Offshore Trusts Report: Isle of Man
Supervisory and Licensing Regime
Until 2004, trustees were not licensed or supervised
by the Financial Supervision Commission, unless the fiduciary carried
on business in investment, banking or insurance, in which case licences
are required under those headings. However, this changed with the
introduction of new Fiduciary Services legislation. For more information
on this, see below.
Although trusts do not need to be registered unless
they are public (charitable) trusts or involve real estate on the
Isle of Man, Unit Trusts (Collective Investment Schemes) are subject
to various special requirements under the Collective Investment
Schemes Act, 2008.
As in other jurisdictions whose trust law follows
the English pattern, a beneficiary of the trust may apply to the
court to stop a trustee from dealing with trust assets in an unauthorised
manner. Loss as a result of an authorised conduct will result in
the trustee being responsible for making the loss good. The asset
value of the trustee is therefore an important consideration.
Where a breach of trust is committed by a corporate
trustee, every person who at the time of breach was a director of
the trustee may be deemed, in certain circumstances, to be guarantor
of the trustee (ie personally liable) in respect of damages awarded
by the court. Principles of constructive trusteeship also apply.
Where the beneficiaries lack the capacity to enforce
the trust against the trustee for any one of a number of reasons,
the Manx case of Schmidt v Rosewood Trust Ltd (2003) has
confirmed that the right to an accounting should be regarded as
one aspect of the inherent jurisdiction of the court. This ruling
is the authority on this matter and has ensured that the trusts
are enforceable against the trustees, regardless of the way in which
the trust is worded.
The Court also has an inherent right to approve the
retirement of a trustee just as it has the right to appoint a trustee.
This ensures that there will not be a deadlock with the trustees.
In common with many other offshore jurisdictions,
the Isle of Man responded to pressure from the OECD by tightening
up its regulatory regime. In July, 2003, the Financial Services
Commission presented a draft of the Fiduciary Services Bill 2003,
which intended to extend the Corporate Service Providers Act 2000
to require persons who, by way of business, provide certain services
to trusts and partnerships or act as nominee holders of units in
unit trusts, to hold a fiduciary licence.
In November, 2004, with Tynwald considering the Fiduciary
Services Bill, the Isle of Man Financial Supervision Commission
announced the launch of a consultation into the latest draft of
the Fiduciary Services Regulatory Codes. In an attempt to avoid
delays in the implementation of the new licensing regime for trust
providers, the FSC worked with the firms to identify best industry
practice and thus determine the most appropriate regulatory standards
against which members of the trust business should be measured.
“In amending the draft Fiduciary Services (General
Requirements) Regulatory Code and the Fiduciary Service (Clients’
Money and Trust Money) Regulatory Code and associated guidance notes,
we were particularly aware of the industry’s concerns in respect
of potential conflict with trust law and that the financial resources
requirements should not be too onerous,” noted Jane Bates, Head
of Authorisations & Companies at the FSC.
“We hope that we have now achieved a good balance
and have set standards that will meet the Commission’s regulatory
imperatives without placing an unreasonable burden on the industry,”
The legislation came into force as the Fiduciary Services