Christopher Jehan of Midshore Consulting Limited has been working with the Guernsey Investment Funds Association on Global Funds Distribution and discovered that one of the less well-known facets of this is the possibility of private placement into the United States under Regulation D.
Regulation D is a Securities and Exchange Commission (SEC) regulation governing private placement exemptions. Regulation D allows usually smaller companies to raise capital through the sale of equity or debt securities without having to register their securities with the SEC
Regulation D private placement is already being used by Guernsey funds and other investment structures to great success and Guernsey fund service providers have the experience and expertise to be able to assist managers of Guernsey funds in filing the necessary returns.
To date over 144,000 Form D filings have been made with the SEC. Of these, the vast majority are structures (companies, funds, investment vehicles) from the United States and Canada. Stripping these away leaves a much smaller population to deal with and the top-10 non-North American jurisdictions for Regulation D issues are:
Source: Securities & Exchange Commission
Given the geographic location of the Cayman Islands, and their use by United States investment managers as a fund domicile, the dominance of Cayman is entirely understandable and to be expected.
Guernsey is the second highest offshore fund domicile utilising Regulation D private placement in the US and is well-placed ahead of other key domiciles such as Luxembourg, Ireland and Jersey.
Paul Smith, Chairman of GIFA, commented that,
This is a further demonstration of the reach and accessibility to markets of Guernsey funds and strengthens Guernsey’s status as a global fund centre. I would encourage our members to make current and prospective clients aware of this route to the US market and to highlight Guernsey’s leading position in this area.
The Gross Domestic Product of the United States is roughly comparable to the European Union (pre-Brexit) and the US Regulation D Private Placement route can be compared to the EU AIFMD National Private Placement Regime in the following table:
|USA Regulation D||AIFMD NPPR Article 42|
|Significant harmonisation at federal level||No harmonisation at Union level|
|Notification only||Some notification, mostly authorisation|
|States cannot “opt out”||Member States can “opt out”|
|Can access all 50 States, the District of Columbia, the US Virgin Islands and Puerto Rico||Can only access around two-thirds of EU/EEA Member States|
Whilst there are some differences between the filing requirements in the different US states, these are mostly minor (notification timescales, fees, submission methodologies and forms). The US Regulation D route provides: