A number of recent regulatory public statements and enforcement orders made in Guernsey by the Island’s regulator, the Guernsey Financial Services Commission (the GFSC), has reinforced Guernsey’s strong commitment to taking action against those directors and regulated entities that put at risk both the public interest and the reputation of Guernsey as a financial centre. Whilst these public statements do not create new offences, they confirm the commitment of Guernsey to being a well-run but not over-regulated offshore financial services centre and to comply with its local and international obligations.
In summary, the GFSC’s public statements imposed financial penalties and prohibition orders on both individuals and entities. These included regulatory conditions ensuring that certain persons be removed from Guernsey regulated structures and independent directors be appointed. The regulatory criteria of fitness and propriety were not satisfied and the required prudence, integrity and professional skills were also not complied with, thus creating breaches of the minimum criteria and standards that are required for all regulated entities and persons.
Board and corporate governance in Guernsey centre not only around the written laws, rules and regulations but also the various codes issued by regulatory authorities (including listing authorities) and the general concepts of common law which are treated as high persuasive authority by the Guernsey courts. The overarching principle of directors having to comply with their fiduciary duties of acting in the best interest of the companies and treating all shareholders equally and fairly shows that corporate governance is all about the behaviour of directors.
The recent public statements issued by the GFSC seem to have had common themes running throughout, which should not only be re-stated as the obvious but as reflections of the GFSC’s commitment to upholding the required standards.
Whilst these cases are rare exceptions and do not represent the general trend of good governance maintained by most Guernsey boards and their service providers, the common themes that occurred in these cases were:
- Boards and/or directors lacked competence, independence, judgement and diligence in the overall running of the businesses, including a complete reliance on and obedience to unchallenged directions from clients, a lack of oversight of activities delegated to third-parties (including managers), a lack of considered board decision making processes with no active involvement in deliberations, a lack of understanding of the businesses or the underlying assets or activities of the companies and the failure to maintain proper records (being minutes, decisions or agreements) relevant to the day-to-day running of the entities;
- A lack of communication, consultation or reporting to the GFSC, a failure to be open and co-operative with the GFSC and the making of false or reckless claims to the GFSC, with no remedial actions undertaken after initial findings or concerns raised by the GFSC; and
- A failure in service providers to understand risk profiles, managing conflicts and having adequate systems, processes, procedures and training on anti-money laundering requirements (including monitoring and updates) and anti-bribery and corruption procedures.
Whilst such public statements would be obvious and not surprising to most, if not all of us, they are a stark reminder that notwithstanding time pressures and work commitments, the basic principles of good and appropriate (and regular) governance, compliance and requirements should never be ignored by directors or their Guernsey service providers whilst discharging their management or oversight roles and duties.