Individuals: to act as a director of a company, a co-trustee or protector of a trust, an executor of a will or administrator of an estate you will need a personal fiduciary licence if you are receiving an income, fee, emolument or other consideration in money or money's worth for doing so.
Company incorporated in Guernsey or Alderney: you will need a full fiduciary licence to carry on regulated activities by way of business from anywhere in the world.
Company other than one incorporated in Guernsey or Alderney: you will need a full fiduciary licence to carry on regulated activities by way of business, in or from within the Bailiwick of Guernsey.
Regulated activities: are set out under section 2 of the Fiduciary Law and include the formation, management or administration of trusts, companies, partnerships or other unincorporated bodies or the provision of advice in relation to their formation.
Statutory exemptions: are set out under section 3 of the Fiduciary Law which can be carried on without the need for a personal or full fiduciary licence.
We can offer general comments as to the activities covered by the Fiduciary Law, but we cannot provide legal advice in respect of specific circumstances. If you are in doubt, you should seek advice from a lawyer qualified in Guernsey law.
The role of acting as a director in or from within the Bailiwick is a regulated activity for which a fiduciary licence is required whether the role is undertaken by an individual or a corporate director.
There is a limited exemption in the Fiduciary Law which allows individuals to hold up to a maximum of 6 directorships, which are not subject to any other exemptions in the Fiduciary Law, without the need to obtain a personal fiduciary licence. The exemption is not available to corporate directors who must be licensed under the Fiduciaries Law. The exemption does not cover the provision of any other corporate services including providing a registered office.
The Commission has the power to disapply this exemption if it determines that, in having regard to the minimum licensing criteria in Schedule 1 to the Fiduciaries Law, an individual is not fit and proper to be a director of a company. This can include instances where the individual has failed to comply with any of the anti-money laundering and counter terrorism financing legislation and the rules of the Handbook.
Whilst an individual utilising this exemption does not require a personal fiduciary licence, he remains subject to the Proceeds of Crime Law and is required to comply with the requirements in the Criminal Justice Proceeds of Crime Regulations and the rules in the Handbook.
This means that those individuals acting as director under this exemption must undertake customer due diligence on the beneficial ownership of the companies they serve and carry out ongoing monitoring of the companies' activities to the same regulatory standard as any other Bailiwick financial services business.
The Commission may enquire into the number and nature of an individual's directorships where the number and nature of directorships held suggest that a personal fiduciary licence may be required under the Fiduciary Law.
A Private Trust Company ("PTC") is a company that acts as a trustee to a specific trust or a group of connected trusts, often for one family.
Acting as trustee is a regulated activity under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2000 (“the Fiduciaries Law”). If a PTC acts as a trustee, by way of business, in or from within the Bailiwick or if a Bailiwick company acts as a trustee, by way of business, in or from within any place whatsoever, it must either apply for an exemption or a licence under the Fiduciaries Law. The term “by way of business” is further explained below but it is noted that a PTC which does not conduct activities by way of business falls outside the scope of the Fiduciaries Law.
“By Way of Business”
Under the Fiduciaries Law a person who carries on an activity shall be deemed to do so by way of business if he receives any income, fee, emolument or other consideration in money or money's worth for doing so. For the avoidance of doubt, a PTC is acting by way of business even if it is merely acting as a conduit and paying fees onto a third party. A PTC which does not act by way of business is not required to apply for exemption or licensing under the Fiduciaries Law.
Exemption from licensing
However, under section 3(1)(y) of the Fiduciaries Law, it is possible for a PTC that is operating by way of business to seek a discretionary exemption from licensing. The Commission recognises that it may be potentially disproportionate to require a full fiduciary licence for essentially one business relationship. Therefore the Commission may, where it thinks appropriate, having given consideration to the specific circumstances, and on application, exempt a PTC from the requirement to obtain a licence, provided that certain criteria are met.
The Guidance Note on Private Trust Companies here provides more information in relation to PTCs and discretionary exemption.
The Commission has a policy of encouraging innovation through initiatives such as our Innovation Soundbox, which offers a supportive environment where existing or future licencees can come and discuss ideas, innovations or future applications with our authorisations or supervisory experts.
Globally, one specific area of innovation within financial services has been the increasing use of virtual, or crypto, currencies including in the development of Initial Coin Offerings (“ICO”), where an individual receives a token or coin in exchange for an investment into a company or alternative vehicle.
Whilst the Commission has already worked with firms using the underlying technology of these currencies, i.e. Blockchain, in common with other regulators around the world, the Commission believes there are significant risks in the use of virtual or crypto currencies especially for retail customers. Nevertheless, we understand that professional investors with a high risk appetite may wish to invest in this developing sector.
Virtual or crypto currencies could interact with our regulatory laws in a number of ways and therefore any application would need to be assessed on its individual merits. We will assess any application by the same criteria we use for other asset types or structures, which means we would look to ensure that key controls are appropriate - for example around custody, liquidity, valuation of assets and investor information.
Our current Handbook for Financial Services Businesses on Countering Financial Crime and Terrorist Financing already permits the use of technology for customer due diligence and we would expect any applicant to demonstrate to us how it plans to comply within the Bailiwick’s current laws and rules, especially when establishing the identity of investors and beneficial owners.
Due to the significant risk of fraud and/or money laundering, we would be cautious about approving applications for ICOs which could then be traded on a secondary market. We would also be cautious about the establishment of a digital currency exchange within the Bailiwick.
We continue to encourage firms or individuals to use our Innovation Soundbox to discuss potential applications and to meet with our Authorisations team at an early stage so we can help them understand what our key questions are likely to be when they make a formal application.