This article covers the regulatory environment for managed futures funds in a selection of European offshore centers:

• Gibraltar;
• Isle of Man;
• Guernsey;
• Jersey.

GIBRALTAR

There are no specific regulations for futures funds in Gibraltar, but the Financial Services (Collective Investment Schemes) Regulations, 1991 apply to futures funds established in Gibraltar in addition to the Part III of the Financial Services Ordinance.

The regulator of the financial industry in Gibraltar is the Financial Services Commission (FSC) which may impose specific further requirements on particular funds under its discretionary powers.

Futures funds can be either open-ended or closed-ended, contractual or corporate. There are no specific investment restrictions, with the FSC deciding on each fund on a case by case basis. Depending on its decision, futures funds may invest in futures and options on or off exchange, and are not subject to any limit on the percentage of net assets which can be used for margin or option premiums and so on. General investment restrictions are set out in the regulations but the FSC prefers to take up a flexible approach with the emphasis on ‘best practice’.

Approval from the FSC comes through a licence under regulations 4 and sections 6 and 8 of the ordinance. In order to obtain a licence, the marketing documentation must be submitted to the FSC, the manager of the fund must be a company incorporated and licensed in Gibraltar, and the applicant must complete a questionnaire and other documents.

It is likely that only persons or companies with a suitable track record in the futures fund business will be granted licences to operate from the Rock.

ISLE OF MAN

There is no specific legislation for futures funds in the Isle of Man. The Isle of Man Financial Supervision Act 1988 applies to collective investment schemes of all types. It allows for the formation of four classes of schemes: authorised, recognised, restricted and exempt restricted.

Futures funds are not allowed to be authorised schemes at the moment, and so domestic futures funds which are structured as collective investment schemes are either restricted or exempt restricted schemes. Restricted schemes are regulated under the Financial Supervision Act, while exempt restricted schemes are regarded as private arrangements and are not subject to regulation.

Closed-ended funds are not collective investment schemes as defined by the Financial Supervision Act and so are not subject to approval by the Isle of Man Financial Supervision Commission (FSC).

There are no particular investment restrictions for futures funds, but the FSC has stated that it prefers schemes whose primary investments are assets which can be easily liquidated and accurately valued through a recognised investment exchange or market.

Restricted schemes must have a manager in the Isle of Man who is authorised under the Investment Business Act 1991 and a trustee who is either an authorised person or who is authorised to act as a trustee under the law of one of the prescribed countries or territories, currently the UK, Jersey and Guernsey. The manager’s licence must specifically apply to each restricted scheme it has to manage.

Exempt restricted schemes must have fewer than 50 investors and their constitutional documents must prohibit the making of an invitation in any part of the world to the public, or any section of it, to subscribe for or purchase shares in the scheme.

A closed-ended fund does not have to obtain any regulatory approval or licence from the FSC.

Any public offering by a futures fund in corporate form, including a closed- ended fund, must abide by the prospectus requirements of Isle of Man company law.

More about: Regulation of Managed Futures Funds in the Principal European Offshore Centers

• Regulation of Managed Futures Funds in the US and Japan
• Regulation of Managed Futures Funds in the US and Japan
• Regulation of Managed Futures Funds in Europe Part 5
• Regulation of Managed Futures Funds in Europe Part 13
• Regulation of Managed Futures Funds in Europe Part 4
• Regulation of Managed Futures Funds in the US and Japan
• Regulation of Managed Futures Funds in Europe Part 7
• Regulation of Managed Futures Funds in Europe Part 8
• Regulation of Managed Futures Funds in the Principal European Offshore Centers (continue...)
• Regulation of Managed Futures Funds in Europe Part 12

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