Isle of Man: Regulatory Update: What's In Store For 2016

Last Updated: 29 January 2016
Article by Adam Killip

Adam Killip, an associate advocate within the regulatory & compliance services team in leading offshore law firm DQ Advocates, provides a useful summary of what to expect in 2016 if you are operating in the regulated sector.

During the course of 2016, regulated businesses on the Isle of Man are likely to face many challenges from a range of new regulatory measures and legislation. In this article, I review some of the key issues facing regulated businesses and provide some suggestions to ensure that such businesses are best prepared for the changes expected in the coming months.

National Risk Assessment and MONEYVAL Visit 2016

The Cabinet Office has now concluded its National Risk Assessment ("NRA") in respect of the money laundering and terrorist financing risks faced by the Isle of Man. The results are due to be made publically available early this year and presentations are ongoing to the various industry bodies to provide details of the process that has been undertaken and highlight some of the key findings.

The NRA and the actions taken as a result of it will be subject to close scrutiny when the MONEYVAL assessment of the Isle of Man takes place in April/May 2016. The assessment will focus on the effectiveness of AML/CFT procedures and it is expected that the assessors will conduct meetings with financial services businesses of their choice as to how the Island's AML/CFT regime is implemented in practice.

Civil penalties, enforcement and prohibitions

With the enhanced civil penalties regime having come into force in August 2015, the Financial Services Authority ("FSA") now has additional powers to deal with serious regulatory failings. The FSA is increasingly taking a more robust approach to dealing with issues identified during supervisory visits including:-

  • issuing a "do not accept new business" direction to a licenceholder (effectively prohibiting the licenceholder from engaging new clients until the matters arising from a supervisory visit report were resolved);
  • issuing the first prohibition pursuant to section 10A of the Financial Services Act 2008. This is a severe sanction which prohibits an individual from working in the regulated sector;
  • more frequent consideration of the use of powers to appoint managers; and
  • an expectation that licenceholders will take any necessary remedial action at the draft visit report stage, rather than waiting for the final visit report to be published.

The FSA is also prepared to exercise an interventionist approach if necessary in order to protect the reputation of the Isle of Man (for example the successful court application by the FSC (as it then was) in summer 2015 for the appointment of managers to UK Secured Finance Fund plc, an Isle of Man collective investment scheme – link here).

Merger of the FSC and the Insurance & Pensions Authority ("IPA") to create the FSA on 1 November 2015

The merger between the FSC and the IPA took place on 1 November 2015, together with the appointment of a new board of commissioners and a new chief executive for the FSA. It remains to be seen how the unification of the former FSC and the IPA and their respective cultures will impact upon the financial services industry, but in the short term at least, DQ expects to see a continuation of the robust approach previously taken by the FSC, particularly with the MONEYVAL visit on the horizon later this year. Longer-term, we expect to see the FSA harnessing the experience of its FSC and IPA staff to create a regulatory body which maintains a tough stance on areas of concern but which engages with the industry in a pro-active manner to implement "best practice" guidance and recommendations. It is encouraging to see the FSA recruiting further senior staff (including several from regulators in other jurisdictions) to ensure that our new regulator has adequate resource to deal with not just enforcement matters but also new business.

Initial industry feedback on the appointment of the new CEO of the FSA, Karen Badgerow, has been universally positive and we in DQ wish her well in her new role.

We also welcome the newly appointed members of the FSA. It is a really positive development to have so many members with extensive private sector experience including some who continue to work in the private sector. It is crucial to have a balanced and pragmatic FSA as the Island navigates its way through the global regulatory and economic minefield that lies ahead.


The FSC issued an initial consultation in April 2015 seeking the industry's views on a possible new regulated activity of facilitating loan and investment crowdfunding. A large number of respondents submitted comments on the initial consultation, which resulted in the circulation of a second consultation document at the end of September 2015. The FSC set out detailed proposals regarding the definition of the regulated activity of 'crowdfunding' and how the Financial Services Rulebook would apply to it.

On 21 December 2015, the FSA published a summary of the comments it received in response to the second consultation document, together with details of the legislative changes it proposes to make in order to introduce crowdfunding as a regulated activity and draft crowdfunding licence conditions.

In broad terms, the FSA proposes that 'crowdfunding' be introduced as a new class 6 regulated activity pursuant to the Regulated Activities Order. The activity is split into two components – 'loan-based' crowdfunding and 'investment-based' crowdfunding. Loan-based crowdfunding will encompass: "the operation of an electronic platform in relation to lending in which the operator of the electronic platform facilitates persons to become lenders and borrowers" and "the administration of crowdfunded lending, including the transfer of repayment funds from borrower to lender and debt collection in relation thereto". By contrast, investment-based crowdfunding is proposed to be defined as: "the operation of an electronic platform in relation to arranging deals in investments in which the operator of the electronic platform facilitates persons to become issuers of investments or direct investors".

There is therefore a clear distinction between providing services which facilitate loans between a lender and borrower and services which facilitate investment (whether by equity, debt securities or other means). The regulated activity is only intended to catch the provision of online platforms, so any entities which offer investment advice or discretionary asset management would need to seek separate class 2 approval. The FSA proposes a minimum share capital of £25,000 for class 6 licenceholders, coupled with a minimum net tangible asset requirement of £50,000.

The deadline for any final responses to the second consultation document is 31 January 2016 (the link to which is here).

Depositors' Compensation Scheme

The Department of Economic Development issued a consultation asking for feedback on its proposal to give preferred creditor status to domestic eligible deposits under the Isle of Man Depositors' Compensation Scheme ("DCS"). The proposed amendment would mean that eligible depositors under the DCS would move up the hierarchy of payment from their present status as unsecured creditors and would rank behind only liquidation expenses and secured creditors during the winding-up of a local bank. Presently, if a bank failure occurs, the Isle of Man Government will reimburse eligible depositors under the DCS but must then recover this money either in the liquidation of the failed bank or from the levies charged in the banking industry generally.

The amendments are designed to accelerate the repayment process, particularly in light of recent changes to EU law (now implemented in the UK) which have already had this effect. The consultation has closed and we await a summary of responses.

Possible amendments to the Financial Services Rulebook in 2016

Licenceholders will be aware that the FSA intends to consult on possible changes to the Financial Services Rulebook during the early part of 2016. To this end, the FSC circulated a 'tabular' format of the current Rulebook during the summer of 2015 which is designed to make it easier for licenceholders to identify which rules apply to them depending upon the classes of regulated activity they conduct. The FSA intends to introduce the 'tabular' format of the Rulebook simultaneously with the publication of the consultation on the new edition of the Rulebook early this year.

Although the FSA has not yet set a date for the 2016 consultation, we understand that it should be released by May 2016. It may be a useful exercise for licenceholders to keep an eye on regulatory updates in the forthcoming weeks so that they have plenty of time to review and comment upon the proposed Rulebook amendments once the consultation becomes publically available.

Common Reporting Standard ("CRS")

As of 1 January 2016, Isle of Man regulated businesses which are subject to the CRS will need to apply the new account opening procedures referred to in the Income Tax (Common Reporting Standard) Regulations 2015, which were given Tynwald approval in October 2015. The Assessor of Income Tax published an industry update on 23 December 2015 (the link to which is here) which stated that the Assessor will shortly issue a guidance note on the implementation of the CRS in the Isle of Man.

Now that most regulated businesses are FATCA experts, it is time to turn their attention to the CRS! Unsurprisingly, the United States continues to play by its own rules outside the CRS regime and so, for the time being, businesses need to be aware of the distinctions between the FATCA and CRS regimes.

Well there you have it, that's our regulatory update for Q1 2016. In this fast changing area of law, it is important to remain on top of the latest rules and best practices, so keep an eye on our website for regular updates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions