Introduction to the TSP Licensing Regime Financial Supervision Commission 24 May 2005

Welcome Jane D N Bates Head of Authorisations and Companies

Preliminaries Housekeeping The Authorisations Team Timescales Today’s agenda

Housekeeping Fire 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 – Manager Helen Cullen – Manager Kerry Thomson - Manager Marie Ball – Supervision Officer Scott Dixon - Administrator

What do we do? ALL current licensing and vetting Banks Building societies Investment business Schemes CSPs NOT ongoing supervision TSP licensing and vetting

The TSP Regime - Where we are now? Fiduciary Services Bill passed by Tynwald Awaiting Royal Assent Appointed Day Enactment 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 Berry Senior Policy Adviser – Companies

TSP Legislative Framework Legislation & guidance TSP Regulated Activities “New” TSP Licence Exemptions TSP Licence Categories TSP Financial Resources Legislative 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” Advocates Registered Legal Practitioner Chartered & Certified Accountants De minimis (individuals who are Specified Persons only)

TSP Licence Categories Category 1 – all TSP regulated activities except Trust Corporation Category 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 accounts Must provide sufficient information Conform 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 work Directors’ solvency declaration Quarterly liquidity declarations Clients’ money account Material 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 Berry Senior Policy Adviser – Companies

How the Commission will process applications Paul de Weerd Senior 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 published  Sets out TSP policy  Eventually consolidate licensing policy for all regulated business Training and Competency Framework  Consultative document 18 March  Sets out benchmark standards  Recognises 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 process Carry out the vetting of individuals Review and discuss with the applicant Report to Chief Executive Chief Executive’s recommendation Commissioners 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 BQ Last vetted over 5 years ago – full PQ and BQ Last 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 TSP Wrap up the “subject to’s” quickly Issue 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 Bates Head of Authorisations and Companies

Introduction Why it is important to prepare Main areas to address Gathering data Presenting your application effectively

Why Prepare? it is satisfied Commission “shall not grant a licence unless it 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 offered Staff structure Experience within the TSP Professional advisers here and overseas Services or advice bought in Control procedures Training

Demonstrating Competence – Key Persons Licensing Policy Trust Corporations Training and Competence Framework Experience and qualifications We encourage CVs Explain experience where it is not obvious Do not under- or over- sell yourself!

Gathering Data Accounts 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 Weerd Senior Manager - Authorisations

Introduction Initial thoughts Build on what we have Continuity Incremental development

CSP Supervision Team Michael Weldon – Head of Supervision Sue Ferrario - Manager Geraldine Smith - Manager Lynda Cain – Supervision Officer Nathan Holden – Supervision Officer

Handover from Authorisations Authorisations and CSP team work together Same relationship manager for all fiduciary business As TSP licensing nears completion, some staff will move to Supervision

CSP Supervision Processes Annual Compliance Return Business Meetings Visits:  Supervisory  Focus  On-Site Risk Assessment

TSP Supervision process Extending the CSP process: Quarterly declaration of solvency Extend the Annual Compliance Return Extend visits to look at trusts as well as companies

Private Trust Companies Administering the exemption Exempted if administered by a TSP Requirement to notify FSC List with Annual Compliance Return

Focus of Supervisory Visits Focus on process:  KYC  Administration,  Record-keeping  Accounting 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)