The Guernsey Financial Advice Standards (GFAS) is a set of standards to be introduced within Guernsey's finance industry. GFAS is particularly aimed at those providing investment advice to retail clients in the investment and insurance sectors.
Its implementation is, according to Carl Rosumek, Director of Investment Supervision and Policy Division at the GFSC, "intended to increase professional standards, make adviser charging more transparent and reduce potential conflicts of interest. This will contribute to the protection of the public against financial loss due to potential dishonesty, incompetence or malpractice by persons carrying on finance business".
GFAS is therefore designed to protect and enhance Guernsey's reputation as a leading international financial centre.
The GFAS came about when the GFSC were tasked by Guernsey's Commerce and Employment Department to introduce provisions similar to the UK's Retail Distribution Review, implemented by the Financial Conduct Authority in 2013. The GFSC issued a consultation paper on GFAS in September 2013 and feedback on the consultation paper has now been published on the GFC's website.
CHANGES TO LAW
The introduction of GFAS will necessitate amendments to financial services legislation, including:
- the Licensees (Conduct of Business) Rules, 2009 issued under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended (POI COBR);
- the Conduct of Business Rules issued under The Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002, as amended (IMIIL COBR); and
- the Code of Conduct for Authorised Insurance Representatives (AIR Code).
The consultation process highlighted anomalies and inconsistencies between requirements of POI COBR and IMIIL COBR and the AIR Code which proved problematic for some licensees. It is proposed that the implementation of GFAS will streamline IMIL COBR in line with the requirements of POI COBR.
WHO IS AFFECTED?
Implementation of GFAS will affect:
- licensees advising retail clients in respect of controlled investments, i.e., licensees under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended (POI Licensees);
- licensed insurance intermediaries and their authorised insurance representatives, advising on "long term single premium" and "long term regular premium products" (such terms to be defined in the new rules); and
- licensed insurance intermediaries in relation to disclosure of their charges in all cases of long term business.
The feedback paper confirms that GFAS is currently intended to apply only in respect of advising. Arranging execution-only transactions will fall outside the scope of GFAS.
Other points to note:
Authorised insurance representatives and investment advisors who advise retail clients will be required to obtain an FCA level 4 qualification within a specified timescale.
Existing advisers are to obtain such qualification by 31 December 2015, while new advisers will have 30 months to obtain relevant qualifications. Advice may only be given by advisers who hold relevant qualifications in that area of advice.
A list of accepted qualifications and a guidance note on Financial Adviser Supervision Schemes can be found here.
Independence of advisers
The GFSC will not pursue its original proposal to disallow the use of the term "independent" but will instead focus on enhanced disclosure requirements in product sourcing and conflicts of interest.
The GFSC will shortly be issuing a consultation paper which will include drafts of:
- proposed changes to POI COBR, IMIL COBR and the AIR Code;
- the new Code of Conduct for Financial Advisers;
- conditions to be placed on POI Licensees licensed for the activity of advising, in dealings with retail and non-retail clients.
Comments on the forthcoming consultation paper will be invited during the period of six weeks from publication.
Subject to all amendments being in place by the third quarter of 2014, it is proposed that GFAS will become effective from 1 January 2015.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.