Consolidation and Review of Financial Services Legislation (“ CAROL ”) Jane D N Bates Head of Policy and Legal Unit Financial Supervision Commission 21 st March 2006

Objectives Consolidate FSC legislation into one Act and - Modernise the regulatory framework Review FSC mandate & remit –Opportunities and Risks –Joined-up Regulation Benchmark against other jurisdictions

Benefits Streamlined & up to date framework which is: –Easy to use & understand –Less bureaucratic Enhanced international respect through : –Taking account of international standards –Facilitating appropriate international cooperation (MOUs)

Benefits (2) Appropriate effective consistent regulation, which: –Underpins the “Can Do Economy” –Supports existing business streams (market access) –Creates new opportunities for quality business

The First Stage Consultation Paper issued 6 March 2006 Published on our website ( Shape of proposed legislative framework The Commission’s remit and accountabilities Proposed changes to existing regulatory legislation Interactive questions: e- responses encouraged Comments by 28 April 2006 please

Proposed new framework One Financial Services Act One Regulated Activities Order - detailing all the activities to be regulated and relevant exclusions (i.e. activities outside the scope of the Act) Exemption Regulations

Proposed new framework (2) One Combined Regulatory Code (or Rulebook) which has sections covering the various topics e.g. Conduct of Business, Financial Resources etc. An improved user-friendly, on-line Handbook

The Wider Picture Overriding Government Regulatory Strategy Creating and implementing the Regulatory Framework FSC Remit FSC Accountability

Proposals for an Overriding Government Regulatory Strategy IOM committed to level playing field IOM will adhere to principles of regulation accepted in leading international financial centres IOM will take cognisance of aspirational standards of standard-setting bodies

Creation and Implementation of the Regulatory Framework Tynwald Scrutiny and approval of the legislation Treasury/Government Changes to Overriding Government Regulatory Strategy Proposals for policy changes Consideration and approval of detailed policy propositions

Creation and Implementation of the Regulatory Framework (2) FSC Initiation and development of policy propositions Consultation with industry and Treasury Formulating rules (Legislation and Guidance) Implementation of policy and legislation

Creation and Implementation of the Regulatory Framework (3) Industry Suggestions for policy change Advice on potential or proposed changes – existing fora and Industry Advisory Group Comment upon policy propositions Contribute to the detailed assessment of proposals and the practical impact of implementation

The FSC’s Remit

Clarification of the FSC’s Remit The FSC seeks a formal, statutory remit to Provide a clear transparent statement of its role Properly empower it to carry out all aspects of that role Facilitate effective regulation whilst safeguarding the rights of licenceholders and the public Assist understanding of what the Commission can do – and what it cannot!

FSC’s Accountability Operational Independence –Setting objectives & responsibilities –Conduct of licensing & supervision Improved accountability mechanisms –Reporting & Audit –Corporate Governance –Communication with Government & Tynwald

CAROL Legislative Liaison Group Representatives from Industry Associations and Professional Bodies Role Discuss proposals (pre consultation) Feedback to their organisations Seek comments on specific issues Help to consider consultation responses

Proposed regulatory changes Regulated Activities, Exclusions and Exemptions to be reviewed New areas – e-money and e-environment Update of existing areas – e.g. Definition of Banking Business, Funds etc Generally issues that are already identified

Proposed regulatory changes (2) Conduct of Business and related matters Treating Customers Fairly Impact of MiFID Review Enforcement /Disciplinary Powers Summary of proposed changes in consultation document

Consultation Timetable Shape of framework and FSCCurrent Regulated Activities & Exemptions Q Draft Financial Services BillQ Client Money/ Assets & Custody Q Conduct of Business & Advertising Q Financial Resources, Audit & General Requirements Q Ancillary Matters, Fees and Forms 2007

Any Questions?