The Fiduciary Rules and Guidance 2021: Acting with Integrity (“Fiduciary Rules”) and the Pension Scheme and Gratuity Scheme Rules and Guidance 2020: Acting with Integrity (“Pension Rules”)
The Fiduciary Rules and Guidance, 2021 which come into force on 1 November 2021, replaced and revoked the following:
- The Fiduciary Rules and Guidance, 2020;
- The Regulation of Fiduciaries (Annual Return) Regulations, 2017; and
- The Regulation of Fiduciaries (Fiduciary Advertisements and Annual Returns) Regulations, 2012.
When the Fiduciary Rules and Guidance, 2020 came into force on 31 December 2020, the following were revoked:
- 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 Guidance, 2020 and Pension Rules and Guidance, 2020 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 following provides guidance on questions relating to implementation of the revised framework. This list is updated as necessary to reflect any significant arising questions.
We have an existing derogation, modification or waiver issued under the Fiduciary Rules, 2020 or the Pension Rules, 2020. Do we need to seek permission from the Commission for the derogation, modification or waiver to be continued under the Fiduciary Rules, 2021 or the Pension Rules, 2021?
Where a derogation, modification or waiver has been issued by the Commission under the Fiduciary Rules, 2020 or the Pension Rules, 2020, such derogation, modification or waiver will be deemed to continue in respect of equivalent provisions under the Fiduciary Rules, 2021 or the Pension Rules, 2021. 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, 2021 or the Pension Rules, 2021.
The Fiduciary Rules, 2021 are due to come into operation on 1 November 2021, what are the transitional arrangements for existing licensees?
The Fiduciary Rules, 2021 and The Pension Rules, 2021 were made available, in draft form, on 6 October 2021. Changes made to the Fiduciary Rules, 2020 were consulted to the licensees as well as the public in April 2021. Key changes are as follows:
- The introduction of rules to account for, and relevant to, the different and new categories of licence under the new law, and how changes of categorisation can be effected. A notice was circulated to all fiduciary licensees in September 2021 explaining the process of conversion of a licensee into the relevant category;
- Provisions for annual returns – coming from relevant regulation; and
- Repeal of restrictions on PFL advertising.
Both the Fiduciary Rules, 2021 and The Pension Rules, 2021 came into force on 1 November 2021. As explained in the notice to licensees, in most cases no action is required by licensees as re-categorisation will occur automatically. Licensees should contact the Commission if they wish to convert a joint/secondary fiduciary licensee to a lead/primary fiduciary licensee or vice versa, or if they have any questions about the re-categorisation process.
The Fiduciary Rules, 2021 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, when the Fiduciary Rules, 2020 came into force, 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.
Do we need to notify the Commission of outsourcing arrangements existing prior to implementation of the Fiduciary Rules?
Rules concerning outsourcing have been incorporated within the Fiduciary Rules, 2021 unchanged from the Fiduciary Rules, 2020 which came 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, 2021 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 either the Financial Reporting Council (the ISA (UK)) or the International Auditing and Assurance Standards Board (“IAASB”).
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 Fiduciary Rules, 2020 (Rule 2.4.2(3)). The Rule continues to exist under the Fiduciary Rules, 2021. If a licensee has previously received such confirmation, it will be deemed to continue to be valid for the purposes of the Fiduciary Rules, 2021.
I am a PFL. How do I report my financial position under the Fiduciary Rules, 2021?
PFLs are required to provide annually as part of the Annual Return, particulars of their financial position, with regards to regulated activities (Rule 2.4.2(1)). The particulars referred to in the rule 2.4.2(1) do not have to take the form of a financial statement. A statement of the income from, and any liabilities relating to, the personal fiduciary licensee’s regulated activities for the accounting period is sufficient.
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.