Offshore Regulation

Question 1

How does offshore centres implement regulatory frameworks?

Answer 1

Regulatory frameworks for financial services industries are heavily influenced by international bodies/ initiatives

Offshore centres incorporate intentional initiatives into own regulatory framework & conduct business with equilivent standards

Not compelled but chosen to implement as they recognise Importance to help maintain investor confidence, attract foreign investments, & reputation to allow offshore to compete without sanctions

Question 2

What does regulation of offshore involve?

1) Primary legislation

Answer 2

Primary legislation

• FSMA is UK primary financial market legislation
• Provides creation of regulator that authorises provision of financial services business

Regulator powers

• authorise organisations to provide business
• supervise organisations to adhere with jurisdictions laws, orders and codes
• enforce/ sanction if they don’t

Sanctions include fines, public statement of conduct or banning individuals from operating in industry

Authorisation of license it granted if applicants are ‘fit & proper’

COMPETENCY
INTEGRITY
FINANCIAL SOUNDNESS

Question 3

2) Secondary Legislation

Answer 3

-referred as regulations / orders
-uses powers granted & supplements primary legislation by placing additional more detail requirements
on authorised persons

Question 4

3) Codes of Practice

Answer 4

• Regulatory codes published by regulator / similar to FCA principles
• failure to follow codes doesn’t render person liable for proceedings / however used in evidence in court to determine questions

Question 5

4) Guidance

Answer 5

Outline requirements if justifications primary & secondary legislations (statutory requirements) on particular subject matters & present way which authorised persons can comply with them

Provides practice interpretation for service providers / promotes desired approach by regulator and assists development of organisations systems and controls

Content of guidance is regulatory requirement & failure to follow could form basis of regulatory action & legal action/ decide whether person has committed offence under law

Question 6

How are offshore rust & company service providers regulated?

Answer 6

In accordance with offshore requirements

UK provision less pre-levant / therefore approach of regulation differs to offshore centres

UK based trust and company service providers are required under ML regulations 2007 to register with HMRC for AML purposes / doesn’t fall within scope of FSMA

Question 7

What is the AIFMD ?

Answer 7

Alternative Investment Fund Managers Directive

Places conditions in alternative investment fund managers (AIFMs) to get authorisation from home regulator to market funds in EU countries & manage those domicile in other EU countries

FCA regulator of directive / rules create level playing field across Europe making it easier to operate cross boarder, improve standards and offer more protection for investors

Question 8

AIFMD Offshore

Answer 8

AIFMs located offshore caught by requirement of AIFMD if market or manage funds in EU

AIFMs in 3rd countries (jsy/ gsy) continue to market professional investor within EU until 2018 using private placement regimes (must meet certain condition)

Gov & regulators offshore seek competitiveness & work hard to meet requirements of AIFMD

Ensure laws & codes compliment directive & sign cooperation agreements with home regulator in EU state in form approved by European Securities & Markets Authority