This page explains, in general terms, enforcement by the Commission. This page is not intended to be an exhaustive explanation of the scope of the Commission’s enforcement powers. Parties with specific queries concerning the enforcement powers of the Commission should refer to the provisions of the laws listed below, and may wish to consider consulting a professional for further advice / information.
Regulation, of itself, does not ensure compliance, which can only be assured by a combination of respect and competence, underpinned by enforcement. International standards and assessments enjoin or encourage enforcement to ensure compliance, and regulatory performance is invariably coupled with compliance issues.
The Commission’s enforcement powers are derived principally from the following legislation:
The Financial Services Commission (Bailiwick of Guernsey) Law, 1987
The Banking Supervision (Bailiwick of Guernsey) Law, 1994
The Regulation of Fiduciaries, Administration Businesses and Company Directors etc (Bailiwick of Guernsey) Law, 2000
The Insurance Business (Bailiwick of Guernsey) Law, 2002
The Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002
The Protection of Investors (Bailiwick of Guernsey) Law, 1987
The Prescribed Businesses (Bailiwick of Guernsey) Law, 2008
The Criminal Justice (Proceeds of Crime)(Legal Professionals, Accountants and Estate Agents)(Bailiwick of Guernsey) Regulations, 2008
The Financial Services Commission (Site Visits) (Bailiwick of Guernsey) Ordinance, 2008
The Protection of Investors (Administration and Intervention) (Bailiwick of Guernsey) Ordinance, 2008; and
The Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008,
in each case, as amended, collectively, for the purposes of this document, “the Regulatory Laws”.
The Commission also performs other prescribed regulatory functions under other Bailiwick legislation. These include:
The Protection of Depositors, Companies and Prevention of Fraud (Bailiwick of Guernsey) Law, 1969
The Road traffic (Compulsory Third-Party Insurance) (Guernsey) Law, 1936
Surf-Riding (Long Boards) (Compulsory Third-Party Insurance) (Guernsey) Law, 1969
The Vessels and Speedboats (Compulsory Third-Party Insurance, Mooring Charges and Removal of Boats) (Guernsey) Law, 1972
The Companies (Guernsey) Law, 2008
The Companies (Alderney) Law, 1994
The Control of Borrowing (Bailiwick of Guernsey) Ordinance 1959, and
The Limited Partnerships (Guernsey) Law, 1995,
in each case, as amended.
The Commission is also responsible for supervising regulated entities’ compliance with the regulatory requirements identified in the minimum licensing requirements of the Regulatory Laws. These include the requirements of:
The Companies (Guernsey) Law, 2008
The Criminal Justice (Proceeds of Crime)(Bailiwick of Guernsey) Law, 1999
Criminal Justice (Proceeds of Crime) (Financial Services Businesses) (Bailiwick of Guernsey) Regulations, 2007
The Disclosure (Bailiwick of Guernsey) Law, 2007
The Criminal Justice (Fraud Investigation) (Bailiwick of Guernsey) Law, 1991
The Terrorism and Crime (Bailiwick of Guernsey) Law, 2002
The Drug Trafficking (Bailiwick of Guernsey) Law, 2000; and
The Transfer of Funds (Guernsey) Ordinance, 2007, the Transfer of Funds ; (Alderney) Ordinance, 2007 and the Transfer of Funds (Sark) Ordinance, 2007,
in each case, as amended, and Nos. 2-8 collectively (“the AML/CFT regime”).
COMMISSION’S APPROACH TO ENFORCEMENT
The Commission’s use of its enforcement powers in any case is guided by the Commission’s Enforcement Policy (the “Policy”). As noted in the Policy, “enforcement” includes all the means available to the Commission to achieve compliance with the regulatory regimes for which it is responsible.
Where sufficient and appropriate, the Commission will address regulatory contraventions or misconduct by agreement with the person concerned, through ongoing supervisory processes, and try to agree the implementation of a remedial action plan.
Where the nature of the contravention or misconduct is of sufficient seriousness, enforcement measures or a combination of remediation and enforcement measures may be warranted. Where appropriate, the Commission will engage the party with a view to reaching agreed terms regarding these measures. The Commission will determine the appropriateness of such engagement on a case by case basis.
The Commission may utilise a range of enforcement measures. These include:
1. Warnings & Private Reprimands
The Commission may issue a private written warning, in which the Commission sets out its concerns about a party’s conduct, the identified measures to rectify the situation, and the consequences of repetition or failure to fully remediate those concerns. The power to issue a warning is considered to be an intrinsic part of the Commission’s supervisory functions.
The Commission may issue a private reprimand to an entity or a director, controller, partner, senior officer or beneficial owner, regulated pursuant to the Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008.
2. Licence Directions and Conditions
The Commission may issue directions requiring that certain action be taken or not taken, and/or impose licence conditions, requiring that certain action be taken or not taken. It is an offence to contravene a direction or licence condition, whether agreed to by the party or imposed by the Commission. Contravention of a licence condition can also be relied upon as grounds upon which the Commission may, and in certain circumstances where the public might be adversely affected will, seek the revocation of a licence. The Commission may give public notice of the imposition or variation of a direction and the date from which it is effective.
3. Objection to Use of Name / Directions and Misleading Advertising
The Commission may object to the name that a regulated entity proposes to use or where it has failed to provide the Commission with the requisite notice there of. It is an offence to contravene this objection. The Commission may issue a direction in relation to proposed or actual advertising that it determines to be misleading. The scope of the direction can include a prohibition on the issue of any advertisements or any advertisements of a specified description to take all practical steps to withdraw the advertisements or that the advertisements be modified in a specified manner. A person who issues or causes to be issued, in the Bailiwick or elsewhere, an advertisement that is prohibited or otherwise contravenes a direction, is guilty of an offence.
4. Objection to Directors / Controllers / Significant Shareholders & Refusal to Approve Directors / Managers
The Commission may object to, or refuse to approve, the appointment of a party to a position for which notification or approval is required under the Regulatory Laws. It is an offence to subsequently appoint a party, once the Commission has objected to / refused to approve an appointment. The contravention of an objection / refusal can also be relied upon as grounds upon which the Commission may issue a direction restricting certain rights associated with certain shareholdings, and /or for a court order to compel or restrict the sale of shares held by a controller or significant shareholder (as applicable).
5. Production of Information, Documents & Appointment of Inspector
The Commission may require that information be produced, the scope of which being such as the Commission may reasonably require for the performance of its functions. The Commission may also require the production of a report by an accountant or person with relevant professional skills, on any matter in relation to which the Commission may require information. Further enforcement measures may be considered by the Commission once it has reviewed the information obtained. It is an offence to fail to co-operate with these requirements, without reasonable excuse.
6. Refusal, Revocation & Wind-Up
The Commission can refuse to approve a licence application, or authorisation/ registration of a collective investment scheme. The Commission may also revoke an existing licence / authorisation or registration. The refusal or revocation of a licence can be used as the grounds upon which the Commission may make an application to the Court for the appointment of a liquidator, and for the company to be wound-up.
7. Public Statement
The Commission may publish a public statement about a party and its findings concerning the party’s non-compliance with regulatory requirements. The criteria to be considered in assessing whether to impose a public statement are listed in section 11C of the Financial Services Commission (Bailiwick of Guernsey) Law, 1987.
8. Disqualification Orders Against Auditors and Actuaries
The Commission can issue an order disqualifying a person from acting as an auditor of a licensee or as an actuary of a licensed insurer carrying on long term insurance business. The Commission can also report an auditor or actuary to any authority, institution or professional body that the auditor is subject to where the auditor has failed to comply with its obligations under the regulatory Laws. The Commission may disclose any information to those bodies with a view to the commencement of or in relation to disciplinary proceedings involving an auditor or actuary.
9. PROHIBITION ORDER / DISQUALIFICATION ORDER
The Commission can issue an order prohibiting a party from working within the regulated financial industry of the Bailiwick, at particular levels of authority or responsibility and for a specified period of time. The Commission maintains a list on its website of those individuals against whom a prohibition order has been made. The Commission can also make an application to the court for an order that an individual be disqualified from acting as a director within the Bailiwick under the Companies (Guernsey) Law, 2008.
A person who performs or who agrees to perform any function in breach of a prohibition order or disqualification order is guilty of an offence.
10. Discretionary Financial Penalty
The Commission may impose a discretionary financial penalty of up to a maximum of £200,000. The criteria to be considered in assessing whether to impose a discretionary financial penalty are listed in section 11D of the Financial Services Commission (Bailiwick of Guernsey) Law, 1987.
Discretionary financial penalties are to be distinguished from administrative financial penalties. Administrative financial penalties automatically apply where a party has contravened a routine requirement such as the filing of annual accounts. The Commission does not have the discretion to vary or waive administrative financial penalties.
11. Other Court Orders
The Commission can apply to the court for various other orders, in addition to the ones noted above. These include orders to:
restrain unlawful business, to prevent a party from engaging in conduct contrary to a Regulatory Law,
repay monies accepted or paid over in the course of carrying on an unlawful business, which can also include the appointment of a receiver in order to recover those amounts,
sell the shares of a controller or significant shareholder held in contravention of a Regulatory Law,
appoint an administrative manager to direct the affairs, business and property of a licensee for a prescribed period, and
direct that a company change its name, where the name may mislead the public as to its regulatory status.
The Commission is not a prosecuting authority, and does not have the power to bring criminal charges against a person or to undertake a criminal investigation into an apparent breach of the Regulatory Laws or the Bailiwick’s AML/CFT regime, for which the Commission undertakes supervisory functions.
Should the Commission come across, at any time, a suspected or apparent breach of a Regulatory Law or the Bailiwick’s AML/ CFT regime, the Commission may refer the matter to HM Procureur (ie Attorney General), or may refer the matter directly to the law enforcement agencies – the Guernsey Police or Guernsey Border Agency. A decision whether to commence an investigation and/or bring criminal charges is a matter solely for HM Procureur.
The Commission will generally regard a breach of a Regulatory Law or the Bailiwick’s AML/ CFT regime as sufficiently serious if and to the extent that it poses a threat to clients or potential clients or to the reputation of the Bailiwick and/or where it casts doubt on the integrity, competence or financial standing of the person concerned. It will also be relevant if the breach was deliberate or premeditated rather than accidental, or if the party has failed to report the matter giving rise to the breach to the Commission.
Failure, inability or refusal to cooperate with the Commission to rectify a breach, and a history of past breaches or poor regulatory compliance (which may give grounds to believe that the breach is likely to be repeated and/or is part of a systemic failure) will also be taken into account. These factors are not exhaustive, but are intended to indicate the types of matters that may be referred for consideration by HM Procureur. Ultimately, cases that may be referred will be assessed by the Commission on their merits on a case-by-case basis, and referral will not necessarily be made on every occasion.
RIGHT TO APPEAL
The right to appeal against a decision of the Commission to impose an enforcement measure is prescribed in the Regulatory Laws listed above.
This article has been prepared for information purposes and does not constitute legal advice. The Commission does not accept any legal liability for any action that may be taken in response or as a result of the information contained in this article.