Licensees (Conduct of Business) Rules and Guidance, 2021 (consolidated text)

Summary

This is the consolidated text of the Guernsey Financial Services Commission's Licensees (Conduct of Business) Rules and Guidance, 2021, made under the Protection of Investors (Bailiwick of Guernsey) Law, 2020. It replaces the 2016 version of the Rules and sets out detailed conduct-of-business standards for licensees carrying on controlled investment business, including corporate governance, compliance arrangements, record keeping, client categorisation, complaints, client assets, contract notes, conflicts of interest and notification obligations. Guidance notes in shaded boxes supplement but do not form part of the binding Rules.

• Corporate governance: Boards must maintain policies, procedures and controls to meet obligations under the Law, evaluate compliance with the Finance Sector Code of Corporate Governance, retain responsibility for outsourced functions, appoint a chief executive, and ensure a minimum number of Guernsey resident directors (one for administered licensees, two for others).
• Compliance function: Licensees must appoint a Guernsey-resident compliance officer with defined responsibilities, maintain a breaches register, keep written compliance procedures available to the Commission, review those procedures at least annually, and operate a compliance monitoring programme with an annual compliance return.
• Financial advisers: Licensees advising retail clients on controlled investment business must authorise financial advisers in writing, specifying scope of authority, and must supervise and review their activities.
• Accounting, records and audit: Licensees must keep accounting records, prepare audited financial statements, appoint an auditor, and retain specified transaction, scheme property and client records for set periods, including rules on destruction of records.
• Client relations and categorisation: Rules cover fitness and propriety, client categorisation (retail, professional, eligible counterparty) and notification to clients of their categorisation, dealing/managing/advising standards, promotion and advertising, and best execution.
• Complaints and client assets: Licensees must have a complaints procedure with notification and record-keeping requirements, and comply with detailed safekeeping-of-client-assets and client money account rules, including for collective investment schemes.
• Contract notes and conflicts of interest: Licensees must issue contract notes meeting content requirements and maintain a conflicts of interest policy, records of conflicts, and controls on gifts and inducements.
• Notifications to the Commission: Licensees must notify the Commission of matters including changes of name/address, appointment and details of key employees, general proceedings, holding company and subsidiary information, and proposed changes in restricted activity.

The Commission may exclude or modify the application of any Rule for a particular licensee by written notice, and may issue supplementary guidance that does not itself constitute binding rules. The document does not state a specific commencement date for the base 2021 Rules within the extracted text, though a 2022 amendment inserted an additional Bailiwick-based senior executive requirement.

Key obligations

• Boards must appoint a chief executive and maintain a minimum number of Guernsey resident directors (one for administered licensees, two for others)
• Licensees must appoint a compliance officer resident in Guernsey with defined duties and reporting lines to the board
• Licensees must maintain a breaches register logging all instances of non-compliance
• Licensees must keep written compliance procedures available at their offices and provide them to the Commission on demand
• Licensees must review written compliance procedures at least annually
• Licensees must establish and maintain a compliance monitoring programme and complete an annual compliance return
• Licensees advising retail clients on controlled investment business must authorise financial advisers in writing meeting specified content requirements
• Licensees must keep proper accounting records and prepare audited financial statements with an appointed auditor
• Licensees must categorise clients (retail, professional, eligible counterparty) and notify clients of their categorisation
• Licensees must maintain a complaints procedure with associated notification and record-keeping obligations
• Licensees must comply with client asset safekeeping and client money account rules
• Licensees must issue contract notes containing prescribed content
• Licensees must maintain a conflicts of interest policy and keep records of conflicts and of gifts/inducements
• Licensees must notify the Commission of specified events including changes in name/address, key employee changes, proceedings, holding company/subsidiary changes and proposed changes in restricted activity

Applies to

licensees under the Protection of Investors (Bailiwick of Guernsey) Law, 2020, licensees carrying on controlled investment business, financial advisers acting on behalf of licensees, administered licensees

Deadlines

• at least annually: Licensees must review their written compliance procedures
• no longer than one year: Maximum appropriate interval for board discussion/review of compliance with the Rules

Related documents

• This document is made under Protection of Investors (Bailiwick of Guernsey) Law, 2020