Knowledge

The Guernsey Financial Services Commission (the "Commission") has produced comprehensive guidance on its enforcement powers that provides clarity on the role that Senior Decision Makers ("SDMs") play in the regulation of the Bailiwick's financial services sector.  The guidance describes the structured governance framework and provides transparency on the practical realities of the enforcement process, where the law necessarily does not.

The SDM role is unique to Guernsey and has been described as quasi-judicial.  SDMs are appointed in cases where there has been a serious regulatory breach.  The SDM is not one single individual, they are selected from a panel on a case-by-case basis. Such panel members have been appointed by the Commission and comprise very senior lawyers with extensive multi-jurisdictional experience and specialisms in a number of legal fields.  The SDM is selected for each case with reference to any specialist knowledge they might have, and is also subject to conflict-of-interest checks.

As part of the regulatory investigation and enforcement process, if an SDM is appointed, it is as an alternative to the appointment of a Commissioners' Decisions Committee ("CDC").  The CDC is an ad-hoc appointment of no less than three Commissioners who are Commission employees, but are of equivalent industry experience to SDMs and extremely knowledgeable in multi-jurisdictional financial regulation.  SDMs, however, sit alone to decide on the appropriate sanction for a regulatory breach.  Both the CDC and the SDM exercise the Commission's enforcement powers under Guernsey's regulatory laws.

As part of reforms in 2014, the Commission introduced the SDM role in regulatory process.  Prior to this, decision making was done by CDCs alone, which raised question marks over the Commission's impartiality as regulator of the financial services sector.  Such questions had been raised as long ago as 2003 in reporting on the supervision and regulation of Guernsey financial services.  There has also been extensive judicial discussion on the independence of the Commission's decision-making and the interplay and compatibility with the absolute right to a fair trial.

The SDM is appointed towards the end of an investigation process, after a matter has been reviewed twice by a case review panel.  Once the SDM has received a referral they have ten weeks to confirm the decision they are minded to take, which can be either:

• no action, in which case the matter will be closed;
• request more information or clarification; or
• move to the next stage in the decision-making process, which would be to issue a 'Minded To' Notice, which sets out the enforcement decision the Commission is minded to make, and  triggers a further timeline for the subject of the investigation to make representations, whether oral or written, to the SDM for consideration.  Thereafter, the SDM will review those representations and issue the Decision. 

The penalties that the Commission is permitted to enforce are wide-ranging and include licence suspension and revocation, prohibition and disqualification orders, private reprimands, public statements, enforceable undertakings and even the appointment of an administrator, the winding up of a company and injunctions.

These statutory sanctions are not incapable of challenge: rights of appeal exist and include possible grounds such as that:

• the decision was made ultra vires or there was some error of law;
• the decision was unreasonable and/or made in bad faith;
• the decision was disproportionate; and
• there was a material error on the facts or as to procedure. 

Appeals are primarily dealt with by the Royal Court. 

The SDM role does not feature in the financial regulation of other jurisdictions such as England & Wales, Jersey and other offshore jurisdictions such as the Isle of Man, the Cayman Islands and the British Virgin Islands. The Commission believes that embedding senior legal judgment into the regulatory regime has strengthened both procedural fairness and regulatory credibility through the introduction of the SDM, which adds another layer of critical and robust legal oversight to the Commission's enforcement practices, all enhancing the Bailiwick's reputation as a robustly regulated and trusted international finance jurisdiction.