Regulated Investment Exchange Operator Rules and Guidance, 2024

Summary

These Rules, made under the Protection of Investors (Bailiwick of Guernsey) Law 2020, set out the standards a Guernsey Financial Services Commission licensee must meet when carrying on the restricted activity of operating an investment exchange. They replace the 1998 Investment Exchange (Notification) Rules and cover governance, compliance, conduct, prudential and operational requirements for exchange operators, with accompanying Commission guidance in shaded boxes that does not itself form part of the binding rules.

• Governance and compliance: Requires an effective board, a designated chief executive, Bailiwick-based senior executives, a compliance officer, a compliance monitoring programme, employee screening and training, and a breaches register.
• Conduct of business: Covers integrity, fitness and propriety, regulatory cooperation, confidentiality, risk management systems, business continuity planning, and controls on outsourcing/delegation to or from a licensee.
• Conflicts, records and complaints: Requires a conflicts of interest policy, controls on gifts and inducements, accounting records and audited financial statements, record retention and destruction procedures, and a complaints handling and notification process.
• Client money: Sets rules for holding, segregating and paying out client money, including operation of client money bank accounts.
• Operating the exchange: Covers exchange rules, membership, listing and disclosure requirements for issuers, trading/settlement transparency, market monitoring and surveillance, large exposures, short selling, investor safeguards, and market information.
• Prudential requirements: Imposes financial resources and liquidity requirements, notification obligations on capital/liquidity breaches, wind-down planning, controls on liabilities of related entities, and insurance arrangements, with position and counterparty risk calculated per Schedule 1.
• Additional notifications: Requires notification to the Commission of matters such as changes to constitution, name/address, key employees and appointments, disciplinary matters, trading hours, categories of listed investments, offences, subsidiaries, holding company, insolvency/legal proceedings, and business plan changes, plus periodic and ad hoc reporting.

The Rules apply to any person licensed to operate an investment exchange under the Protection of Investors Law. The commencement date in the source text is left blank, so the exact effective date is not yet specified in this version of the document.

Key obligations

• The board must ensure effective policies, procedures and controls to meet obligations under the Law and these Rules, and must evaluate and record its compliance with the Finance Sector Code of Corporate Governance.
• A licensee must appoint a chief executive and Bailiwick-based senior executives commensurate with the nature, size and complexity of its business.
• A licensee must notify the Commission before any proposed change to its constitution, articles, governing statute, charter or by-laws is circulated to members, giving reasons and the intended effective date.
• A licensee must appoint a compliance officer and maintain a compliance monitoring programme, employee screening and training arrangements.
• A licensee must keep a breaches register logging all instances of non-compliance with specified obligations and make compliance procedures available to the Commission on request.
• A licensee must maintain a conflicts of interest policy, record services or activities giving rise to detrimental conflicts, and control gifts and inducements.
• A licensee must maintain accounting records, prepare audited financial statements, and appoint an auditor.
• A licensee must establish retention periods for records and procedures for destruction of records or files.
• A licensee must have a complaints procedure, notify the Commission of complaints as required, and keep records of complaints.
• A licensee must segregate and properly operate client money bank accounts and control payments from them.
• A licensee operating an investment exchange must have rules covering membership, listing, trading/settlement, disclosure by issuers, market monitoring and surveillance, investor safeguards, settlements and market information.
• A licensee must meet financial resources and liquidity requirements and notify the Commission of breaches of capital or liquidity requirements.
• A licensee must maintain a wind-down plan and appropriate insurance arrangements.
• A licensee must notify the Commission of changes to name/address, governance, key employees and appointments, disciplinary matters, trading hours, categories of listed investments, offences, subsidiaries, holding company changes, insolvency or legal proceedings, and proposed changes to its business plan.
• A licensee must comply with periodic and ad hoc reporting requirements set by the Commission.

Applies to

licensees operating a regulated investment exchange under the Protection of Investors (Bailiwick of Guernsey) Law 2020

Related documents

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