Introduction to the TSP Licensing Regime

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

2. Welcome Jane D N Bates Head of Authorisations and Companies

3. Preliminaries • Housekeeping • The Authorisations Team • Timescales • Today’s agenda

4. Housekeeping • Fire exits • Mobile phones • Handouts • Slides on website

5. Who are the Authorisations Team? • John Aspden – Chief Executive • Jane Bates – Head of Division • Liz Berry – Senior Policy Advisor • Paul de Weerd – Senior Manager

6. Who are the Authorisations Team? • Justine Bowen – Manager • Helen Cullen – Manager • Kerry Thomson - Manager • Marie Ball – Supervision Officer • Scott Dixon - Administrator

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

8. 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”

9. Today’s Agenda • Legislation update • How the Commission will process applications • Coffee (and chance to put in written questions)

10. Today’s Agenda (cont’d) • Preparing an application • Supervisory Regime • Panel session

11. TSP Legislative Framework Liz Berry Senior Policy Adviser – Companies

12. TSP Legislative Framework • Legislation & guidance • TSP Regulated Activities • “New” TSP Licence Exemptions • TSP Licence Categories • TSP Financial Resources • Legislative Timetable

13. TSP Legislative Framework • Corporate Service Providers Act 2000 updated • By Fiduciary Services Act [2005] • Collectively = Fiduciary Services Acts 2000 and 2005

14. TSP Legislative Framework • Fiduciary Services (General Requirements) Regulatory Code [2005] • Fiduciary Services (Clients’ Money and Trust Money) Regulatory Code [2005]

15. TSP Legislative Framework • Licensing Policy • Training & Competence Framework consultation

16. Who needs a TSP licence? TSP Regulated Activities – • By way of business • In or from Isle of Man

17. Who needs a TSP licence? • “express trust” • Foundations • Annual licence fee banded by number of companies, partnerships and trusts

18. TSP Regulated Activities • Acting as trustee, protector or enforcer • Trust administration • Trust Corporation (Trustee Act 1961, s.65A)

19. “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)

20. 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)

21. 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)

22. TSP Financial Resources • Audited accounts • Must provide sufficient information • Conform to recognised standards (IAS, UK or US GAAP) • Liquidity monitoring (solvency) • Liquidity quarterly declaration

23. TSP Financial Resources • Adequately capitalised (£25,000 paid up) • Sole trader (£25,000 segregated bank deposit)

24. 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

25. 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

26. Legislative Timetable After enactment • Fiduciary Regulatory Codes into operation • Amendment to Anti Money Laundering Code to include TSPs

27. TSP Legislative Framework Liz Berry Senior Policy Adviser – Companies

28. How the Commission will process applications Paul de Weerd Senior Manager - Authorisations

29. Introduction • Information on the FSC website • A reminder of the licensing process • The order in which staff will handle applications

30. 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

31. 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

32. 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

33. Changes to the paper • Applicant receives a copy of the entire paper • New structure: risk-based • Includes some information about individuals

34. 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

35. Workflow planning • 150 applications • Small team • Efficient handling of workflow

36. 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

37. Issuing the licence • Licence as soon as ready • No big first batch • To the Board each month for signature • Not signed between Board meetings

38. Appearance of the Licence • Consolidation in due course • Separate CSP and TSP licences for now

39. Questions • Any comments or questions now? • Coffee break

40. Preparing for and Submitting an Application Jane D N Bates Head of Authorisations and Companies

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

42. Why Prepare? • Commission “shall not grant a licence unless it is satisfied…” • CSP licence not guarantee of TSP licence

43. The Three Tests • Integrity • Solvency • Competence

44. Solvency • Quarterly declaration of solvency • Guidance: £25,000 capital and reserves • Turnover and expenditure in the audited accounts

45. 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

46. 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

47. 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!

48. Gathering Data • Accounts and financial projections • Staffing and Group structure • Corporate trustees/protectors and what they do • Business Plan

49. Summary • Licensing is not automatic, but • CSP Licenceholders well placed • Focus on demonstrating TSP competencies

50. Questions • Any comments or questions now? • Feedback forms at end of session