A view from the Isle of Man
16 July 2001
However, unlike Jersey and Guernsey, which have progressed legislation in relation to "fiduciary business" (corporate and trust service providers) as a single package, the Isle of Man has chosen to concentrate its initial efforts on the corporate sector for two main reasons.
First, the corporate sector in the Isle of Man is very much larger than its own trust sector, and with some 40,000 companies registered locally, it is the largest corporate sector in the three islands. Accordingly, issues of corporate governance are of major concern. Second, the issues relating to the regulation of trust service providers (TSPs) are legally and practically complex, and it was considered that the experience gleaned from the regulation of corporate service providers (CSPs) would facilitate the development of a more effective and acceptable TSP regime at a later date. This has proved to be the case.
The Isle of Man Financial Supervision Commission is charged with the task of licensing and supervising CSPs and TSPs. The Corporate Service Providers Act 2000 came into force on 1 November 2000 (with the exception of Section 2, which makes it an offence to carry on business as a CSP without a licence). The commission is currently processing more than 130 CSP licence applications. With more applications known to be pending, it is likely that the total number of CSP licence holders will be in excess of 150. Most of these businesses will also be TSPs.
The act sets out the commission's powers in relation to the licensing and ongoing supervision of CSPs. In order to be granted a licence, applicants and their directors, controllers, managers and key staff must meet the commission's 'fit and proper' test. Fitness and propriety are adjudged according to three criteria: integrity, competence and solvency.
Although the initial vetting process for applications is a lengthy one, the commission has completed the process and made its decision in respect of a substantial number of applications. It would be in a position to announce the granting of the first licences were it not for an undertaking given to the industry during the consultation on the introduction of the legislation, to the effect that as many licences as possible would be issued on the same day in order to avoid any disadvantage arising from licences being granted over what might be a lengthy period. As a result, it is likely that the first batch of licences, estimated to be in excess of 100, will be awarded by this autumn. After the award of these licences, Section 2 of the act will be brought into force, subject to transitional arrangements for those who have applied for a licence but whose application has not been finalised on the appointed day.
The detailed requirements to be met after licensing are contained in a series of codes. At present, these codes cover general requirements and clients' money. The General Requirements Code covers matters such as "know your customer" (anti-money laundering compliance); financial resources; internal systems; the dual control, or 'four-eyes', requirement; staff training and competence; the provision of directors; the contents of client agreements; complaints procedures; professional indemnity insurance; disaster recovery; and advertising.
Consultation is now taking place with the Isle of Man's industry sector to apply the structure developed for CSPs to TSPs. It is proposed that the act will be extended to TSPs and that new TSP-specific codes will be developed and consulted prior to enactment. Subject to a general election in the Isle of Man in November, it is expected that the TSP legislation will be enacted in mid-2002.
Jane Bates is head of companies supervision at the Financial Supervision Commission for the Isle of Man