This briefing is the 3rd in a collection of briefings by Walkers on the Lending, Credit and Finance (Bailiwick of Guernsey) Legislation, 2022 (the “LCFL“), and supplies an overview of the licensing routine applicable to “financial firm company” under Part III of the LCFL (a “Component III FFB Licence“) and the vital factors of the Lending, Credit rating and Finance Regulations and Assistance, 2023 (the “Rules“), issued by the Guernsey Money Companies Commission (the “GFSC“) applicable to the holder of a Element III Licence (a “Licensee“).
Related briefings on the LCFL licensing regimes in Guernsey are available here:
Who needs a Aspect III FFB Licence?
All firms that have on “economical agency company” in or from within just the Bailiwick of Guernsey (“Guernsey“) and all Guernsey corporations that carry on “monetary agency company” any place in the world will want a Component III FFB Licence until an exemption applies. Carrying out any of these actions devoid of a Part III FFB Licence or an relevant exemption is a prison offence.
“Money firm business enterprise” covers all of the functions that have been subject matter to the earlier registration routine established out in the now repealed Registration of Non-Controlled Economical Providers Corporations (Bailiwick of Guernsey) Legislation, 2008 (“NRFSB Regulation“), which protected a variety of unregulated financial products and services business enterprise, these types of as revenue companies, payment managing, international trade, lending and credit rating organizations.
What if the small business is now controlled?
Holders of any other licence underneath other regulatory rules in Guernsey, and holders of a Element II Licence below the LCFL, do not need to attain a Aspect III FFB Licence in buy to undertake money organization business enterprise activities.
Consequently a bank, for occasion, which provides corporate financial loans does not need to have a Portion III FFB Licence in addition to its banking licence, though it necessitates a Element II licence if it provides credit to retail customers.
Are there any exemptions?
There is no equivalence-based mostly exemption from a Element III FFB Licence in regard of businesses controlled in jurisdictions regarded as to supply acceptable or equivalent protections.
Pursuant to the LCFL, the GFSC have released a Detect with respect to the Disapplication of the Requirement to keep a Licence under area 40 of the LCFL (the “Course Exemptions Observe”) which sets out specified blanket exemptions.
The Class Exemptions Notice disapplies the provisions of the LCFL to particular persons/entities who might undertake what may perhaps be captured as money company business enterprise, this record contains:
- Lending by an entity that is administered by a fund administrator, CSP or licensed insurance supervisor in Guernsey, having said that the lending have to possibly:
- be ancillary to the lender’s major activity
- be intra-team or
- relate to a holding framework which invests in or retains assets (including by way of debt), and does not have a key objective of lending to 3rd functions
- Lending by an entity with an proven area of enterprise in Guernsey to other users of its team
- Folks lending to family members, possibly immediately or by means of entities wholly owned by the similar relatives members
- Lending to administrators, registered partners, registered shareholders (if debtors are bona fide shareholders of the entity) or beneficial entrepreneurs
- Lending by directors, registered partners, registered shareholders (if lenders are bona fide shareholders of the bower entity) or useful proprietors
- Lending to staff members and
- Guernsey trustees lending to beneficiaries in
All those qualifying for an exemption under the Course Exemptions Detect are not demanded to undertake any more motion or make any notifications or apps to the GFSC.
The GFSC also have the ability to grant a discretionary exemption where a lender is not within the Class Exemptions Detect, but on the information it is not ideal for them to be licensed.
Money firm enterprise activities carried on for no thought, these as lending for no desire or no price, are
not in scope of the Aspect III FFB Licence regime.
What needs utilize to a Licensee?
The Rules apply economical methods and insurance policies specifications, even so these do not implement to a holder of a licence beneath possibly the Banking Supervision (Bailiwick of Guernsey) Law, 2020, as amended, or the Insurance policies Business (Bailiwick of Guernsey) Legislation, 2002, as amended.
Licensees must ensure that they constantly hold ample liquid assets in reserve to allow for for an orderly wind-down about a three-thirty day period interval. Further more, the amount of these resources need to be monitored and checked at least quarterly and the Licensee need to straight away notify the GFSC in which it is discovered that the resources are no longer adequate (the notification must contain the techniques staying taken to rectify the breach).
The Regulations involve particular company governance and administration obligations, widespread to all persons certified less than the LCFL which mirror those required underneath other regulatory law certified persons. These specifications relate to:
- Minimum conditions for licensing – a Licensee need to meet the minimal conditions for licensing established out in the LCFL (the necessities are very similar to that in other regulatory regulations in Guernsey). The GFSC also has the complete variety of supervisory, enforcement and rule-making powers under the LCFL that it has under those other regulatory rules
- Conduct of small business principles – these ten rules relate to integrity, talent, treatment and diligence, conflicts of desire, information and facts about clients, shopper belongings, market place apply, economic means, inner organisation, and relations with the GFSC
- MLRO and MLCO– Licensees have to appoint a Guernsey resident Revenue Laundering Reporting Officer and a British Isles resident Income Laundering Compliance Officer
- Audited accounts – Licensees must have their accounts audited
- Conflicts of interest coverage – Licensees will have to have a plan on taking care of conflicts of fascination acceptable to their company
- Outsourcing – Licensees continue to be accountable for outsourced capabilities, and ought to have appropriate devices in spot to oversee, management and monitor outsourced functions. Before appointing an outsourced support – provider, a Licensee should carry out thanks diligence on the company and perform a risk evaluation
- Grievances – together with a prerequisite for a grievances technique and a issues log, with each other with an escalation approach and GFSC notification
- Shopper dollars – purchaser funds is required to be held in a segregated client cash financial institution account with an accepted financial institution and
- Advertising – Licensees should make sure that promotions and promoting are fair, transparent, and sincere. Other prerequisites implement to advertising and marketing and promotions.
The Aspect III FFB Licence and Principles have transitioned the prior registration regime under the NRFSB Legislation into a total licensing routine.
Businesses operating in a variety of sectors which supply different economic companies these types of as payment handling and international exchange companies, lending and credit history to firms, which include casual or non-bank/private loan companies, could perfectly be caught inside of the scope of the Aspect III FFB Licence regime (enterprises that lend or provide credit score to retail buyers will usually be in just the Aspect II Licence regime). Impacted companies will want to consider elements these kinds of as examining or planning relevant small business threat assessments, company programs, and their terms and disorders of enterprise, guidelines and processes to make sure that they are LCFL compliant.