New Trust Industry Legislation Intended To Attract High Quality Business
Jersey has become the first international jurisdiction to implement comprehensive new legislation to regulate trust companies and company service providers.
The Financial Services (Extension) Jersey Law was approved by the States of Jersey, the Island's government, and became law on 27th November 2000. Businesses have until February 2nd next year to complete and submit their application to conduct business to the Jersey Financial Services Commission, the Island's regulators.
The States of Jersey has described the legislation as "an important law which fulfils a promise we made following the Edwards Report on Jersey's finance industry and to other evaluators of Jersey's regulations, and it will undoubtedly enhance our reputation still further."
There has been extensive consultation with the industry over the contents of the legislation and the Codes of Practice that accompany it. Jersey's senior industry body, the Jersey Finance Industry Association, and a steering group, of which I was a member, comprising trust professionals and others affected by the law, have convened regularly to discuss and, where necessary, recommend changes to the legislation and the Codes, to help ensure that the law will be both effective and practical.
In this short overview, I have summarised some of the more interesting aspects of the regulations.
The legislation does not propose to interfere in the individual decisions made by a trustee or director. Instead, regulation will focus on the general qualities of the registered person who acts as trustee or director and the office procedures that they have in place. The Jersey Financial Services Commission will have the power to check that the registered person and its procedures comply with the new legislation and they may have access to specific trust or company records for this purpose, but this will not be done for the purpose of directly assessing whether or not the registered person's decisions in relation to a particular trust or company were properly made. Such questions will remain a matter for the registered person's customer and ultimately the courts.
The Codes of Practice cover matters such as the financial resources, competency and integrity of the registered person and its personnel and require that its business be conducted in accordance with certain standards and in a manner which is transparent as to costs and procedures.
The extent to which money and assets held for a customer (which includes beneficiaries under a trust) should be controlled, required very careful consideration because of the almost infinite range of circumstances in which a trustee or director might carry on their activities.
However, the following conclusions were reached:
1. A registered person must arrange proper protection by segregating and identifying assets under its control or for which it is responsible and required to safeguard.
2. A registered person must comply with specific provisions to be made by subordinate legislation in relation to customer money.
3. A registered person should have robust arrangements in place to deal with authorisations to handle customer assets.
It is consequently intended that the proposals take account of the distinct characteristics of trust company business and will create a regime that, at once, ensures that trustees will meet required professional standards, whilst retaining their ability to exercise independent judgement.
Work continues within the Commission and the steering group on some of the finer details but this will not delay the introduction of the legislation. It has been a fine example of how regulators and an industry body can work together to the common goal of establishing regulation of high quality which, whilst necessarily creating extra responsibilities for the trust professionals and company providers, will be well received in the international market place among the quality institutions and corporate clients from whom Jersey wishes to attract business.
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.