Introduction
This briefing is the fifth in a series of briefings by Walkers on the Lending, Credit and Finance (Bailiwick of Guernsey) Law, 2022 (the "LCFL"), and provides an overview of the licensing regime applicable to financial platforms, crowdfunding and alternative non-bank credit under Part IV of the LCFL (a "Part IV Licence") and the key aspects of the Lending, Credit and Finance Rules and Guidance, 2023 (the "Rules"), issued by the Guernsey Financial Services Commission (the "GFSC") applicable to the holder of a Part IV Licence (a "Licensee").
Related briefings on the LCFL licensing regimes in Guernsey are available here:
- Overview
- Consumer Credit
- Financial Firm Business
- Virtual Asset Service Providers
Who needs a Part IV Licence?
All businesses that provide or platform and intermediation business, in or from within the Bailiwick of Guernsey ("Guernsey") will need a Part IV Licence unless an exemption applies. Further, all Guernsey businesses that provide or offer platform and intermediation, anywhere in the world will need a Part IV Licence unless an exemption applies.
"Platform and intermediation business" includes the operation of:
- a peer to peer platform (such as a marketplace matching borrowers to lenders);
- a crowdfunding platform (where persons seek
to raise money or other finance through the issue of general securities and derivatives); and - the provision of alternative non-bank credit or finance intermediation (intermediation or brokerage services, for the purposes of matching lenders with borrowers), in each case, regardless of whether carried out by electronic means or otherwise.
What if the business is already regulated?
The Rules clarify that holders of any other licence under other regulatory laws in Guernsey must also hold a Part IV Licence in order to undertake activities regulated under Part IV of the LCFL.Are there any exemptions
Are there any exemptions?
The GFSC have published a Notice with respect to the Disapplication of the Requirement to hold a Licence under section 40 of the LCFL (the "Class Exemptions Notice") which sets out certain blanket exemptions.
The Class Exemptions Notice does not provide for any exemptions under Part IV of the LCFL. However, the GFSC have the power under the LCFL to disapply any requirement to be licensed at their discretion on the application of any person from the licensing requirement in writing.
What requirements apply to a Licensee?
Customer information
A Licensee must ensure all information provided to customers (which for the avoidance of doubt are classed as any and all users of the platform) is clean, fair and not misleading. At a minimum, they must provide the following to customers before entering into a transaction:
- the parties to the relevant transactions;
- terms of the transaction;
- all income and relevant to be received the Licensee or any associated party; and
- a clear explanation of the risks.
Following the completion of a transaction, a closing statement must be provided by the Licensee to the relevant customer including certain details at a minimum.
Customer limits
Licensees must not permit a customer to lend, invest or
otherwise over 15% of their net assets via the Licensees'
platform, whether in one transaction or cumulatively.
The Rules specify what would should be omitted from
the net asset calculation.
Licensee responsibilities
The Rules include certain corporate governance and management
responsibilities, common to all persons licensed under the LCFL
which mirror those required
under other regulatory law licensed persons.
These requirements relate to:
- Minimum criteria for licensing - a Licensee must meet the minimum criteria for licensing set out in the LCFL (the requirements are similar to that in other regulatory laws in Guernsey). The GFSC also has the full range of supervisory, enforcement and rule-making powers under the LCFL that it has under those other regulatory laws;
- Conduct of business principles – these ten principles relate to integrity, skill, care and diligence, conflicts of interest, information about customers, customer assets, market practice, financial resources, internal organisation, and relations with the GFSC;
- MLRO and MLCO – Licensees must appoint a Guernsey resident Money Laundering Reporting Officer and a British Isles resident Money Laundering Compliance Officer;
- Audited accounts – Licensees must have their accounts audited (except for the holder of a Part II Licence that is only providing services ancillary to credit);
- Conflicts of interest policy – Licensees must have a policy on managing conflicts of interest appropriate to their business;
- Outsourcing – Licensees remain responsible for outsourced functions, and must have appropriate systems in place to oversee, control and monitor outsourced functions. Before appointing an outsourced service-provider, a Licensee must carry out due diligence on the provider and conduct a risk assessment;
- Complaints – including a requirement for a complaints procedure and a complaints log, together with an escalation process and GFSC notification;
- Customer money – customer money is required to be held in a segregated customer money bank account with an approved bank; and
- Marketing – Licensees must ensure that promotions and advertising are fair, transparent, and honest. Other requirements apply to advertising and promotions.
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.
