Another initiative identified by the Isle of Man Funds Review Group ("FRG") is to position the Island as a preferred location for the establishment of front and middle office operations for global fund managers.
As a result the Isle of Man Financial Supervision Commission (the "FSC") has recently announced proposed refinements to its licensing policy which is designed to attract hedge fund management and related operations to the Island.
In common with normal licensing requirements, all licence applications must be made by Isle of Man companies that are managed and controlled in the Isle of Man by individuals with appropriate experience and qualifications and who are otherwise fit and proper to be involved with a licensed entity. However, the FSC will consider favourably the following two categories of applicants for the granting of dispensations from certain of the supervisory requirements that would ordinarily apply to the holders of fund management licences:
- Associated Asset Managers— being applicants who only propose to provide services in relation to Isle of Man Specialist Funds and their equivalent in other jurisdictions and who are either members of a group of companies of which an associated member is regulated for activities of this nature in a jurisdiction that the FSC has approved for the purpose or is under common control with an entity which is regulated for equivalent activities in an acceptable jurisdiction; and
- Specialist Asset Managers—being applicants who are not associated asset managers but who only propose to provide services in relation to Isle of Man Specialist Funds and their equivalent in other jurisdictions.
It is proposed that such applicants will benefit from a streamlined process and applications will be processed within 2 months of receipt of all necessary documents. Examples of the types of dispensations which it is proposed will be allowed include annual statutory audit and reporting as opposed to quarterly financial reporting and applicants will not be subject to prescriptive requirements as to the number and seniority of staff located in the Island. In addition, it is proposed that associated asset managers will not be subject to prescriptive capital requirements (but will need to meet an ongoing solvency requirement) and may operate under the PII cover of a group or affiliated entity.
Any fund management or administration business based in the Isle of Man will benefit from the Island's zero rate of corporate income tax. In addition the fees levied by fund administrators and investment managers based in the Isle of Man are exempt from VAT in the Isle of Man.
It is believed that the Island's low tax status, political and economic stability, capacity and appetite for growth, proximity to London, competitive operating costs and high quality of life make it a compelling and cost effective environment for basing hedge fund operations.
Even before the new policy was in place, the Isle of Man was establishing its credentials for attracting hedge fund operations. Dickinson Cruickshank has assisted in relation to the establishment of two new operations, namely Bridge Asset Management (IOM) Limited and Pelham Capital Management (Isle of Man) Limited. Both these companies were issued with category 3(b) investment business licences within the last month.
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