Overview of the Proposed Ancillary Vehicle Notification Regime

One of the most significant changes on the regulatory horizon is the proposed introduction by the GFSC of the ancillary vehicle notification regime. For many licensees involved in the administration of fund structures this will be a very welcome development which will address an unfortunate overlap between the fiduciary and investment regulatory regimes. The proposed new regime will give clarity on the treatment of certain vehicles closely connected to a fund structure and will reduce the burden on administrators and those wishing to set-up new structures.

To address the issue, the new Fiduciaries Law 2020 will include a new automatic statutory licensing exemption to apply to certain vehicles within the structure of a fund that is authorised or registered under the POI Law, thereby alleviating the need to apply for a fiduciary discretionary exemption. Instead, such vehicles will be required to notify the Commission under the proposed Ancillary Vehicle Rules to gain advantage of the fiduciary licensing exemption.

The last remaining hurdle is determining what types of vehicles and activities should fall within the scope of the statutory licensing exemption. A Discussion Paper in August 2020 proposed the following activities:

• Acting as General Partner of a carried interest L.P.
• Acting as General Partner of a co-investment L.P.

In its April 2021 Consultation Paper[1], the GFSC sought feedback on other types of auxiliary vehicles and/or activities to include within the scope of the exemption and outlines the following in addition to those above:

• Acting as a director of a General Partner of a carried interest L.P.
• Acting as a director of a General Partner of a co-investment L.P.
• Acting as a director of a carried interest company
• Acting as a director of a co-investment company
• Acting as General Partner of a Single Investor Vehicle

Notifications under the proposed new regime are expected to be made by a licensed fiduciary and the exemption would become valid upon submission of the notification.

The GFSC plans to assess the functioning of the new regime by carrying out post-facto reviews of notifications, in a similar way to fast-track fund registrations, and will consider banning firms from the regime if found to be misusing the exemption.

Next Steps

Administrators need to consider whether based on their activities it will be necessary to:

• Update relevant policies and procedures;
• Update compliance monitoring programmes to test if notifications are being made to the GFSC when required;
• Train relevant staff on the upcoming changes; and
• Implement a method for keeping an accurate and up-to-date record of ancillary vehicle exemptions to enable the timely completion of the Fiduciary Annual Return, as well as making timely notifications under the new rules.

If you would like our help to understand how the proposed new regime may impact your business, as well as ways to implement changes to your existing policies and procedures then please give us a call to discuss further.