Regulating Fiduciaries (Corporate and Trust Service Providers)
The Financial Services Act 2008 is the primary legislation and sets out the requirements for licensing Corporate Service Providers and Trust Service Providers. Previously, the Fiduciary Services Acts 2000 and 2005 were the statutory basis for regulating fiduciaries. They were repealed by the FSA 2008. A licence to Carry on the Class 4 regulated activity of Corporate Services permits a business operating in or from the Isle of Man (within certain criteria and with specified exclusions) to:
a) provide services with respect to the formation, sale, transfer or disposal of companies
b) provide registered office or accommodation address facilities for a company
c) act as a ‘registered’ agent
d) act as an officer of a company
e) act as a nominee shareholder/member of a company
f) provide administration services to a company, or
g) provide similar services to the above in respect of a partnership.
A licence to carry on the Class 5 regulated activity of Trust Services permits a business operating in or from the Isle of Man (within certain criteria and with specified exclusions) to:
a) act as trustee in relation to an express trust
b) provide trust administration services in relation to an express trust
c) act as a trust corporation
d) act as a protector in relation to an express trust, or
e) act as an enforcer in relation to a purpose trust.
Exemptions from the requirement to hold a licence
Certain professional services provided by an accountant, an advocate or a registered legal practitioner - eg. giving accountancy or legal advice - do not require a licence where the activity is in a professional capacity.
Private Trust companies do not require a licence and the exemption applies to companies whose sole purpose is to provide services to a specific trust (s) and which do not hold themselves out to the public as undertaking Trust Service provider activities. Full details of exemptions can be obtained from Regulated Activities Order 2008.
The Commission’s Licensing Policy
Licenceholders and key staff are required to be ‘fit and proper persons’. The Licensing Policy determines the fitness and propriety of licence applicants as well as assessing ongoing fitness and propriety.
The Financial Services Rule Book 2008 contains the general requirements for the conduct of business in areas such as:
Due diligence; client Agreements/terms of business; dual control; compliance systems, procedures and returns; complaints; avoidance of conflicts of interest; and adequate professional indemnity cover.
The Rule Book sets out the requirements for the handling of client’s money and trust assets and segregation thereof from the provider’s own monies, together with the requirement for the payment of interest on clients` and trust money.
One significant change brought in under the new legislation is in respect of financial resources of a provider, that is the requirements relating to financial viability. Taking account of contingent and prospective liabilities, a licenceholder must be - and be likely to remain - a going concern. A licenceholder must maintain adequate financial resources to survive periods of market weakness.