Guernsey Readies Fiduciaries Law

Jason Gorringe, Tax-news.com

16 August 2000

Guernsey's fiduciary sector (that's to say, the formation, management or administration of trusts and companies and the provision of directorship and executorship services) is to be regulated for the first time.

A draft law prepared by the States' Advisory and Finance Committee under the name of The Regulation of Fiduciaries and Administration Businesses (Bailiwick of Guernsey) Law 2000, is now being vetted by the States and is likely to become law later this year.

There are currently more than 200 fiduciary businesses in Guernsey, employing 1,300 staff, about 20% of those working in the finance industry. Although a formal regulatory structure has often been discussed, it has taken the Edwards Report and looming pressure from the OECD to get regulation onto the statute books.

The Guernsey Financial Services Commission undertook extensive consultation before drafting the regulations, which contain a four eyes rule, standards for capital adequacy and compulsory indemnity insurance. The offer or provision of fiduciary services without a licence will incur criminal sanctions.

A licence will be required by any company, wherever registered, providing fiduciary services in the Bailiwick and by Guernsey-registered companies providing fiduciary services anywhere in the world. Fiduciary businesses will require ‘full’ licences and individuals, acting as directors or trustees by way of business, will require a ‘personal’ licence.

The draft law provides extensive powers to the GFSC in the granting, refusal, revocation, and application of conditions to fiduciary licences. It will also have authority to control the names of, and advertising by, fiduciary businesses, and rights to obtain information and documents, right of entry to obtain information and documents, and powers to conduct investigations.

See Tax-news.com Resources for a draft of the new law and the codes of practice for fiduciary companies and individuals.

Below is a statement dated 23rd June 2000 by the Guernsey Financial Services Commission regarding the draft law.

Fiduciary business in the Bailiwick of Guernsey

Currently, fiduciaries (trustees and corporate service providers) are not subject to formal supervision by the Commission. However, since 1984 there has been an embargo on the formation of new fiduciary businesses with certain exemptions, namely where the application is from a local professional firm, a local bank or an institution found to be otherwise acceptable (for example, an overseas bank or a substantial professional firm).

There are approximately 200 businesses in the Bailiwick providing fiduciary services.
The question of whether and how fiduciaries in the Bailiwick should be supervised has been the subject of much deliberation. Guernsey is one of the first jurisdictions to take active action on the issue of fiduciary supervision. The objective of the Commission is to establish a specific régime of supervision for those engaged in fiduciary business.

The draft Regulation of Fiduciaries and Administration Businesses (Bailiwick of Guernsey) Law is available online at http://www.gfsc.guernseyci.com/fiduciary/Law.pdf as a ".pdf" document (Acrobat 4.0 - 735Kb). This document is a working draft and remains the subject of continuing work by the Law Officers and the Commission's Fiduciary Services Committee. Please note that it will be very slow to print as it runs to 127 pages and each page is watermarked as a draft to avoid any confusion over its status.

The draft law is intended to put into effect the recommendations of the policy letter, available here as a ".pdf" document (Acrobat 4.0). The draft law starts with the creation of a criminal offence of providing fiduciary services without a licence because that is the background to the licensing system. It contains the full range of investigation and enforcement powers which is necessary for an effective regulatory system, and at least as much of the draft law is taken up by provisions relating to those powers as by the licensing system itself. This does not mean that there has been any change in the Commission's intended method of regulation. As was explained in the policy letter, the powers are necessary for use as a last resort, and the Commission's intention remains to operate in an approachable and non-bureaucratic way.

The draft codes of practice are available by clicking below:

for corporate service providers, http://www.gfsc.guernseyci.com/fiduciary/practice-CSP.pdf

for trust service providers,
http://www.gfsc.guernseyci.com/fiduciary/practice-TSP.pdf

for professional directors
http://www.gfsc.guernseyci.com/fiduciary/practice-dir.pdf

Like the draft Law, these are working drafts and are likely to need refining.
The Commission would welcome comments on the draft law and codes of practice, either by letter or by email to strevor@gfsc.guernseyci.com. Please forward any comments by 25 August at the very latest.

The Law Officers and the Commission will shortly be preparing drafts of the regulations which the Advisory and Finance Committee and the Commission will need to make under the proposed law. Those will deal, for example, with annual returns, fees, accounts and advertising. The prohibition on advertising by holders of personal fiduciary licences (see paragraph 2.7 of the policy letter) will appear in those regulations and therefore does not appear in the draft law. The Commission's intention is that the regulations, together with licence application forms, should be available in draft form before they are finalised and details will be posted here as soon as possible.

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