Licensing
Regulation
The Turks & Caicos Islands (TCI) recently introduced a law regulating investment dealers, the Investment Dealers Ordinance 2001. The ordinance came into effect on May 22 2001.
An 'investment dealer' offers the following services:
- trades on behalf of customers;
- acts as a fund manager;
- solicits subscriptions for new issues of investments; and
- offers advice about investments.
Such investments include the following:
- commodities trading;
- corporate bonds;
- equities;
- government and local authority bonds;
- units in collective investment schemes;
- warrants;
- options;
- futures;
- forward contracts;
- swaps; and
- synthetic products that replicate all these items (Section 2).
Only a company or partnership that is licensed or is otherwise exempt can do business as an investment dealer (Section 3). Applications for licences are made to the licensing committee of the Financial Services Commission (FSC). The governor may prescribe conditions, including the size and risk of an investment dealer's business, and the formula on which the investment dealer's capital is calculated. No such regulations have yet been introduced.
Each applicant (if a company) must have a manager who is ordinarily resident in the TCI and at least two directors who are natural persons, and must be precluded by its articles of association from issuing bearer shares. An applicant that is a partnership must have at least one partner who is ordinarily resident in the TCI and suitably qualified (Section 7).
There are four types of licence:
- a full licence;
- an execution-only licence;
- a fund manager's licence; and
- an adviser's licence.
Licensees must meet a variety of insurance, capitalization, reporting, accounting, audit, client account management and corporate governance requirements, and are answerable to the FSC, which is the principal regulatory authority (Section 15).
The governor may pass regulations that require clients' money and investments to be held in trust in accordance with those regulations (Section 13). Audited accounts must be submitted to the FSC within six months of the end of the licensee's financial year (Section 14).
The FSC licensing committee has powers of inspection and investigation (Section 17), and may appoint a third party to investigate the affairs or business of a person specified in the authorization, or a subject matter specified in the authorization (Section 18). That investigator can request documents or information with respect to an investigation (Section 19), and the Supreme Court may issue a warrant allowing the police powers of entry and search in certain circumstances in relation to the investigation (Section 20). Documents removed in the course of a search may be retained for three months or until the conclusion of criminal proceedings if those proceedings are commenced within that three-month period.
The FSC can revoke a licence in certain circumstances (Section 10). Before exercising that power it must comply with a notice procedure under which the licence holder has the right to make representations. The licence holder may appeal to the Supreme Court (Section 11). As an alternative to (or a precursor of) revocation, Section 23 grants the FSC licensing committee powers of intervention under which it can order a licensee not to take on any new business or order the appointment of a suitably qualified interim manager.
If a licensee becomes insolvent or is wound up, the money and investments of its clients shall be used to execute the clients' outstanding and unsettled transactions and will then be returned to the clients less the sums owed to the licensee for professional services rendered (Section 24).
Subsidiary regulations under the ordinance have not yet been introduced.
For further information on this topic please contact Owen Foley at Misick & Stanbrook by telephone (+1 649 946 4732) or by fax (+1 649 946 4734) or by email ([email protected]).