Jersey is about to become the first international jurisdiction to implement comprehensive new legislation to regulate trust companies and company service providers.
The Financial Services Extension Jersey Law has been approved by Jersey’s government (the States) and will become law before the end of the year.
Businesses have until 2 February 2001 to complete new registration forms and submit their application to conduct business to the Jersey Financial Services Commission, the island’s regulator.
A spokesperson for the States has described the legislation as “an important law which fulfils a promise we made following the Edwards Report on Jersey’s finance industry, and to other evaluators of Jersey’s regulations, and it will undoubtedly enhance our reputation still further”.
There has been extensive consultation with the industry on the contents of the legislation and the codes of practice that accompany it. Jersey’s senior industry body, the Jersey Finance Industry Association, and a steering group comprising trust professionals and others affected by the law, have convened regularly to discuss and, where necessary, recommend changes to the legislation and the codes, to help ensure that the law will be both effective and practical.
The legislation does not propose to interfere in the individual decisions made by a trustee or director. Instead, regulation will focus on the general qualities of the registered person who acts as trustee or director and the office procedures that they have in place.
The Jersey Financial Services Commission will have the power to check that the registered person and their procedures comply with the new legislation, and it may have access to specific trust or company records for this purpose. But this should not be done for the purpose of assessing whether or not the registered person’s decisions in relation to a particular trust or company were properly made or not.
The codes cover matters such as the company’s financial resources, the competency and integrity of the registered person and the company’s personnel. They require that its business be conducted in accordance with certain standards and in a manner which is transparent as regards costs and procedures.
The extent to which money and assets held for a customer (which includes beneficiaries under a trust) should be controlled required careful consideration due to the almost infinite range of circumstances in which a trustee or a director might carry on their activities.
However, the following conclusions were drawn:
1. A registered person must arrange proper protection by segregating and identifying assets under their control or for which they are responsible and required to safeguard.
2. A registered person must comply with specific provisions in relation to customer money.
3. A registered person should have robust arrangements in place to deal with authorisations to handle customer assets.
It is consequently intended that the proposals take account of the distinct characteristics of trust company business and will create a regime that ensures trustees will meet required professional standards while also retaining their ability to exercise independent judgement.
Work continues within the commission and the steering group on some of the finer details, but this will not delay the introduction of the legislation.
It has been a fine example of how regulators and an industry body can work together to a common goal, which in this case is to establish the regulation of high quality which, while necessarily creating extra responsibilities for the trust professionals and company providers, will be well received in the international marketplace among the quality institutions and corporate clients from whom Jersey wishes to attract business.
Simon Gould is a partner at Mourant du Feu & Jeune in Jersey.