Collective Investment Schemes (Compensation of Investors) Rules 1988 (as amended)

Summary

These 1988 rules (as amended) establish the Guernsey Financial Services Commission's investor compensation scheme for Class A authorised collective investment schemes. They set out how compensation funds are built and administered, who must contribute to them, how compensation claims from investors are assessed and paid, and the Commission's right to recover sums it pays out.

• Who is a participant: Every licensee acting as the designated manager, designated trustee or custodian, or principal manager of a Class A authorised collective investment scheme is a participant and falls within the scheme.
• Compensation funds: The Commission must establish, maintain and administer a separate compensation fund whenever a compensation event occurs, funded by participant contributions, interest, recoveries and investment income.
• Claims process: Investors may claim compensation when a participant is in default (e.g. winding up, insolvency, struck off, cannot be traced) and has an eligible liability it cannot meet; compensation is generally capped at 90% of the liability.
• Compensation limits: Maximum payable is 90% of liabilities up to £50,000; £45,000 plus 30% of the excess up to £100,000; and £60,000 maximum where total liabilities exceed £100,000. Aggregate compensation costs are capped at £5,000,000 per compensation year (15 November to the following 15 November), with rateable abatement if this would be exceeded.
• Exceptions: Claims are excluded for professional, business or experienced investors in certain circumstances, and where the applicant bears responsibility for or profited from the participant's difficulties.
• Levies on participants: The Commission levies equal contributions on all participants to cover estimated net compensation costs following a default, with written notice of the amount, calculation method and payment date; late payment attracts interest at 2% above LIBOR.
• Cooperation and subrogation: Participants (and any liquidator, administrator or supervisor standing in their place) must cooperate fully with the Commission, and investors receiving compensation must assign their rights to the Commission, which may then pursue recovery from the defaulting participant.

The rules came into operation on 15 November 1988 and remain in force as amended; the document itself does not indicate any repeal or sunset.

Key obligations

• Investors must submit a compensation application within 6 months of becoming aware, or reasonably ought to have become aware, of the participant's default, unless the Commission allows a late claim due to exceptional circumstances
• Participants must pay contributions levied under rule 4.02 by the date specified in the Commission's written notice, or become liable for interest at 2% above LIBOR on the unpaid amount
• Every participant (and, where relevant, its liquidator, administrator or supervisor of voluntary arrangements) must cooperate with the Commission by providing information, books, documents and other assistance needed for the Commission to perform its functions under these rules
• An investor who receives compensation must agree to assign their existing rights against the defaulting participant to the Commission, execute any necessary documents, and pay over to the Commission any amounts subsequently recovered in respect of those rights (net of amounts due to the investor)

Applies to

designated managers of Class A authorised collective investment schemes, designated trustees or custodians of Class A authorised collective investment schemes, principal managers of Class A authorised collective investment schemes, investors in Class A authorised collective investment schemes

Deadlines

• 6 months after the investor became aware, or ought reasonably to have become aware, of the default: Time limit for an investor to submit an application for compensation, absent exceptional circumstances allowed by the Commission
• 15th November, 1988: Commencement date of these rules
• the date stated in the Commission's written levy notice: Deadline by which a participant must pay a contribution levied under rule 4.02, after which interest at 2% above LIBOR accrues