Regulation of Trust Business in the Channel Islands

We briefly reported in the Spring issue that Jersey and, more recently Guernsey, had introduced legislation to regulate individuals and firms within the fiduciary services industry. The two laws are quite different in construction and approach although the requirements and standards imposed are relatively similar. In Jersey the legislation was incorporated into the existing law regulating investment business and renamed the Financial Services (Jersey) Law 1998, effective 27 November 2000. Guernsey introduced a law dedicated to the issue in The Regulation of Fiduciaries, Administration Businesses and Company Directors Etc. (Bailiwick of Guernsey) Law, 2000, which came into force on 1 April 2001.

Both laws employ mechanics similar to financial services laws elsewhere in that individuals and businesses need to be licensed unless their activities are exempted. The regulation is overseen by supervisory bodies in each jurisdiction that issue non-statutory codes of practice for the purposes of "providing guidance as to the duties, requirements and standards to be complied with and the procedures and best practices to be observed by persons carrying on by way of business any regulated activity" *

The laws have been introduced as part of both Islands' desire to remain at the fore-front of international financial centres by way of being well regulated for the benefit and protection of the clients that they seek to serve and thus the protection and enhancement of their own reputations.

The standards expected of registered providers are broadly the same and cover overreaching principles that are detailed by way of rules and guidance notes within the codes of practice on issues of corporate governance, client interests and employee training under the following headings:-

1. Conduct its business with integrity.
2. Have the highest regard for the interests of its "customers".
3. Organise and control its affairs effectively for the proper performance of its business activities and be able to demonstrate the existence of adequate risk management systems.
4. Transparency in its business arrangements.
5. Maintain and be able to demonstrate the existence of both adequate financial resources and adequate insurance.
6. Maintain relations with the Commission and other authorities in the Bailiwick in an open and co-operative manner. **

Corporate trust businesses are required under both laws to evidence that the staff employed within are adequately skilled by way of both experience and qualification according to the role fulfilled within the firm. Deutsche Bank Offshore is already committed to ensuring that all staff are suitably trained in line with its commitment to the Investors in People programme.

* Taken from The Regulation of Fiduciaries, Administration Businesses and Company Directors Etc. (Bailiwick of Guernsey) Law, 2000, S35 (1)(b)(i).

** Taken from the Financial Services (Jersey) Law 1998 Trust Company Business, Codes of Practice, December 2000