A Time for (Regulatory) Change

Summer…. A time for holidays, beaches, ice cream and regulation!

It might be the time of year when many people think about slowing down, but those responsible for the regulatory programme in any Guernsey-based financial services business have much to keep them busy. Ignoring minor changes to the Prospectus Rules & Registered Funds Rules there are some major changes in the pipeline. In this article, we will examine five key changes and their implications before looking at what more is to come.

Pension Rules

What is it?
The Pension Licensees (Conduct of Business) & Domestic and International Pension Scheme and Gratuity Scheme Rules 2017
Stage:
The Rules are finalised
Implementation:
30th September 2018
Impact:
Licensees undertaking Pension Scheme & Gratuity Scheme formation, management and/or administration

The Rules cover the formation, management or administration of Pension Schemes or Gratuity Schemes under the Fiduciaries Law. The Rules bear some striking similarities to the Conduct of Business Rules for Investment Licensees, which makes sense given that many pension schemes operate in a manner analogous to collective investment schemes.

Key Deliverables:
By 30 September 2017 Licensees must have conducted an assessment of the internal controls in order to identify and plan for any amendments required to ensure compliance with the Rules by 30 September 2018.

MiFID II & MiFIR

What is it?
The Markets in Financial Instruments Directive II
The Markets in Financial Instruments Regulation
Stage:
The Directive & Regulation are finalised
Implementation:
3rd January 2018
Impact:
Licensees providing a range of activities* on various instruments to clients in the European Union (including the UK)

* Reception/transmission of orders; execution of client orders; dealing on own account; portfolio management; investment advice; underwriting of financial instruments; placing of financial instruments; operation of a MTF or OTF.

The Directive and Regulation cover the provision of various investment services to people and institutions in the European Union. Both the Directive and the Regulation include requirements for the provision of services from third countries (non-EU). At this point the Guernsey Financial Services Commission is not considering wholescale adoption of MiFID II & MiFIR.

Key Deliverables:
Consider what activities are provided to EU-based clients, including potential marketing to attract new clients. Please be aware that not only Investment Licensees will be captured as the Directive and Regulation work on the basis of the activities and instruments rather than a category of licensee.

GDPR & New Guernsey Data Protection Law

What is it?
General Data Protection Regulation
Guernsey Data Protection Law (new version to achieve equivalence)
Stage:
The EU Regulation is finalised; The Guernsey Law is in draft
Implementation:
25th May 2018
Impact:
All businesses holding personal data

The Regulation gives increased rights to data subjects, increased requirements for data controllers and data processors, increased fines and penalties to regulators, and increased responsibilities for data protection officers.

Key Deliverable:
Consider what data is being held, why it is held, whether it is held securely and how is it accessed/maintained. Review internal documentation as well as client consent collection. Ensure all stages of your project are documented as your “road to compliance”.

New Guernsey AML/CFT Framework

What is it?
The Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) (Amendment) Ordinance, 2017
Handbook on Countering Financial Crime and Terrorist Financing
Stage:
Consultation (until 31 July 2017)
Implementation:
TBC
Impact:
All regulated financial services businesses, registered financial services business & prescribed businesses

The updated Ordinance and Handbook seek to deal with “deficiencies” identified in the Moneyval review of the Guernsey AML/CFT framework. The changes will place additional requirements on impacted businesses and require new business risk assessments, policies, procedures & controls. There is also a requirement to review existing business relationships to ensure information held complies with the new standards.

Consider the resources that will be needed to complete the following:

  • 4 months after implementation – revised business risk assessment
  • 6 months after implementation – revised policies, procedures & controls
  • 1 year after implementation – review existing high-risk business relationships
  • 2 years after implementation – review all other existing business relationships

Lending, Credit & Finance Framework

What is it?
Lending, Credit & Finance Consultation Paper
Stage:
Consultation (until 15 September 2017)
Implementation:
TBC
Impact:
Registered financial services business, regulated financial services businesses & other affected businesses

The consultation proposes replacing the existing Non-Registered Financial Services Business (NRFSB) framework with a new Lending Credit & Finance Framework, splitting business into three supervision categories:

  1. Alternative Financial Products & Services
  2. AML/CFT only
  3. Consumer Lending & Credit

Existing regulated financial services businesses (such as banks) may also need to register under the new framework (for example under category 3 if the bank providers consumer lending services). Other businesses, which are currently not regulated, may require licensing under the proposals (e.g. an AML/CFT platform).

Consider the resources that will be needed to complete the following:

  • 30 business days before implementation – submit Notice of Intent
  • 3 months after implementation – deadline for applying for a Class 3 Licence
  • 6 months after implementation – deadline for applying for a Class 1 Licence
  • General – ensuring new policies, procedures and processes are in place, particularly those required for applications to the Commission

More to come…

Don’t forget that other changes are still expected over the coming year (or more), including:

  • New/Revised Financial Services legislation – beginning with the Enforcement Law
  • Investment & Fiduciary Division review of the Client Money & Client Asset rules
  • Clarification of the landscape post-Brexit
  • Expansion to countries reported under CRS
  • Measures introduced to ensure BEPS-compliance

What next?

For help with any new, existing or updated regulation impacting on your business please contact Midshore Consulting. We are here to help, and the first consultation is free.

Please contact us here.

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