Background
In January 1998, the UK Home Secretary commissioned Andrew Edwards (a retired senior official of HM Treasury) to review the regulation of the financial services industries in the Crown Dependencies (the Isle of Man, Jersey and Guernsey), together with related matters such as the combating of financial crime and co-operation with other jurisdictions.
The review was undertaken during much of 1998. Edwards visited the Isle of Man on two occasions, in March and June 1998. His report was published in November 1998. On 6 April, 1999 the Isle of Man Government published its response to the review and one of its conclusions was that “the CSP (corporate service providers) regime will address a number of the principal points that were highlighted by Mr Edwards”.
While ‘the CSP regime’ had been under consideration since well before the publication of the Edwards review (the Isle of Man recognised the need to regulate the providers of corporate services, which forms a significant part of the finance sector, some years ago), and the Edwards review was not the driving force behind the introduction of the regime, it is possible that some observers may benchmark the regime that is now being gradually introduced by reference to the terms of the Edwards review.
The status of the legislation
The Corporate Service Providers Act 2000
was passed by Tynwald (the Manx Parliament) and received Royal Assent in October 2000. The majority of provisions of the act came into operation on 1 November and the Financial Supervision Commission (FSC) invited CSPs to submit licence applications from 27 November.
CSPs will have a period of time in which to apply for a licence before section 2 of the act (which makes it an offence to operate without a CSP licence) comes into operation.
On 1 November the FSC issued the Corporate Service Providers (General Requirements)
Regulatory Code 2000 and the Corporate Service Providers (Clients’ Money) Regulatory Code 2000, which set out detailed rules which apply to the conduct of business by CSP licence holders. Because the legislation is ground-breaking (there is nothing similar in the UK), the FSC consulted extensively with the professional bodies and associations representing the sector as well as directly with individual CSPs to find a pragmatic approach to the regulation of a diverse range of businesses involved in CSP activity.
During the long consultation period, the CSP industry requested that as many initial licences as possible should be issued simultaneously, in order to avoid unfair advantage accruing to those to whom licences were issued first. The FSC announced that to facilitate compliance with this request, applicants wishing to be considered for the first batch of licences should submit their applications by 26 January.
The FSC has not yet indicated a time by which the processing of applications will be completed, because this will in part depend on the total number of applications received.
When this has been assessed the FSC will also advise when it is intended that Section 2 of the act will come into force, after which anyone carrying out regulated activities will need to be licensed and will commit a criminal offence by carrying on such business without a licence.
