Financial Services (Trust Company Business) (Exemptions Amendment No. 2) (Jersey) Order 201-

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A decision made 17 November 2010 regarding: Financial Services (Trust Company Business) (Exemptions Amendment No. 2) (Jersey) Order 201-.

Decision Reference: MD-E-2010-0189
Decision Summary Title :	Financial Services (Trust Company Business) (Exemptions Amendment No. 2) (Jersey) Order 201-		Date of Decision Summary:	November 2010
Decision Summary Author:	Director, Finance Industry Development		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	n/a
Written Report Title :	Report for Financial Services (Trust Company Business) (Exemptions Amendment No. 2) (Jersey) Order 201-		Date of Written Report:	9 November 2010
Written Report Author:	Director, Finance Industry Development		Written Report : Public or Exempt?	Public
Subject: Financial Services (Trust Company Business) (Exemptions Amendment No. 2) (Jersey) Order 201- (“the Draft Order”)
Decision(s): The Minister made the Financial Services (Trust Company Business) (Exemptions Amendment No. 2) (Jersey) Order 201-.
Reason(s) for Decision: The Draft Order makes amendments to the Schedule to the Financial Services (Trust Company Business (Exemptions)) (Jersey) Order 2000 (“the 2000 Order”) and to the Schedule to the Financial Services (Trust Company Business (Exemptions No. 4)) (Jersey) Order 2001. These clarify the position that persons who hold a limited number of directorships are not acting by way of business and are exempted from registration requirements for carrying on trust company business.
Resource Implications: There are no resource or manpower implications for the States.
Action required: The Minister to sign, date and seal the draft Order and for it to be returned to the States Greffe.
Signature:		Position: Minister for Economic Development
Date Signed:		Date of Decision (If different from Date Signed):

Financial Services (Trust Company Business) (Exemptions Amendment No. 2) (Jersey) Order 201-

Financial Services (Trust Company Business (Exemptions Amendment No.2)) (Jersey) Order 201- (The “Draft Order”)

ISSUE AND RECOMMENDATION
1. In the principal law, there is a requirement to be registered in order to carry on financial service business. This requirement is subject to exemptions. The Draft Order changes the qualifying conditions for an individual to benefit from two of these exemptions.
2. The Draft Order establishes a new condition, exempting a person from registration providing that he or she does not act or perform the function of director, in or from within Jersey, of more than six companies.
3. The Draft Order removes an ambiguity in the criteria that determines what is a “connected company”, as that term applies to an exemption from registration for an individual acting as a director of such a company.
BACKGROUND
1. It is an offence under Article 7 of the Financial Services (Jersey) Law 1998 (the “Law”), to carry on financial service business in or from within Jersey unless the person is for the time being registered under the Law.
2. The meaning of financial services business is defined by Article 2 of the Law. Under paragraph (1) it includes when a person, by way of business, carries on trust company business. The term trust company business is then defined by paragraphs (3) and (4) to include the provision of company administration services, or fiduciary services, which are, inter alia, acting or fulfilling the functions of a director or alternate director of a company.
3. The Law also provides for exceptions to be made, either from the application of the entire Law, or from the requirement to be registered under Article 7. A number of such exemptions have been established by means of a range of Orders, some of which depend upon certain criteria being satisfied.
4. The Draft Order makes changes to two existing Orders that provide for exemption from the registration requirements of Article 7.
5. Paragraph 13 of the Schedule to the Financial Services (Trust Company Business (Exemptions)) (Jersey) Order 2000 (“the 2000 Exemption”) prescribes the conditions for a person that is a director of a company to be exempt from registration. The change being made by the Draft Order is to extend the exemption so that registration will not be required if the person is a director of no more than six companies (after discounting any companies that are exempt through the existing criteria or any other exemption).
6. The exemption available from registration under the Financial Services (Trust Company Business (Exemptions No.4)) (Jersey) Order 2001 (“the 2001 Exemption”) was originally introduced to benefit anyone who is a director of a company that he or she beneficially owns. This was subsequently extended to apply also to associates, to enable, for example, the husband or wife of the owner of a company to enjoy the exemption.
7. In making this change, the intention was that both parts should apply; however, it appears that the present wording is open to a different interpretation that would extend the exemption to a wider population than is desirable. The Draft Order removes the ambiguity by adding the word “and” between the two criteria.
8. Both changes will clarify the circumstances in which the respective exemptions will apply to individual cases.
9. With regard to the 2000 Exemption for multiple directorships, the new de minimus provision seeks to qualify the boundary that determines when the number of directorships that an individual holds should be regarded as falling within the meaning of by way of business. It will principally benefit those who undertake non-executive directorships but who otherwise do not perform any financial service business.
10. With regard to the 2001 Exemption for connected companies, the relevant Order is presently unclear as to whether both criteria must be satisfied, or only one of them. The change will remove any doubt that the conditions are cumulative. Inevitably, this change will mean that some individuals who have hitherto believed that they benefitted from the exemption will now have to register in order to comply with the Law. To allow time for applications to be made and determined, Article 3 of the Draft Order delays the coming into force of this change for three months.
11. The proposal to make these changes was the subject of a public consultation paper issued by the Jersey Financial Services Commission (the “Commission”). The paper (Reference 5/2010) was issued in March 2010 and the consultation period closed on 18 June 2010. The final form of the Draft Order includes changes made as a result of comments received by the Commission.
12. Pursuant to the requirements of Article 42(1) of the Law, the Board of Commissioners has recommended that the Minister makes the Draft Order.
RECOMMENDATION
1. It is recommended that the Minister signs, dates and seals the Draft Order and that it then be returned to the States Greffe without delay.

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