As part of the regulatory regime for licensed fiduciaries, the Guernsey Financial Services Commission carries out onsite visits to both corporate and individual licensees. This update provides practical advice for licensees on how best to prepare for such a visit.

Providing information before visit – Before an onsite visit – the Guernsey Financial Services Commission usually sends a letter to the licensee attaching a list of documents and information which it will require in advance. It is important that the licensee provides the commission with all the documents that it requires and that such documents are complete, up to date and in good order. This initial response will set the tone for the visit itself.

Regulatory changes – It is important for licensees to keep abreast of any relevant changes in legislation, including changes to rules and regulations, and any guidance notes that have been issued by the commission. The commission will expect to see that licensees are operating in accordance with the law as it stands at the time of its visit and will have no sympathy with licensees that are lagging. If deadlines for compliance with recent rules and regulations fall after the visit, the commission will nevertheless expect to see that the licensee is making the necessary preparations in order to meet such deadlines.

Feedback from previous visits – The commission has completed many onsite visits to licensed fiduciaries and is now in its follow-up round of visits. During these visits, the commission asks the licensee to update it on any changes that the licensee has made in relation to any areas about which the commission previously raised concerns or provided comments. Licensees should review closely any feedback from a previous visit in preparation for the follow-up visit. The commission actively encourages such preparation.

Documents and information – Having reviewed the documents and information provided before its visit, the commission will advise the licensee as to which documents and information it requires to be made available on its arrival. Again, it is important that this information is in good order and available on request. Ordinarily, most such documents can be laid out for the commission to review on arrival at the inspection site. However, such documents might be required to be held in a specific location elsewhere, perhaps for operational reasons or reasons relating to the licensee’s obligations as custodian. Regardless of any such circumstances, these documents must be available to the commission on demand, even if this requires them to be inspected in situ.

External advice – The commission seems particularly concerned with a licensee’s compliance (or otherwise) with its obligations in respect of anti-money laundering, corporate governance and fiduciary duties. Licensees should be constantly monitoring their compliance in these areas and clearly should not be scrambling to fill the gaps when it receives notification that the commission intends to carry out an onsite visit. It is advisable for licensees to seek regular independent external advice from experts. Naturally, licensees will have significant expertise of their own in these areas; however, it can be extremely useful to gain a fresh perspective from a suitably qualified independent third party. It pays to be pre-emptive in this regard – no amount of professional advice will be of use on the eve of an onsite visit.

Investment management – One emerging issue for the commission is investment management. The guidance notes in the Code of Practice for Trust Service Providers set out the obligation of licensees to exercise professional oversight of any company owned by a trust and to consider appointing competent agents, including investment managers. It further states that if investment managers are appointed, licensees should record all agreements, instructions, investment parameters and investment benchmarks, and should review regular reports on performance. As well as recording these matters at the outset of a professional relationship, the licensee should review the investment manager’s performance at regular intervals and a record should be kept of that review.

Practicalities – Among others, the following practical considerations should be addressed in advance of a commission visit:

1. The commission will require an appropriate space in which to carry out its work. Ordinarily this will be at the main office of the licensee in question and will be a private, enclosed space where the commission can work in isolation. Ideally, the space which is provided to the commission will be set aside for the entirety of its visit and will have telephone access and, where necessary, access to a computer (including, where appropriate, the necessary elements of the licensee’s operating systems) with an internet connection.
2. The commission will invariably need to seek clarification on various points during its onsite visit. As such, it will be necessary for the relevant personnel to be available to the commission throughout its visit. It is likely that the commission will require assistance from the licensee’s head of compliance and from one or more of the board of directors of the licensee, at any given time. As such, thought needs to be given to such individuals’ availability.
3. The commission will expect client files to be ready on demand and will not expect to have to wait while, for example, a correspondence file is ‘tidied up’.

Managed trust companies – The licensee in question may have entered into administration agreements with one or more other licensees (ie, so-called ‘managed trust companies’), whereby it has agreed to conduct the day-to-day management of these businesses in return for a fee. The commission might wish to review one or more of any such managed trust companies during its onsite visit and is likely to make this explicit in any correspondence prior to its visit. However, the licensee responsible for the administration of such managed trust companies should make sure that its obligations in this regard are fully understood and should liaise with the commission accordingly before an onsite visit.

Seeking advice or assistance – Preparing for a visit by the commission is likely to take a considerable amount of time. Even an extremely well-run business is likely to have to commit a significant amount of management time and other resources to preparing itself for a visit. As such, it might be necessary to bring in temporary staff to provide administrative support in the event that significant works (eg, outstanding filing or systems works) need to be carried out prior to the commission making an onsite visit. In addition to seeking administrative support, a licensee might consider seeking specific professional advice from lawyers, accountants or other specialists as to how to conduct itself during an inspection (eg, in relation to its obligations in respect of client confidentiality). Such issues should be considered as soon as a licensee is put on notice of a visit, so that the necessary provisions can be put in place in good time.

Post-visit action – The commission usually seeks to provide feedback from its visit in general terms either at the close of its visit or soon thereafter. The commission then follows up with more detailed written comments at a later date. The commission may request further information from or meetings with the board of the licensee before it finalizes such written comments. In most cases the commission will have suggestions for ways in which the licensee can improve its operating procedures so that it is in a better position to comply with its regulatory duties in the future, regardless of whether the commission has identified a breach. Such suggestions should be taken on board immediately and any appropriate remedial action taken. In cases where the commission is less satisfied, it may impose regulatory penalties until such time as its concerns have been addressed. In any event, it is important that licensees respond promptly and comprehensively, so as to avoid a nasty surprise when next the commission decides to pay a visit.

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