The Isle of Man Financial Services Authority (IOMFSA) is looking to change four pieces of legislation through a single amendment bill which would affect all regulated firms, schemes and individuals in the industry.
The regulator’s discussion paper is aimed at collective investment schemes (CISs), designated businesses and insurers, and it would widen the IOMFSA’s powers and reach in the crown dependency’s financial services sector.
Tweaking the law
The proposals would “harmonise” the different provisions across regulations, the watchdog said.
For instance, the IOMFSA is looking to expand its ability to impose civil penalties on high profile individuals; such as controllers, directors and chief executives, designated businesses and CISs.
It currently only has the power to do so under the Insurance Act 2008, the change would expand this power to the other three pieces of legislation.
The regulator would also acquire the ability to inspect and investigate people or firms whether or not a breach is suspected.
In cases of misleading practices or statements, the watchdog would be allowed to look into people who are not regulated or exempt.
These powers would extend to CISs as well, since currently the regulator needs to rely on indirect routes, such as company law, to inspect and investigate these type of schemes.
The IOMFSA said that it cannot use company law any longer because it does not offer protection to investors in CISs.
Additionally, the watchdog is looking to be given provisions to circumnavigate non-disclosure agreements, in the event those would prevent individuals from cooperating with the financial authority.
Shifting responsibility
The IOMFSA is also trying to make companies prove that an individual is a “fit and proper person” when they seek appointment for a controlled function.
Currently, it is the regulator’s responsibility to determine whether an individual within a regulated entity is not fit and proper.
“The burden should remain on the regulated entity/individual to satisfy the authority of the individual’s fitness and propriety,” the IOMFSA said.
Physical presence
The discussion paper is aiming to add a requirement for designated businesses to be managed and controlled on the island as well.
“Some businesses have registered despite having no presence on the island apart from a registered office,” the regulator said.
“This limits the effectiveness of the oversight regime, and gives rise to significant reputational risk to the island.
“Therefore, building upon the Designated Businesses Registration Policy of October 2018, a requirement for designated businesses to be managed and controlled on the island will remedy this issue.”
It seems the IOMFSA is looking to implement economic substance requirements to avoid being blacklisted as a non-cooperative jurisdiction for tax purposes by the EU.
