Consultation Paper on Proposals to Create a Single Fiduciary Handbook

Closed 7 Nov 2019

Opened 12 Sep 2019

Results Updated 18 Feb 2020

Feedback statement on Fiduciary Rules and Guidance

 

We asked

We asked for feedback on proposals to consolidate and modernise rules and guidance applying to licensees under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000 (the “Fiduciaries Law”).

24 responses were received from a cross section of industry, trade associations and other industry participants. 

Further feedback was also obtained from one to one meetings with various stakeholders conducted on the content and subject matter of the Consultation Paper.

Overall the consultation has highlighted evidence of industry’s strong support of, and engagement with, the regulatory policy development process and it is hoped that this will lead to positive outcomes for both customers and providers of fiduciary services. 

 

You said

The majority of the feedback was supportive of the overall aims of the proposed revision to the framework set out in the Consultation Paper. 

The majority of feedback received addressed matters of interpretation, scope of application, challenges with practical application of the proposed rules or matters of drafting detail.

 

We did

We are pleased to say that we have been able to address the majority of feedback received in drafting the final version of the Rules.

The following is a summary of certain key points extracted from the consultation responses including instances where as a result of respondent recommendations material modifications have been made to the original proposal:

  • The title of the consolidated document has been changed from “Handbook” to “Rules and Guidance” to avoid the possibility of confusion with the Handbook on Countering Financial Crime and Terrorist Financing;
  • The rules around client money have been revised to more clearly distinguish the treatment of money held by the licensee and client money under the control of the licensee, the treatment of pooled accounts has been clarified, a more risk-based approach to reconciliation has been introduced and further guidance around the rule prohibiting directly profiting from holding client money has been added;
  • The record retention requirements have been amended to introduce a minimum retention period of six years or a higher period in line with applicable law;
  • The scope of Financial Resource Requirement Rules has been changed to reflect that these remain applicable only to lead licensees;
  • A definition of “outsourcing” has been provided and additional guidance added explaining that contingency planning does not require maintenance of additional redundant resource capacity;
  • The trigger level for certain data-related notifications to the Guernsey Financial Services Commission(“GFSC”) has been adjusted to ensure the appropriate level of communication with the GFSC while avoiding over-burdensome reporting;
  • Rules relating to appropriate complaints handling have been amended to make these easier to understand; and
  • It remains a requirement that licensees must ensure that clients are informed of terms of business but the previous drafting suggesting that this must include a personal discussion has now been removed.

A number of further, less material amendments have been made to the draft in response to consultation responses received.

Other comments were received and carefully considered where the decision was taken to retain the drafting consulted upon, for example:

  • One respondent expressed the view that the Rules may conflict with the provisions of the Trusts (Guernsey) Law 2007 (the “Trusts Law”). We note that the rules relating to licensee’s consideration of clients’ best interests are materially unchanged on the provisions in the current Codes of Practice. We remain respectful of the jurisdiction of the Court with regard to the Trusts Law.
  • Some respondents sought further amendment to the Financial Resources Rules. These specific rules were included within the new document as part of the consolidation process, largely unchanged on the current version of the rules in force, the rules having been amended as recently as 2018. There is no plan to revise these rules at this time. It should be noted that in limited, specific circumstances the Commission may use its discretion to make derogations where it is satisfied that there is no increase in prudential risk.

We would like to thank everyone who responded to the Consultation Paper. The feedback received has played a helpful role in the development of a framework that seeks to be practical and proportionate while supporting the integrity of the sector.

Next Steps

The GFSC considers that that the provisions of the new Rules broadly reflect the current practices of the licensed sector but nevertheless, in line with the requests of respondents to the consultation, a reasonable period of time will be allowed for licensees to take any necessary steps to ensure compliance with the Rules. Licensees will therefore be required to comply with the provisions of the Rules from 1 January 2021. In due course the GFSC will host stakeholder feedback sessions on the new Rules highlighting significant changes and providing an opportunity to address further specific queries.

 

Links:

Overview

Introduction

Purpose of the Consultation Paper

The Commission seeks to regulate and supervise financial services in the Bailiwick of Guernsey, with integrity, proportionality and professional excellence, and in so doing help to uphold the international reputation of the Bailiwick of Guernsey as a finance centre.

Consistent with the Commission’s objectives, the proposals in this Consultation Paper are designed to enhance the levels of confidence and security in the Bailiwick’s regulatory and supervisory framework for fiduciary services.

The purpose of this Consultation Paper is to seek feedback from all interested parties on detailed proposals for potential modernising of the regulatory framework under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000 (the “Fiduciaries Law”) with the objective of ensuring that the regime continues to be both compliant with international standards and appropriate for the Guernsey market.

The publication of this Consultation Paper follows the Commission’s review and consideration of feedback received on the Discussion Paper issued in March 2019. A high level summary of this feedback is provided in Part 1 of this paper and additional discussion on specific elements is provided in Part 2.

The detailed proposals are set out in a draft Fiduciary Handbook comprising both Rules and Guidance. The draft Fiduciary Handbook is provided in the Appendix to this paper.

This Consultation Paper is a working document and does not prejudge any final decision to be made by the Commission.


 

Why We Are Consulting

Background to the proposals

Fiduciaries

In its March Discussion Paper the Commission proposed a refresh of the policy framework underlying the Fiduciaries Law, primarily in the area of business conduct to ensure compliance with international standards and introduce simplification and consolidation with the creation of a single Fiduciary Handbook (the “Fiduciary Handbook”). The Discussion Paper also highlighted proposals for further enhancements to the underlying policy framework including new provisions for client money, outsourcing, communication to clients (including advertisement) and terms of business.

At present licensed fiduciaries are subject to relevant Codes of Practice (Codes of Practice for Corporate Service Providers (CSP), Trust Service Providers (TSP), Foundation Service Providers (FSP) and Company Directors together, “the Codes”), the Regulation of Fiduciaries (Accounts) Rules, 2001 (“the Account Rules”), and, for full fiduciary licensees only, the Financial Resources Requirements Rules, 2018 (“the FRR Rules”). It is proposed that these rules and Codes will be repealed and the current provisions reframed and strengthened under a single Fiduciary Handbook. New provisions relating to international standards will also form part of this new Handbook. This approach provides for consolidation of 6 pieces of legislation into one. 

It should be noted that the introduction of the Fiduciary Handbook, which applies only to fiduciary licensees, will not vary the requirement for all licensees to comply with the Handbook on Countering Financial Crime and Terrorist Financing.

Review of Pension Licensees (Conduct of Business) & Domestic and International Pension Scheme and Gratuity Scheme Rules (No.2) 2017 (the "Pension Rules")

The March Discussion Paper provided feedback on industry comments on the Pension Rules and proposed the consolidation of the conduct of business-related elements of the current Pension Rules into the new single Fiduciary Handbook with the publication of separate, revised Pension Rules covering pension specific requirements. This Consultation Paper is therefore relevant to all licensed Fiduciaries, including pension providers. It should be noted that a separate consultation on proposals in respect of revised Pension Rules is taking place concurrently with this consultation and licensed pension providers and other interested parties should consider these separate proposals in addition to the proposals in this Consultation Paper.


 

What Happens Next

The closing date for the Consultation Paper is 7 November 2019. Responses to this Consultation Paper will be considered by the Commission with a view to issuing the Fiduciary Handbook in final form.

 

Audiences

  • Financial Services Business