Guidance Note on the Independence of Managers and Trustees of Class A Collective Investment Schemes

Summary

This is a Guernsey Financial Services Commission guidance note explaining how it interprets the independence requirements for managers and trustees of Class A collective investment schemes under Rule 7.17(1) of the Collective Investment Schemes (Class A) Rules 2002. It clarifies the factors the Commission considers when assessing whether a manager and trustee are sufficiently independent of each other, rather than creating new legal rules.

• Common directors/officers: Independence is compromised if either the manager or trustee can exercise de facto or de jure control over the other through shared directors or officers, including via associated companies or arrangements such as quorum provisions or reserved decision-making powers.
• Cross shareholdings: The Commission will normally treat a manager holding 15% or more of the trustee's voting share capital (or vice versa), including aggregated associate holdings, as failing the independence test, though it may consider exceptions case by case.
• Contractual arrangements: Arrangements such as the trustee receiving fund promotion fees, or the manager committing significant dealing through a broker-dealer associated with the trustee, may also compromise independence.
• Consultation requirement: The Commission must be consulted in advance on any commitment or arrangement that could affect the actual or perceived independence of the manager and trustee.

The guidance applies to funds authorised under the 2002 Rules and treats 'manager' as including both principal and designated managers, though it does not require independence between those two roles.

Key obligations

• The manager and trustee of an authorised Class A scheme must be different persons and act independently of each other.
• Each of the manager and trustee must be licensed under the Law and administered, with a place of business, in Guernsey.
• The trustee must not be a subsidiary of the manager (or vice versa), and they must not have directors or other officers in common.
• In the case of a company scheme, the trustee must not have directors or officers in common with the company.
• Cross-shareholdings between manager and trustee (including aggregated associate holdings) should not reach or exceed 15% of voting share capital without risking a finding of non-independence.
• Any arrangement or commitment that could affect the actual or perceived independence of the manager and trustee must be referred to the Commission for consultation in advance.

Applies to

managers of Class A collective investment schemes, trustees of Class A collective investment schemes, authorised collective investment schemes