of its subsidiary and undertakes to provide all the necessary information to the MFSA. If any of the external service-providers to be appointed by the PIF operate from a country that is not a “Recognised Jurisdiction” or are not subsidiaries of a company involved in financial services and regulated in a Recognised Jurisdiction, it is recommended that at an early stage, applicants request a preliminary indication of acceptability of the PIF.

In such a case, the MFSA will review the proposed structure of the PIF and its prospective Service Providers and will inform the applicant whether the proposed structure of the PIF and its Service Providers are acceptable to the MFSA.

The MFSA will ordinarily communicate the acceptability or otherwise of the proposed structure of the PIF within seven business days of receipt of the application for preliminary indication of acceptability of a PIF. However, this does not substitute the application for a PIF Licence.

applications for a collective Investment schemes Licence/ Professional Investor Fund LicenceWhen submitting an application for a licence under the Investment Services Act, the promoter should ensure that the appropriate Application Form is completed. The application process can be divided into three phases as follows:Phase One – PreparatoryIn all cases, the MFSA recommends that the promoters meet up with the regulatory authority to describe their proposal. This meeting should take place prior to the actual submission of the application. Although guidance will be given on the relevant regulatory requirements and on the completion of the Application documents, responsibility for the formulation of the proposal and the completion of the Application documents will remain with the Applicant. It is essential that the Applicant provides a comprehensive description of the proposed activity at the beginning of Phase One.

After preliminary discussions, the promoters should submit a draft Application Form, together with the supporting documents specified in the Application Form itself. The Application Form and the supporting documentation will be reviewed and comments provided to the Applicant. The MFSA may ask for more information and may make such further enquiries as it considers necessary. The ‘fit and proper’ checks – which entail following up the information which has been provided in the Application documents – begin at this stage.

The MFSA will consider the nature of the proposed Scheme/Fund and a decision will be made regarding which “Standard Licence Conditions” (SLCs) should apply. Some of these conditions may be disapplied or amended (where the circumstances justify such treatment, as long as investors are adequately protected) and supplementary conditions (if any) may be applied. The licence conditions are very important since they represent the ongoing requirements to which the Applicant will be subject, if and when licensed.Phase Two – Pre-LicensingOnce the review of the draft Application and supporting documents has been completed, the Authority will issue its ‘in principle’ approval for the issue of a licence. At this stage, the Applicant will be required to finalise any outstanding matters. Submission of signed copies of the revised Application form together with supporting documents in their final format, and any other issues raised during the Application process, should be resolved as part of this phase. A licence will be issued as soon as all pre-licensing issues are resolved.Phase Three – Post-Licensing/Pre-Commencement of BusinessThe Applicant may be required to satisfy a number of post-licensing matters prior to formal commencement of business.

regulatory approval time:The MFSA is used to working within agreed timeframes and deadlines. These may vary according to circumstances such as the prompt submission of information and feedback required from the fund promoter and the nature and complexity of the funds and the verification process. However the following are indicative timelines:

Collective Investment Schemes: The general rule is that MFSA will review the draft application form and the supporting documentation and will provide feedback within three weeks from submission of the application documents.

Third party managed Professional Investor Funds promoted to Experienced or Qualifying Investors: The MFSA will review the Application Form and supporting documents and provide the Applicant with comments thereon within seven business days from receipt of the application documents.

Third party managed Professional Investor Funds promoted to Extraordinary Investors: The MFSA will review the Application Form and the supporting documents and will provide the Applicant with comments thereto within three business days. This time-frame only applies when the PIF appoints a third party Manager and where all service-providers are based and regulated in Recognised Jurisdictions. n

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Exceptional Growth for Malta’s Fund Industry

The number of collective investment schemes increased from 200 in 2006 to 525 in December 2011.

This success was made possible by Malta’s highly favourable business environment. This includes the role played by the island’s Single Regulator, renowned throughout the industry for its flexibility coupled with

meticulous attention to detail.

The island’s highly competitive, cost-effective business environment and the presence of all the Big Four accounting firms adds even further advantage.

An onshore EU jurisdiction allowing passporting and redomiciliation of funds, with an efficient fiscal regime,

a balmy Mediterranean climate and a multilingual, ethical and professional workforce, Malta offers a winning combination of advantages specifically designed to foster further growth and maximise success.

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Documents

Alternative Investment Funds - Hedgeweek · the formation of alternative investment funds, having approximately 2,525 funds registered or recognised under the Securities and Investment