Offshore Services - Guernsey

Site Visits

The Financial Services Commission (Site Visits) (Bailiwick of Guernsey) Ordinance 2008 came into force on January 30 2008. Under this ordinance, officers of the commission can conduct ad hoc site visits, with or without notice, to the offices of licensees and associated parties. Failure to comply with certain aspects of these visits can result in criminal penalties by way of an unlimited fine, a term of imprisonment not exceeding two years or both. The site visits may be conducted at such times, intervals and places as the commission’s officers deem fit to ensure compliance with the provisions of all regulatory laws, ordinances, rules, codes and so on. The site visits may be effected with notice but without the need for the agreement of the licensee or associated party, or alternatively without any notice at all. The commission’s officers can require officers, servants and agents of the licensee or associated party to produce any documentation (or copies) for examination, seizure and retention by the commission, and to answer questions or provide an explanation in respect of any such documentation. Such information must be disclosed notwithstanding any restriction as to confidentiality imposed by law, contract or otherwise; however, the principle of legal professional privilege will still apply to prevent disclosure of certain communications with lawyers.

Financial Penalties

The commission is set to enjoy further powers, primarily in relation to the imposition of financial penalties, should the Financial Services Commission (Enforcement Powers) (Bailiwick of Guernsey) Law 2008 come into force. Under this proposed legislation, the commission would have the power to impose financial penalties of up to £200,000 where it is satisfied that a contravention of the legislation has been committed by a licensee, former licensee or relevant officer of the relevant entity; or that the minimum criteria for licensing specified in the legislation are not fulfilled by those persons. In addition to the financial penalty, the commission can make a statement to the public, publishing the name of the transgressor and the amount of the penalty imposed. The commission would still have the power to make disqualification orders against auditors, although the terms upon which these orders can be made have altered slightly. There is a right of appeal against a decision made by the commission. However, there are specific limited grounds for any such appeal and specific time limits. There is a further right of appeal to the Court of Appeal, although this will arise purely on questions of law.

Powers of Investigation – Foreign Assistance

The commission’s powers of investigation and enforcement may be further extended and strengthened by the Protection of Investors (Bailiwick of Guernsey) (Amendment) Law 2007, which is also awaiting royal assent. The commission will be given certain investigative powers in relation to any licensee to protect the interests of investors, the public or the financial reputation of the bailiwick. Inspectors will be able to investigate the licensee and report back to the commission. Associated persons of the licensee or company - such as partners, auditors, agents and shareholders, whether they be currently or previously associated - can also be required to disclose all documents within their custody relating to the licensee or company under investigation and can be required to answer any questions put to them by the inspector. The costs, fees and expenses of such investigations and the correlating reports are payable by the licensee under investigation.

Criminal offences are committed by those persons who do not comply with these investigative provisions, the offender being liable to a term of imprisonment of up to two years, an unlimited fine or both. The commission will also be able to exercise its investigative powers if so requested by a relevant overseas authority in providing assistance in connection with the investigation of market abuse. If a person fails to comply with any requirement or obligation imposed on him or her pertaining to the investigation, the Royal Court can impose a financial penalty of up to £500,000 for non-compliance. A person will also commit a criminal offence if he or she knows or even suspects that an investigation is to take place and, as a consequence, falsifies, destroys or conceals any relevant document. In addition, a person who intentionally or recklessly provides false or misleading information in the course of an investigation can be liable to a term of imprisonment of up to two years, an unlimited fine or both. The procureur (Guernsey's attorney general) is also granted investigative powers in relation to criminal offences involving market abuse and again, the failure to comply with the investigation renders a person liable to the criminal penalties stated above. Further, it is a criminal offence to ‘tip off’ another person as to the fact that an investigation is being conducted or proposed to be conducted by the procureur and, if found guilty of this offence, a person shall be liable to a term of imprisonment of up to five years, an unlimited fine or both.