CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.

IoM Updates Guidance For Trust Services Providers

Friday, March 8, 2013

The Isle of Man's Financial Supervision Commission has issued new draft guidance on the expected practice of Trust Service Providers (TSPs) to strengthen existing guidelines in place since October 2010.

The guidance reminds licenseholders of their obligations in respect of their conduct when acting as trustees, trust administrators and protectors of trusts; and discusses enforcement tools at the Commission's disposal.

The Commission explained that it intends to strengthen the guidance as trust deeds often contain wide powers for the trustees and wide indemnities. Furthermore potential beneficiaries of discretionary trusts have limited rights to obtain information. It is possible that a trustee could engage in a course of conduct which is not a breach of the terms of the trust deed and is covered by an indemnity in the trust deed, but which nonetheless falls short of the General Licensing Policy and Rule Book requirements for competence and integrity.

This, the Commission pointed out, emphasizes the need for: High standards of professionalism in the industry; Rigorous internal checks and scrutiny within TSPs; and protectors of trusts to be independent of the trustee and unconflicted.

The latest guidance in particular seeks to strengthen the following provisions:

  • 6.2 Skill, care and diligence: The requirement to use skill, care and diligence including activities in connection with the formation, drafting, governance and administration of a trust.
  • 6.6 Action likely to bring the island into disrepute: This includes conduct which is exploitative, or not clearly in the interests of beneficiaries, or which could damage the reputation of the Isle of Man.
  • 6.7 Integrity & fair dealing: This rule applies to the carrying on of all regulated activities, and includes dealing fairly with clients in an open way.
  • 6.8 Informed decisions: This rule includes a requirement to avoid misleading or deceptive representations or practices and applies to the information provided to settlors, protectors and other influential parties about the nature of services provided and about the costs and benefits of trustee decisions.
  • 8.4 Management controls: This rule includes the requirement to ensure systems and controls are in place to ensure fair treatment of clients and would include controls over the use of trust assets and monies.
  • 8.6 Risk management: This rule includes the requirement to manage the risks applicable to the licenseholder.
  • 8.19 Functions of compliance officer: This rule includes the requirement to have robust and documented arrangements for compliance and to monitor the operational arrangements - which should include operational arrangements for making and recording trustees’ decisions, and for making distributions and other payments.

The draft document is to be discussed by the Government and representatives from the Isle of Man Branch of the Society of Trust and Estate Practitioners (STEP) and the Association of Corporate Services Providers (ACSP) at a meeting at the end of March.