Second Consultation on the Implementation of Guernsey Financial Advice Standards
16th July 2014 Second Consultation on the implementation of Guernsey Financial Advice Standards (“GFAS”) and changes to conduct of business rules and codes of conduct
Background
This is the second consultation paper to be issued by the Commission following a request by the Commerce and Employment Department (“C&E”) for the Commission to take appropriate steps to implement the new Guernsey Financial Advice Standards (“GFAS”) which are to be effective from 1 January 2015. This paper takes into account the representations received in response to the first consultation paper and the steps set out in the feedback paper issued by the Commission after consideration of those representations.
Rationale for change
As explained in the consultation paper issued in September 2013, C&E had identified that the introduction of GFAS would protect and enhance Guernsey’s reputation as a leading International Financial Centre, provide better value service from more professional advisers and a more transparent fee structure - all of which should benefit consumers.
The implementation of GFAS is intended to increase professional standards, make adviser charging more transparent and reduce potential conflicts of interest. This will contribute to the protection of the public against financial loss due to potential dishonesty, incompetence or malpractice by persons carrying on finance business.
As set out in the feedback paper issued in May 2014, in order to implement GFAS, the Commission is proposing to take the opportunity to streamline regulatory requirements where possible so that licensees are subject to common requirements.
What is Proposed?
This paper sets out the Commission’s proposals for the repeal and contemporaneous replacement of:
- the Licensees (Conduct of Business) Rules, 2009 issued under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended (“POI Law”);
- the Conduct of Business Rules issued under The Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002, as amended (“the IMIIL”); and
- the Code of Conduct for Authorised Insurance Representatives issued under the IMIIL;
together with the proposal for a condition to be imposed on the licence of those licensees who are licensed under the POI Law for the activity of advising.
Of particular significance in the proposed changes, and as explained by the Commission in the feedback paper to the first consultation paper, is that those people advising retail clients on controlled investments will be required to be appointed to do so by their employing licensee with notification of such appointment, and changes thereto, being made to the Commission.
Also of significance to all licensees whose advisers give advice to retail clients on controlled investments or long term insurance business (as set out in Schedule 1 to the IMIIL, excluding permanent health, credit life assurance and any contracts on human life that are payable annually), is that they will be required to ensure that the advisers giving such advice hold at least the minimum acceptable qualification as set out by the Commission on its website. The Commission would strongly encourage these licensees to ensure that existing advisers have sought guidance from their professional body on any gap fill necessary, in relation to any existing qualification that they may hold, to be completed in advance of the deadline of 31 December 2015. Licensees will also be required to obtain a statement of professional standing to be issued by the adviser’s professional body thereafter on an ongoing annual basis.
Who would be affected by these changes?
All businesses licensed under the POI Law that are subject to the Licensees (Conduct of Business) Rules 2009 and in particular those whose controlled investment business includes advising retail clients and those employed by these licensees to advise retail clients, in respect of controlled investments.
Insurance intermediaries licensed under the IMIIL, and their Authorised Insurance Representatives (“AIRs”), advising on long term insurance business as set out in Schedule 1 to the IMIIL, excluding permanent health, credit life assurance and any contracts on human life that are payable annually.
Insurance intermediaries licensed under the IMIIL, and their AIRs, in respect of the disclosure of the basis of, or the amount of, charges for services provided, in all cases of long term business including to non-retail clients.
Insurance intermediaries licensed under the IMIIL, and their AIRs, advising on general insurance business.
Insurance managers licensed under the IMIIL, to the extent that the IMIIL Conduct of Business Rules which applies both to insurance managers and insurance intermediaries is proposed to be repealed and replaced with conduct of business rules specific to insurance managers.
Insurance managers licensed under the IMIIL who have AIRs that advise retail clients on long term business as set out in Schedule 1 to the IMIIL, excluding permanent health, credit life assurance and any contracts on human life that are payable annually.
Please provide any responses to the questions raised in the paper, preferably by email using the form available from this link to [email protected] by close of business on 29 August 2014.
A feedback statement covering the substantive issues raised by respondents will be issued by the Commission following the close of the consultation period.