Consultation Paper on the Codes and Guidance Documents proposed to be re-issued under the supervisory laws (June 2021)

Guernsey Financial Services Commission Consultation Paper on the Codes and Guidance Documents proposed to be re-issued under The Protection of Investors (Bailiwick of Guernsey) Law, 2020, The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2020, The Banking Supervision (Bailiwick of Guernsey) Law, 2020, The Financial Services Business (Enforcement Powers) (Bailiwick of Guernsey) Law, 2020, The Insurance Business (Bailiwick of Guernsey) Law, 2002 and The Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002 June 2021

Contents INTRODUCTION.................................................................................................................. 5 Purpose of the Consultation Paper ................................................................................................ 5 Background to the proposals......................................................................................................... 8 Current Codes and Guidance.......................................................................................................... 8 Current Codes and Guidance Documents to be removed to clarify regulatory standards in force .... 8 Overall policy approach ................................................................................................................. 9 Next Steps..................................................................................................................................... 9 WITHDRAWAL OF GUIDANCE DOCUMENTS...................................................................... 10 RE-ISSUED CODES AND GUIDANCE DOCUMENTS.............................................................. 12

1. Finance Sector Code of Corporate Governance ....................................................................... 13
2. Fit and Proper Persons – Meeting the Criteria......................................................................... 14
3. Guidance Note on Private Trust Companies............................................................................ 15
4. Company Formation by Full Fiduciary Licensees...................................................................... 16
5. Note on Managed Trust Company Relationships..................................................................... 17
6. Registered Office Services by Unregulated Persons................................................................. 18
7. Guidance Notes Depositary Requirements Article 36 of AIFMD............................................... 19
8. Applications/Notifications in respect of Manager-Led Product................................................ 20
9. Change of Designated Person.................................................................................................. 21
10. Guidance Note on Custodians of Open-Ended Collective Investment Schemes with Indirectly Held Assets.................................................................................................................................. 22
11. Guidance Note on the Independence of Managers and Trustees of Class A Collective Investment Schemes.................................................................................................................... 23
12. Guidance Notes for Completion of Investment Audited Financial Statements and Compliance Returns (Licensee) ....................................................................................................................... 24
13. Guidance Note – Outsourcing of Functions by Entities Licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 1987................................................................................. 25
14. Hedge Funds – Flexible Approach to Authorisation Policy ..................................................... 26
15. Principles of Conduct of Derivatives Business........................................................................ 27
16. Guidance Notes – Pricing Controls in respect of Open-Ended Collective investment Schemes28
17. Private Investment Fund Guidance........................................................................................ 29
18. Code of Market Conduct....................................................................................................... 30
19. Registered Collective Investment Scheme Guidance.............................................................. 31
20. Qualifying Investor Funds Guidance ...................................................................................... 32
21. Licence Applications for Entities Acting in Respect of Qualifying Investor Funds, Registered Collective Investment Schemes or Overseas Collective Investment Schemes Guidance................ 33
22. Code of Practice for Branch Operations ................................................................................. 34
23. Guidance Note for International Life and Pension Insurers.................................................... 35
24. Guidance Note for Licensed Insurers on Category 6 – Non-Special Purpose Insurers ............. 36
25. Guidance Note of Licensed Insurers on Reinsurance and Other Forms of Risk Transfer.......... 37
26. Guidance Note on Special Purpose Insurers.......................................................................... 38
27. Guidance Note for Licensed Insurers on the Completion and Submission of Annual Returns. 39
28. Guidance Note on Actuarial Requirements and Standards..................................................... 40
29. Guidance Note on Licensed Insurers’ Own Solvency Assessments......................................... 41
30. Guidance on Notifications required from Licensed Insurers................................................... 42
31. Guidance Note for Licensed Insurers on Resilience Testing.................................................... 43
32. Code of Conduct for Authorised Insurance Representatives.................................................. 44
33. Code of Conduct for Financial Advisors ................................................................................. 45
34. Guidance on Disclosure under the Authorised Insurance Representatives (AIR) Code ........... 46
35. Guidance Note on Training and Competency Schemes.......................................................... 47
36. Guernsey Financial Services Commission Code of Practice for Banks..................................... 48
37. Principles for the Management of Credit Risk........................................................................ 49
38. Guidance on Liquidity Risk Management............................................................................... 50
39. Guidance Note on Bank Auditors’ reports on Guernsey Financial Services Commission returns used for Prudential Purposes....................................................................................................... 51 APPENDIX 1 ......................................................................................................................... 52

Responses to this Consultation Paper are sought by 26 July 2021. We welcome feedback or comment on any section and question. Feedback may be provided via the Consultation Hub section of the Commission’s website (www.gfsc.gg).

INTRODUCTION Purpose of the Consultation Paper Revision of Laws Project In August and September 2020, the States of Guernsey, the States of Alderney, and the Chief Pleas of Sark, as part of a review of the legislation governing the finance industry, approved the following – • The Protection of Investors (Bailiwick of Guernsey) Law, 2020 (the “POI Law”); • The Banking Supervision (Bailiwick of Guernsey) Law, 2020 (the “Banking Law”); • The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2020 (the “Fiduciaries Law”); and • The Financial Services Business (Enforcement Powers) (Bailiwick of Guernsey) Law, 2020. The amendment Ordinances to the Insurance Business (Bailiwick of Guernsey) Law, 2002 (“IBL”), and The Insurance Managers, and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002 (“IMIIL”) are currently awaiting consideration by the States of Guernsey (the amendment Ordinances together with the new laws set out above are the “New and Amended Laws”). These New and Amended Laws form the suite of legislation contemplated in the Policy Letter on the Revision of the Financial Supervisory and Regulatory Laws which was debated and approved by the States of Deliberation on the 30th of October 2015. As part of the Revision of Laws project, the Commission undertook extensive public consultation and engagement on revising the Bailiwick’s supervisory and regulatory laws to maintain the Bailiwick’s reputation as an efficient and well-regulated international finance centre. This commenced in 2014 with the ‘Discussion Paper on the Revision of Laws Project: Revising the Bailiwick’s financial and regulatory laws to maintain the Bailiwick’s reputation as an efficient and well-regulated international finance centre’ and was followed, in 2015, by the ‘Consultation Paper on the Revision of Laws project’. Additionally, the Commission has undertaken extensive direct engagement with government and industry bodies on the New and Amended Laws arising from the Revision of Laws project. The New and Amended Laws update the provisions of the previous laws and • bring them in line with current appropriate international standards; • improve consistency between the Regulatory Laws; • consolidate all enforcement powers, previously found across the laws, into the newly enacted Financial Services Business (Enforcement Powers) (Bailiwick of Guernsey) Law, 2020. On 21 April 2021 the Commission issued consultation papers on proposals to issue and re-issue Statutory Instruments under the New and Amended Laws. Under these proposals, the substance and meaning of the Statutory Instruments would remain unchanged, but they would be re-issued under the new legislative framework.