Consultation on draft Collective Investment Schemes (Authorised Schemes) (Trustee and Fiduciary Custodian) Order

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1 Consultation on draft Collective Investment Schemes (Authorised Schemes) (Trustee and Fiduciary Custodian) Order This document is particularly relevant to all licenceholders providing services to Authorised Collective Investment Schemes Issue date 30 August 2013 Closing date 4 October 2013

2 1. Background and Rationale DRAFT On 1 June 2013 the Financial Services (Miscellaneous Amendments) Act 2013 added to the Collective Investment Schemes Act 2008 (as amended) ( the Act ) a power to enable the Financial Supervision Commission to amend paragraph 2 of Schedule 1 to the Act by order. Schedule 1 to the Act deals with Authorised Collective Investment Schemes and paragraph 2 addresses authorisation orders. The Commission proposes to replace the existing sub-paragraphs (4) and (5) of paragraph 2 with new paragraphs that will permit persons to undertake the trustee or fiduciary custodian role for Authorised Schemes if they are suitably qualified, whether or not they have a place of business in the Island. An order to amend sub-paragraphs (4) and (5) has been drafted accordingly and guidance will be issued to indicate types of entities that may be considered acceptable. This amendment has become necessary as such roles currently have to be undertaken by Isle of Man licenceholders and the only existing provider of this service in the Isle of Man has confirmed that it intends to withdraw from providing this service in the near future. The proposals nevertheless retain adequate safeguards for investors in Authorised Schemes. The draft new sub-paragraphs aim to address objectives (a) and (c) of the Commission s statutory objectives 1 : (a) secure an appropriate degree of protection for the customers of persons carrying on a regulated activity; (b) reduce financial crime; and (c) support the Island s economy and its development as an international finance centre. Alongside its regulatory objectives, three key messages of: risk mitigation, international recognition and economic development reflect the focus of the Commission s work. 1 As set out in section 2 of the Financial Services Act 2008 ( FSA08 ) 2

3 2. Consultation process The Commission considers open dialogue with industry and other stakeholders as essential in developing its proposals and greatly appreciates comments on the following proposals. This consultation is predominantly relevant to those licenceholders that provide services to Authorised Collective Investment Schemes. Therefore, the draft order is being published for a limited consultation period of five weeks from 30 August to 4 October The purpose of this consultation is to obtain views and we welcome any comments on the draft order and how it may impact upon relevant licenceholders and their clients. However, please note that your comments may not result in a change to the proposals. A summary of the comments received, along with the Commission s responses, will be published on the website 2 after all comments have been considered. We wish to encourage submission of views and so respondents will not be publicly identified. However, please do not submit comments anonymously, as they will not be considered or included in the summary of comments. The closing date for comments is 4 October Please send your views in writing and preferably by to: Mrs Susan Woolard Policy Adviser susan.woolard@fsc.gov.im Financial Supervision Commission, PO Box 58, Finch Hill House, Bucks Road, Douglas, IM99 1BT. Isle of Man. Tel: (01624)

4 3. Proposal The following draft order proposes replacement of the existing sub-paragraphs (4) and (5) of paragraph 2 of Schedule 1 to the Collective Investment Schemes Act The subparagraphs currently say: (4) The manager and the trustee or fiduciary custodian must each be a body corporate which has a place of business in the Island. (5) The manager and the trustee or fiduciary custodian must each be an authorised person who is not prohibited from acting as manager, trustee or fiduciary custodian (as the case may be) under any enactment. The power to amend the sub-paragraphs is contained in sub-paragraphs (15) and (16): (15) The Commission may amend this paragraph by order. (16) An order under sub-paragraph (15) may include such consequential, incidental, supplemental or transitional provisions as appear to the Commission to be necessary or expedient in consequence of amendments made to this paragraph (including consequential amendments to other provisions of this Act). The Commission hopes to lay the draft order before Tynwald in November 2013 for approval. Draft order: COLLECTIVE INVESTMENT SCHEMES ACT 2008 COLLECTIVE INVESTMENT SCHEMES ACT 2008 (AUTHORISED SCHEMES) (TRUSTEE AND FIDUCIARY CUSTODIAN) ORDER 2013 Approved by Tynwald xx November 2013 Coming into operation xx November 2013 The Financial Supervision Commission, after carrying out the consultations required by section 24(13) of the Collective Investment Schemes Act , makes this Order under section 4(1) of, and Schedule 1, to that Act. 1. Title This is the Collective Investment Schemes Act 2008 (Authorised Schemes) (Trustee and Fiduciary Custodian) Order Commencement If approved by Tynwald 4, this Order comes into operation on xx November C.7 4 As required by section 25 of the Act. 4

5 3. Amendments to Schedule 1 In paragraph 2 of Schedule 1 to the Act, for sub-paragraphs (4) and (5) substitute- (4) The manager must be an authorised person whose licence allows it to act as a manager of an authorised scheme. (5) The trustee or fiduciary custodian must be- (a) an authorised person whose licence allows it to act as a trustee or fiduciary custodian of an authorised scheme; or (b) a body corporate that- (i) is incorporated in a jurisdiction with which the Commission has a co-operation agreement that includes provisions in relation to collective investment schemes; (ii) is authorised to act as a trustee or fiduciary custodian for retail collective investment schemes in its jurisdiction of incorporation; and (iii) receives the Commission s approval to act as such in relation to authorised schemes. Made 2013 Commissioner Chief Executive Explanatory Note (This note is not part of the Order) This Order amends Schedule 1 to the Collective Investment Schemes Act 2008, to enable an authorised scheme to have a trustee or fiduciary custodian that does not have a place of business in the Island, but which meets other criteria. In respect of draft sub-paragraph (5)(b)(iii), the Commission will issue guidance to explain that it would normally expect the entity to be part of a deposit-taking/banking group. 4. Impact and questions The Commission seeks to meet its regulatory objectives with minimum negative impact. The draft power will facilitate the provision of Authorised Schemes business in the Isle of Man. No negative impact on any party is anticipated, and it is expected that the amendment will assist all licenceholders that are functionaries to Authorised Collective Investment Schemes. The Commission considers that the alternative draft powers will not be detrimental to any investors in Authorised Schemes. We would appreciate your responses to these questions: Do you have any comments on the draft order? Do you have any other comments on matters connected with the draft order? ************************* 5