Introduction to the TSP Licensing Regime

Financial Supervision Commission24 May 2005

Welcome

Jane D N BatesHead of Authorisations and

Companies

Preliminaries

Housekeeping

The Authorisations Team

Timescales

Today’s agenda

HousekeepingFire exits

Mobile phones

Handouts

Slides on website

Who are the Authorisations Team?

John Aspden – Chief Executive

Jane Bates – Head of Division

Liz Berry – Senior Policy Advisor Paul de Weerd – Senior Manager

Who are the Authorisations Team?

Justine Bowen – ManagerHelen Cullen – ManagerKerry Thomson - ManagerMarie Ball – Supervision OfficerScott Dixon - Administrator

What do we do?

ALL current licensing and vettingBanksBuilding societiesInvestment businessSchemesCSPs

NOT ongoing supervisionTSP licensing and vetting

The TSP Regime - Where we are now?

Fiduciary Services Bill passed by TynwaldAwaiting Royal AssentAppointed DayEnactment of the Codes“Open for business”

Today’s Agenda

Legislation update

How the Commission will process applications

Coffee (and chance to put in written questions)

Today’s Agenda (cont’d)

Preparing an application

Supervisory Regime

Panel session

TSP Legislative Framework

Liz BerrySenior Policy Adviser – Companies

TSP Legislative Framework

Legislation & guidanceTSP Regulated Activities“New” TSP Licence ExemptionsTSP Licence CategoriesTSP Financial ResourcesLegislative Timetable

TSP Legislative Framework

Corporate Service Providers Act 2000 updated

By Fiduciary Services Act [2005]

Collectively = Fiduciary Services Acts 2000 and 2005

TSP Legislative Framework

Fiduciary Services (General Requirements) Regulatory Code [2005]

Fiduciary Services (Clients’ Money and Trust Money) Regulatory Code [2005]

TSP Legislative Framework

Licensing Policy

Training & Competence Framework consultation

Who needs a TSP licence?

TSP Regulated Activities –

By way of business

In or from Isle of Man

Who needs a TSP licence?

“express trust”

Foundations

Annual licence fee banded by number of companies, partnerships and trusts

TSP Regulated Activities

Acting as trustee, protector or enforcer

Trust administration

Trust Corporation (Trustee Act 1961, s.65A)

“New” TSP Licence Exemptions

“Domestic” trusts (residence/domicile settlor/testator)“Specified Persons”

AdvocatesRegistered Legal PractitionerChartered & Certified Accountants

De minimis (individuals who are Specified Persons only)

TSP Licence Categories

Category 1 – all TSP regulated activities except Trust CorporationCategory 2 – acting as co-trustee or protector (individuals only)Trust Corporation – all TSP regulated activities including functions reserved to Trust Corporations (trust & probate law)

TSP Financial Resources

Fit and proper test (solvency criteria) General Requirements Code (Para.11 & guidance)

Applies to business as a whole (CSP & TSP)Going concern (solvency)

TSP Financial Resources

Audited accountsMust provide sufficient informationConform to recognised standards (IAS, UK or US GAAP)Liquidity monitoring (solvency)Liquidity quarterly declaration

TSP Financial Resources

Adequately capitalised (£25,000 paid up)

Sole trader (£25,000 segregated bank deposit)

TSP Financial Resources

Matters on which Auditor required to report to FSC

Relates to annual audit workDirectors’ solvency declarationQuarterly liquidity declarationsClients’ money accountMaterial breaches of Act or Codes

Legislative Timetable

Fiduciary Services Act [2005]Royal assent (June Tynwald?)Into operation (Appointed Day Order incl transitional arrangements)Rehabilitation of Offenders Act 2001 (Exceptions) (Amendment) Order 2005

Legislative Timetable

After enactment

Fiduciary Regulatory Codes into operation

Amendment to Anti Money Laundering Code to include TSPs

TSP Legislative Framework

Liz BerrySenior Policy Adviser – Companies

How the Commission will process applications

Paul de WeerdSenior Manager - Authorisations

Introduction

Information on the FSC website

A reminder of the licensing process

The order in which staff will handle applications

Published Policies

Licensing Policy Consultative Document publishedSets out TSP policyEventually consolidate licensing policy for

all regulated business

Training and Competency FrameworkConsultative document 18 MarchSets out benchmark standardsRecognises value of experience

Improving Information

Handbooks are now free

Guidance on Website to be updated a.s.a.p. after Royal Assent is granted Application form in draft

Handling the application

Few changes: familiar processCarry out the vetting of individualsReview and discuss with the applicantReport to Chief ExecutiveChief Executive’s recommendationCommissioners decide

Changes to the paper

Applicant receives a copy of the entire paper

New structure: risk-based

Includes some information about individuals

Changes to the vetting procedures

Never vetted – full PQ and BQLast vetted over 5 years ago – full PQ and BQLast vetted 2-5 years ago – PD (and last employer’s reference and/or new professional memberships if relevant)Last vetted less than 2 years ago –material changes only

Workflow planning

150 applications

Small team

Efficient handling of workflow

Workflow planning

Handle in order of receipt (in principle)Handle in small batches Availability of contacts at TSPWrap up the “subject to’s” quicklyIssue the licence and move on

Issuing the licence

Licence as soon as ready

No big first batch

To the Board each month for signature

Not signed between Board meetings

Appearance of the Licence

Consolidation in due course

Separate CSP and TSP licences for now

Questions

Any comments or questions now?

Coffee break

Preparing for and Submitting an

Application

Jane D N BatesHead of Authorisations and

Companies

Introduction

Why it is important to prepare

Main areas to address

Gathering data

Presenting your application effectively

Why Prepare?

Commission “shall not grant a licence unless it is satisfiedit is satisfied…”

CSP licence not guarantee of TSP licence

The Three Tests

Integrity

Solvency

Competence

Solvency

Quarterly declaration of solvency

Guidance: £25,000 capital and reserves

Turnover and expenditure in the audited accounts

Competence

Two part test:

The competence of the business as a whole to carry on TSP business in accordance with the Act and Codes

The competence of each key person to carry out his or her role

Demonstrating Competence

- the business as a whole Include a comprehensive Business Plan

Principal sources of business The services to be offeredStaff structureExperience within the TSPProfessional advisers here and overseasServices or advice bought in Control procedures Training

Demonstrating Competence – Key

PersonsLicensing PolicyTrust Corporations Training and Competence FrameworkExperience and qualificationsWe encourage CVsExplain experience where it is not obviousDo not under- or over- sell yourself!

Gathering DataAccounts and financial projections

Staffing and Group structure

Corporate trustees/protectors and what they do

Business Plan

Summary

Licensing is not automatic, but

CSP Licenceholders well placed

Focus on demonstrating TSP competencies

Questions

Any comments or questions now?

Feedback forms at end of session

The Supervisory Regime

Paul de WeerdSenior Manager -

Authorisations

Introduction

Initial thoughts

Build on what we have

Continuity

Incremental development

CSP Supervision Team

Michael Weldon – Head of SupervisionSue Ferrario - ManagerGeraldine Smith - ManagerLynda Cain – Supervision OfficerNathan Holden – Supervision Officer

Handover from Authorisations

Authorisations and CSP team work togetherSame relationship manager for all fiduciary businessAs TSP licensing nears completion, some staff will move to Supervision

CSP Supervision Processes

Annual Compliance ReturnBusiness MeetingsVisits:SupervisoryFocusOn-Site Risk Assessment

TSP Supervision process

Extending the CSP process:Quarterly declaration of solvencyExtend the Annual Compliance ReturnExtend visits to look at trusts as well as companies

Private Trust Companies

Administering the exemptionExempted if administered by a TSPRequirement to notify FSCList with Annual Compliance Return

Focus of Supervisory Visits

Focus on process:KYCAdministration, Record-keepingAccounting

Not second-guessing trust law

Summary

No news is good news!

Over to the Panel

Our guest panellists:

Morning: John Whillis (STEP), Michael Shimmin (ACSP) and John Rimmer (Law Society)

Afternoon: Paul Dougherty (STEP), Chris Eaton (ACSP) and Paul Beckett (Law Society)