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,” she added.
The legislation came into force as the Fiduciary Services Act 2005.
Isle of Man News
IoM Consults On Funds Sector Rules Monday 22/5/2017The Isle of Man Financial Services Authority, which supervises the island's financial services sector, is seeking feedback on draft guidance dealing with the governance of collective investment schemes.