FAQs - The Fiduciary Rules and Pension Rules

The Fiduciary Rules and Guidance 2020: Acting with Integrity (“Fiduciary Rules”) and the Pension Scheme and Gratuity Scheme Rules and Guidance 2020: Acting with Integrity (“Pension Rules”)

On 31 December 2020 the new Fiduciary Rules and Pension Rules will come into operation, replacing:

  • the Code of Practice – Corporate Service Providers, the Code of Practice – Foundation Service Providers Code of Practice – Trust Service Providers, the Code of Practice – Company Directors (together the “Codes”); and
  • the Regulation of Fiduciaries (Accounts) Rules, 2001, The Financial Resources Requirements Rules, 2018 and the Pension Licensees (Conduct of Business) & Domestic and International Pension Scheme and Gratuity Scheme Rules (No. 2) 2017 (together the “Rules”).

The Investment, Fiduciary and Pension Division (“IFPD”) hosted a self-assurance session covering the introduction of the Fiduciary Rules and Pension Rules via live webinar at the GFSC on 3 November 2020. The presentation covered key changes being introduced, how certain rules came about and how responses to the consultation paper were taken into account and reflected in the rules or guidance. The presentation can be found here.

The following provides guidance on questions relating to implementation of the revised framework. This list will be updated as necessary to reflect any significant arising questions.

We have an existing derogation, modification or waiver issued under the Codes. Do we need to seek permission from the Commission for the derogation, modification or waiver to be continued under the Fiduciary Rules or the Pension Rules?

Where a derogation, modification or waiver has been issued by the Commission under the old Codes or Rules, such derogation, modification or waiver will be deemed to continue in respect of equivalent provisions under the new Fiduciary and Pension Rules. If clarification is required licensees should seek to engage with the Commission as soon as possible to ensure there is no breach arising as a result of an existing derogation, modification or waiver not meeting the requirements of the Fiduciary Rules or the Pension Rules.

Any new request for the Commission to consider a derogation, modification or waiver from the Fiduciary Rules or the Pension Rules may be sought prior to 31 December 2020, however any such request should be accompanied by a rationale explaining the need for such a derogation, modification or waiver and set out why there will be no detrimental impact to any person to whom the licensee provides regulated activities should a derogation, modification or waiver be granted.

The Fiduciary Rules are due to come into operation on 31 December 2020, what are the transitional arrangements for existing licensees?

The Fiduciary Rules and The Pension Rules were made in February 2020. Rule 7.1 of the Fiduciary Rules sets out that licensees must complete amendments to their internal controls to ensure compliance with the Fiduciary Rules by 31 December 2020.  A similar provision exists in Rule 4.1 of the Pension Rules. The Commission would expect existing licensees to have reviewed their policies, procedures and controls and made any amendments identified as necessary to those policies, procedures and controls by 31 December 2020. 

Where a licensee believes that it will not be in a position to meet the new requirements introduced by the Fiduciary Rules and Pension Rules by 31 December 2020 it should contact the Commission as soon as possible to discuss this further.

The Fiduciary Rules contain a provision relating to terms of business, does the rule relating to agreeing terms of business apply to existing relationships?

Rule 3.4 of the Fiduciary Rules sets out that licensees should provide and agree terms of business for any person for whom the licensee proposes to provide regulated activities.  For any new regulated activities to be provided to a person with effect from 31 December 2020 the Commission expects that licensees will comply with the requirements of Rule 3.4.  The Commission recognises that Rule 3.4 applies to proposed contracts or agreements for the provision of regulated activities, i.e. for new business post 31 December 2020. Terms of business may already be in place for existing relationships but not comply with the requirements of Rule 3.4(2), in the event that new regulated activities are proposed for an existing relationship licensees should refresh terms of business to comply with Rule 3.4.  Licensees may choose to provide information on new or amended terms of business via reference to standard terms published on the licensee’s website.

Where no terms of business exist between a licensee and a person being provided with regulated activities the licensee may wish to consider if it is appropriate to obtain agreement from the person in order to comply with Rule 3.4.

We have outsourcing arrangements in place and note that there is a notification requirement under Rule 5.2 of the Fiduciary Rules, do we need to notify the Commission of outsourcing arrangements existing prior to implementation of the new rules?

The Fiduciary Rules come into operation on 31 December 2020.  From that date onwards the Commission would expect to be notified within 14 days of any new significant outsourcing arrangement being entered into, any material changes to significant outsourcing arrangements and where there is a failure of an outsourced service provider or other breakdown in the provision of outsourced services which causes significant disruption to the licensed fiduciary’s business. Notification of material outsourcing arrangements in place prior to 31 December 2020 need not be made.

Notifications regarding Outsourcing may be made through the Online Submissions Portal via Form 220 – Outsourcing.

The Fiduciary Rules require that the financial statements submitted to the Commission must be accompanied by an auditor’s report. What auditing standards are accepted?

Rule 2.4.2(4)(e) makes reference to the International Standards on Auditing issued by the Financial Reporting Council (the ISA (UK)). However, it is recognised that some Guernsey companies follow the ISA issued by the International Auditing and Assurance Standards Board (“IAASB”). Given this practice in Guernsey, it is therefore deemed that the ISA issued by the IAASB is accepted. The Rules will be amended to confirm this position accordingly.

We have previously received written confirmation from the GFSC under Rule 10(2) of the Account Rules that the financial statements submission requirements under another Regulatory Law take precedence. Do we need to request a new confirmation?

Provisions equivalent to those of Rule 10(2) of the Accounts Rules 2001 have been made in the new Fiduciary Rules (Rule 2.4.2(3)). If a licensee has previously received such confirmation, it will be deemed to continue to be valid for the purposes of the new Fiduciary Rules.

Rule 2.4.2 of the Fiduciary Rules requires that PFLs report on their financial position to the GFSC within 4 months of the accounting period end. I am a PFL and note that this information is in the Annual Return. Do I still have to supply it separately?

Rule 2.4.2 of the Fiduciary Rules contains the same requirement as Rule 6(3) of the Regulation of Fiduciaries (Accounts) Rules, 2001. It is recognised that the current practice is for PFLs to meet the requirement under Rule 6(3) of the Accounts Rules 2001 through the completion and submission of Form 125 (Annual Return). This practice shall continue to be accepted when the Fiduciary Rules become effective.  

What are examples of Client Bank Accounts? Are they simply pooled accounts?

Rule 2.5.4 of the Fiduciary Rules requires that a licensed fiduciary must ensure that Fiduciary Client Money is held in either a Client Bank Account or a Client Entity Bank Account. Rule 6.1 defines “Client Bank Account” as an account held by a licensed fiduciary at an approved bank which holds, or is intended to hold, money on behalf of one or more clients. From the definition, this type of account covers bank accounts which are in the firm’s name and controlled by it*, for one or more clients. Examples are designated trustee accounts (e.g. bank accounts which include “as trustee of”) and pooled client accounts in the firm’s name. Client Bank Accounts are therefore not limited to just pooled accounts.

*NB: Rule 2.5.1(2) defines “Fiduciary Client Money” as money which is held or received on behalf of a client or controlled by a licensed fiduciary.

What are examples of Client Entity Bank Accounts?

Rule 2.5.4 of the Fiduciary Rules requires that a licensed fiduciary must ensure that Fiduciary Client Money is held in either a Client Bank Account or a Client Entity Bank Account. Rule 6.1 defines “Client Entity Bank Account” as an account at an approved bank, in the name of the client or a client-related entity and which is not in the name of the licensed fiduciary. From the definition, this type of account covers bank accounts which are under the name of a client or client’s company (not in the firm’s name), but are controlled by the firm*.

*NB: Rule 2.5.1(2) defines “Fiduciary Client Money” as money which is held or received on behalf of a client or controlled by a licensed fiduciary.