During 2015, the Conduct Supervisory Unit within the MFSA embarked on an extensive desk based compliance review of Trusts and Fiduciaries following a thematic questionnaire where data was collected from a number of authorised persons. The focus of the questionnaire was on corporate governance.
Corporate governance is most often viewed as both the structure and the relationships which determine corporate direction and performance. The board of directors is typically central to corporate governance. Its relationship to the other primary participants, typically shareholders and management, is critical. Additional participants include employees, customers, suppliers, and creditors. The corporate governance framework also depends on the legal, regulatory, institutional and ethical environment of the community.
The objective of this Thematic Review was to verify the extent to which the selected companies have proper governance structures in place.
The thematic questionnaire was designed in a way to assess three main areas of a company's structure. The first part of the questionnaire focused on the company's organisational structure, its business plan, staff related matters, record keeping, business continuity and outsourcing. The second part of the questionnaire focused on the board of directors, its composition, board of directors' meetings and communication between the board members. The last part of the questionnaire dealt with the operations of the company. Authorised persons were requested to give information on the number of clients, the services offered and operational risk assessment undertaken.
The questionnaire was sent to 60 authorised trustees and fiduciaries which represent approximately half of the licence holders authorised under the Trusts and Trustees Act. The choice of population for this questionnaire varied in size, type and business model in order to obtain a good representation of the sector as a whole.
The Authority analysed the data from two perspectives, regulatory and best practice. The Trusts and Trustees Act and the Code of Conduct for Trustees together with the Companies Act provide a solid guidance on how authorised persons in terms of the Trusts and Trustees Act should operate and have good governance. A risk analysis for each participant was conducted and each authorised person was classified in a particular risk category.
On the 30 December 2015, the Authority issued a circular to the industry highlighting the main issues which resulted from the review of this thematic questionnaire. The circular is intended to encourage authorised persons to take any corrective action required to be in line with regulatory and compliance standards. Based on the findings the Authority also conducted a number of on-site compliance visits and/or business meetings with the board of directors of such entities.
During this year, the Conduct Supervisory Unit intends to continue with the Thematic Questionnaire on governance and is planning to conduct a number of on-site visits or meetings to trustees and other fiduciaries which may, but not entirely, focus on governance.
The Authority encourages authorised trustees and other fiduciaries to consider carefully the findings which are listed in the circular. The circular can be accessed from the following link: Circular addressed to authorised trustees and other fiduciaries in terms of Article 43 of the Trusts and Trustees Act - Thematic Review on compliance with the requirements on Corporate Governance.
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