Revising the Bailiwick’s financial regulatory laws

Closed 24 Apr 2015

Opened 11 Feb 2015

Overview

Purpose of the consultation paper

This consultation paper builds upon the Discussion Paper on the Revision of Laws Project: Revising the Bailiwicks’ financial and regulatory laws to maintain the Bailiwick’s reputation as an efficient and well-regulated international finance centre (the “discussion paper”) issued by the Guernsey Financial Services Commission (“the Commission”) on 10 November 2014.

In order to assist those who read the discussion paper, the text that also appeared in the discussion paper is in BLACK TYPE. Text that has been substantially amended or added since the discussion paper is in BLUE TYPE. Where a subject was included in the discussion paper a reference to where that topic appeared in that paper has also been included. For example, DP 3.2.2 – 3.2.3 means that the same subject was addressed at paragraphs 3.2.2 to 3.2.3 of the discussion paper.

This consultation paper seeks feedback from the financial services industry on a number of proposals to amend the Bailiwick’s supervisory and regulatory laws. It is intended to facilitate discussion between the Commission, government and industry. It is an invitation to industry to work with the Commission to endeavour to ensure that the Bailiwick’s regulatory regime is as user- friendly as possible, while still complying with the relevant international standards.

The paper outlines a number of changes that the Commission is currently considering as part of the Revision of Laws project. The Commission will work with the States to take forward these proposals once the consultation has closed and there has been an opportunity to digest the consultation responses.

There is an urgent need to update our regulatory laws (see section 1.3). Feedback is sought no later than 5pm on Friday, 24 April 2015. Detailed information about how to respond is set out in section 1.8.

 

Why We Are Consulting

Why do we want to make changes?

States of Guernsey policy makes clear the importance of appropriate financial services regulation to the Bailiwick’s economy. The States Strategic Plan contains the general objective of “maintenance of an internationally respected financial service regulatory regime: adopting and applying the international standards”. The Finance Sector Strategy published by the Commerce and Employment Department in 2014 advocates the retention of an internationally acceptable regulatory regime for the financial services industry that is capable of dealing with and facilitating innovation in the financial services industry and the development of a proportionate regulatory approach.

Since the assessment by the International Monetary Fund (the “IMF”) of the Bailiwick’s financial sector supervision and its legal framework in 2010, the international standards against which the Bailiwick was assessed have moved on. Many of these changes have been driven by the global financial crisis and an increased emphasis on consumer protection, and protecting the economy and taxpayers from the huge economic costs of reckless financial risk-taking. As a result, the Bailiwick needs to consider further changes to its supervisory laws before the next IMF assessment.

The Bailiwick’s financial services industry is governed by a range of supervisory and regulatory laws that were implemented as and when the need arose. Whilst each law has generally been effective in enabling supervision of the activities it covers, the differences within and between each of the laws in relation to supervisory practices and procedures have resulted in confusion and inconsistencies in approach between different types of activity. This is unhelpful to licensees and also makes the efficient discharge of the Commission’s functions more difficult. The Commission considers that clearer and more coherent legislation and regulatory requirements would be of benefit to industry.

The pace of change in the global finance industry is such that the Bailiwick needs to be able to respond quickly and appropriately to changes needed to ensure consumer protection and regulatory oversight. The ability to act responsively is also needed to support the Bailiwick’s financial services industry as it seeks to extend the range of services on offer and the markets in which it operates. Suggestions have been sought from industry as to what areas may require regulation in the future.

The timeframe for change

In order to meet the relevant international standards before the next review by the IMF, the Commission is seeking to have all necessary legislative changes in place by November 2016. The process for legislative change means that a States Report detailing any changes sought to primary legislation must be completed by July 2015.

Responses to this consultation paper are sought by Friday, 24 April 2015. These responses will then be reviewed by the Commission, members of industry and representatives of government.

The purpose of the Revision of Laws project

The key aims of the Revision of Laws project are to:

  • include measures to maximise the usability of our laws, including making sure that those outside the Bailiwick can see how our laws work and that we might therefore be a good domicile in which to transact business;
  • create efficiencies for both the Commission and industry by enhancing clarity and removing inconsistencies;
  • so far as is possible, “future-proof” the Bailiwick’s regulatory and supervisory regime by including enabling provisions that allow for the later development of new regimes and/or products;
  • ensure compliance with relevant international standards before the next visit of the IMF, thereby maintaining the Bailiwick’s international “licence to operate”; and
  • provide for the possible requirements of the European Markets in Financial Instruments Directive II (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR).  

The key driver behind the project timetable is the next IMF visit. There may also be potential changes required to ensure continued market access for investment firms to the EU under the new MiFID regime.

Audiences

  • Banking
  • Regulators
  • Policy Officers
  • General Public
  • Insurance
  • Fiduciaries
  • Investment
  • Professional advisers
  • Financial services businesses

Interests

  • Regulation
  • Accountability
  • Financial services
  • Governance
  • Legal
  • Policy
  • Consumer Protection