Isle of Man Financial Services Authority Rule Book Requirements for Record Keeping

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Financial Services Act 2008
Financial Services Rule Book 2016 – Rules relating to record keeping Summary only – this document is not intended to be used without reference to the Financial Services Rule Book, nor can the Isle of Man Financial Services Authority accept responsibility for its accuracy. It remains the user’s responsibility to review the source legislation and ensure compliance with the Rule Book requirements. The Isle of Man Financial Services Authority (“the Authority”) has issued this guidance to assist licenceholders1 to identify rules relating to the maintenance of records. The tables below provide an overview of the different rules that should be addressed by a licenceholder in determining what records to keep and for how long. In addition to the Authority’s Rule Book, a variety of other sources, including company law, tax law, and proceeds of crime (“AML/CFT”) legislation all give rise to requirements to retain records. In addition, the IoM’s Information Commissioner (www.inforights.im) publishes information about the new General Data Protection Regulation, which includes records held. The Authority does not give legal advice and cannot give guidance on the requirements in all the relevant legislation, so the tables relate only to the requirements of the Authority’s Rule Book. Licenceholders could consider publications from other sources – albeit these tend to be based on UK law. Corporate Service Providers might refer to the ICSA Guide to Document Retention published by The Institute of Chartered Secretaries and Administrators. In addition, brief guides to record retention are available free on the internet. The Rule Book is technologically neutral as far as the retention of records is concerned. However, even where a firm scans all documents, the Authority would advise against the destruction of originals of key documents such as the trust deeds of trusts that are still extant – the risks attached to such a practice would seem to greatly outweigh any benefit.

1 The Rule Book applies to every licenceholder except those licensed to carry on regulated activities of Class 1(3) or Class 6. In addition, this piece of guidance does not apply to Professional Officers.

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In respect of AML/CFT, a licenceholder should consider the Anti-Money Laundering and Countering the Financing of Terrorism Code 2015 (‘Code’) (or its successor legislation) and the Anti-Money Laundering & Countering the Financing of Terrorism Handbook to ensure the requirements concerning records can be met. For example, an audit trail of transactions should be able to be established from the records held and this would have to be provided to competent authorities on request. The Code in paragraph 34(1)(c) refers to records being kept on a computer system and states that they should be readily accessible in or from the Island and they should be capable of retrieval without undue delay. The Electronic Transactions Act 2000 (“the Act”) allows the Isle of Man Courts to treat digital records with the same credence as paper records. However, the Act only covers the legal system in the Isle of Man, and there is always the risk that if the documents are needed under any other legal system, that system might not have a similar view. “Transactions” is not a defined term in the Rule Book because the ordinary meaning of the word covers an extensive range of business activity, including but not limited to transfers of money and investments, contracts and other agreements2 .

In respect of clients’ records, rule 8.28 extends beyond records of the transactions themselves to records which explain transactions.
Table A – Rules which set out requirements with wide applicability
Rule Summary of cover Applies to
2.12 Accounting
records
The financial position of the licenceholder’s business All Classes incorporated in the Island
2.15 Accounting
records
The financial position of the licenceholder’s operations in or from the Island All Classes incorporated outside the Island 8.5(3) Continuing professional development (“CPD”) To evidence CPD compliance of relevant individuals All Classes except Class 8(1), 8(2)(b) or 8(3)
8.10 Conflicts of
Interest Register
Full record of each conflict of interest All Classes except Class 8(1), 8(2)(b) or 8(3) 8.16(3) Delegation of function including outsourcing Records relating to all delegated or outsourced functions (whether or not material). All Classes except Class

2 The Electronic Transactions Act further extends this by statute to “a transaction of a non-commercial nature”.

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8(1), 8(2)(b) or
8(3)
8.27 Systems and
controls for record keeping
Having procedures, systems and controls to keep suitable records. Refers in particular to business transactions, financial position, internal organisation and risk management systems. All Classes
8.28 Clients’ records Transactions effected by the
licenceholder on behalf of its clients, including recordings of telephone conversations or electronic communications, even if they do not result in the conclusion of such transactions. All Classes
8.29 Records kept by
third parties
Must be capable of being provided in a timely manner.
All Classes
Table B – Rules which set out more specific requirements
Rule Summary of cover Applies to
3.10 Records to be
kept by licenceholder
Client money received, paid or held by it. Must be sufficient to facilitate a full audit trail. All Class 2, 3, 4 or 5 3.12(2)(e) The reconciliation of client money All Class 2, 3, 4 or 5 3.34(2)(d) The reconciliation of trust money All Class 5 3.37(5) Segregation of relevant funds Record of all relevant funds held. All Class 8(2)(a) or 8(4) 3.40(3) Reconciliation The reconciliation of segregated accounts. All Class 8(2)(a) or 8(4)
4.3 Records of
transactions
Transactions in investments on behalf of a client All Class 2 or Class 3(1), (2), (3), (4), (5), (11) or (12)
4.4 Records of safe￾custody investments
Investments held in safe custody All Class 2 Class 3(1), (2), (3), (4), (5), (11) or (12) 4.10(2) Loans of investments Where a licenceholder lends an investment or document to any person. All Class 2 Class 3(1), (2), (3), (4), (5), (11) or (12)

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4.12(1) Safe-keeping of clients’ title documents The location of documents held in safe keeping All Class 2 Class 3(1), (2), (3), (4), (5), (11) or (12) 6.26(2) Prompt and timely execution The date and time of instructions to deal All Class 2 6.29(2) Knowledge of client All communication with client about his financial advice All Class 2 other than Class 2(3) and/or (7) except for those acting on an execution only basis 6.30(4) Knowledge of client – financial advisers All communication with client about his financial advice Class 2(3) and/or 2(6) and/or 2(7) except for those acting on an execution only basis 6.33(3) Life policies The date and time of instructions to deal All Class 2 6.34(3) Collective Investment Schemes The date and time of instructions to deal All Class 2 6.51(4) Liability in respect of margins Loans to clients to make up shortfalls All Class 2 6.65(b) Nominee shareholders or members Copy of nominee agreement or such other trust instrument All Class 4
6.66 Resignation of
licenceholder
Records of client company All Class 4
8.5(5)Continuing professional development
Retain the Isle of Man Statement of
Professional standing, for financial advisers providing investment advice to retail clients, with relevant individual’s training record. Class 2
8.58 Retention of
client records
Client statements and working papers for financial returns All Class 2