Mauritius FSC Issues Practice Notes For MCSPs

by Lorys Charalambous, for LawAndTax-News.com, Cyprus

11 January 2005

In practice notes released last Thursday, the Mauritius Financial Services Commission sought to give guidance and put in place rules for Management Companies that are hoping to become Managed Corporate Service Providers (MCSPs).

Management Companies are licensed by the FSC under section 24 of the Financial Services Development Act 2001 to set up and manage Global Business Companies, to provide nominee and other services to the latter or to act as corporate trustee or qualified trustee under the Trust Act 2001.

The Commission explained that for the purposes of the Practice Notes, a Managed Corporate Service Provider (MCSP) refers to a licensed Management Company which operates under a Management Agreement with another Management Company having established premises and an office in Mauritius.

The Practice Notes issued by the Financial Services Commission last week stipulated that:

• In addition to the licensing requirements applicable to an MC, an MCSP must indicate in its Business Plan the duration of the MCSP’s contractual arrangement (i.e. the Management Agreement); the target date (not exceeding three years) by which the MCSP plans to convert into a fully-fledged stand alone operation; and the criteria it intends to adopt to decide on setting-up as a stand alone MC.
• The Managing MC and the MCSP shall enter into a Management Agreement which specifies the services to be provided by the Managing MC and allocates precise responsibilities between the Managing MC and the MCSP.
• The Managing MC shall demonstrate to the FSC that it has adequate resources to host a MCSP and shall designate a Principal Officer (and an alternate Principal Officer) who shall be responsible for the day to day affairs of the MCSP.
• The Managing MC shall be appointed to act as secretary to the MCSP’s Board for the duration of the Management Agreement.
• The Board of the Managing MC shall seek from the Principal Officer periodic reports on the operation of the business on behalf of the MCSP focusing on adherence to regulatory requirements and standards.
• The Managing MC and the MCSP are two distinct and separate legal persons. Accordingly, the business affairs of each must be kept totally segregated from the affairs of the other.
• The Board of the Managing MC must exercise due care and diligence in fulfilling its duties towards the clients of the MCSP and shall be accountable to the FSC for all regulatory omissions, defaults or failures committed in the provision of services to the clients of the MCSP to the same extent as the MCSP’s Board of Directors.

The FSC went on to announce that the Practice Notes are set to come into force on 02 February 2005, and warned that failure to comply with the guidelines will expose the Managing MC and the MCSP to regulatory sanctions.

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