Regulation of Fiduciaries - Draft Legislation Published

Introduction

In June 1999 the Guernsey Financial Services Commission (GFSC) issued a consultation paper on the regulation of fiduciary business. A draft of the proposed legislation, entitled The Regulation of Fiduciaries and Administration Businesses (Bailiwick of Guernsey) Law, 2000 (the Fiduciary Law), has been produced for further consultation.

The General Prohibition

A Bailiwick company (ie, a Guernsey company or an Alderney company) is not permitted to carry on by way of business in or from within any place whatsoever any regulated activities, except under the authority of and in accordance with the conditions of a licence granted by the GFSC.

No other person is permitted to carry out by way of business in or from within the Bailiwick any regulated activities, except under the authority of and in accordance with the conditions of a licence granted by the GFSC.

Regulated Activities

Subject to certain exempted activities, the regulated activities are as follows.

Provision of trust services
This means the formation, management or administration of trusts, regardless of whether such trusts or structures are established under the laws of the Bailiwick or elsewhere. It includes:

• the formation, management or administration of structures similar to trusts, including foundations;
  
  
• acting as a corporate or individual trustee, enforcer or protector for trusts or structures similar to trusts, including foundations; and
  
  
• the provision to trusts or structures similar to trusts, including foundations, of corporate or individual trustees, enforcers or protectors.

Provision of company or corporate administration services
These activities include:

• the formation, management or administration of companies, partnerships or other entities incorporated or established under the laws of the Bailiwick or elsewhere;
  
  
• the provision to such entities of corporate or individual directors, individuals or companies to act as company or corporate secretaries, or any other officer, nominee services (eg, shareholders), registered offices or accommodation addresses; and
  
  
• acting as director of any company or other entity, or as a partner of any partnership, whether incorporated, registered or established in or under the laws of the Bailiwick or elsewhere.

Provision of executorship services
This includes acting or accepting appointment as an executor of wills or administrator of estates.

Power to add
The Advisory and Finance Committee of the States of Guernsey has the power by regulation to add or remove any activity as or from a regulated activity.

Exempted Activities

The draft legislation includes a number of activities which are expressly exempted from the Fiduciary Law. These include:

• acting as trustee or custodian of a collective investment scheme authorized by the GFSC under The Protection of Investors (Bailiwick of Guernsey) Law, 1987;
  
  
• acting as a director of a company which has an established place of business within the Bailiwick, provided that no services consisting of or comprising a regulated activity are supplied to the company other than acting as director;
  
  
• acting as a director of a company which is quoted on a stock exchange recognized by the GFSC;
  
  
• acting as a director of a company where more than half of the nominal value of its equity share capital is held by the director, any close relative of the director, or in trust of which the director or the close relative of the director is a beneficiary;
  
  
• acting as a director of a supervised company. A supervised company is a company which (i) is licensed or authorized under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, (ii) is registered as a insurer under the Insurance Business (Guernsey) Law, 1986 or is exempt from such registration, or (iii) is licensed under the Banking Supervision (Bailiwick of Guernsey) Law, 1994;
  
  
• acting as the holder of advance payments in connection with the supply of goods or services;
  
  
• acting as executor of the will or administrator of the estate of a person who is resident or domiciled in the Bailiwick at the time of death;
  
  
• in the case of lawyers and accountants, giving advice or drafting documents in the ordinary course of carrying out their professions;
  
  
• preparing and auditing company accounts;
  
  
• activities which are merely incidental to other regulated activities, provided that these are undertaken without separate remuneration; and
  
  
• any particular activity specifically exempted in writing by the GFSC. This exemption can be revoked or varied at any time by written notice.

The Advisory and Finance Committee has the power by regulation to add to or remove any activity as or from the list of exempt activities.

Categories of Licence

There are two categories of fiduciary licences: a full fiduciary licence for companies and partnerships, and a personal fiduciary licence for individuals.

Licensees will need to demonstrate that they are fit and proper by reference to detailed criterion.

Codes of Practice

The GFSC has published draft codes of good practice for company directors, corporate service providers and trust service providers.

Introduction of the Law

Comments could be submitted to the GFSC until August 26. The draft legislation is expected to be placed before the States of Guernsey (the island's Parliament) in September. Thereafter, if passed, it will require royal assent. A commencement ordinance will then set out the date upon which the law will have effect.

For further information on this topic please contact Ian Kirk at Collas Day by telephone (+44 1481 723 191) or by fax (+44 1481 711 880) or by e-mail ([email protected]).