Part III FFB Licence Decision Tree

"person" includes –

(a) an individual,

(b) a company,

(c) any other legal person, and

(d) an unincorporated body

"Bailiwick" means the Bailiwick of Guernsey.

"Bailiwick body" means –

(a) a Guernsey body, being –

(i) a Guernsey company,

(ii) any other legal person registered, constituted or incorporated in Guernsey (including for the avoidance of doubt a Guernsey limited liability partnership, a Guernsey limited partnership with legal personality and a Guernsey foundation), or

(iii) an unincorporated body whose principal place of business is in Guernsey,

(b) an Alderney body, being –

(i) an Alderney company, or

(ii) an unincorporated body whose principal place of business is in Alderney,

(c) a Sark body, being any body, other than one mentioned in paragraph (a)(i) or (ii) or (b)(i), whose principal place of business is in Sark.

For the purposes of the LCF Law a person who provides any service or carries on any activity shall (unless the Commission, conditionally or unconditionally, directs otherwise in any particular case or, after consultation with the States of Guernsey Policy and Resources Committee, in any particular class or description of cases) be deemed to do so "by way of business" if that person receives any income, fee, emolument or other consideration in money or money's worth for doing so.

(1) In the LCF Law a "customer" means, in relation to any person ("A") –

(a) a person who has entered into or may enter into an agreement for the provision of services by A when A is carrying on business regulated by the LCF Law, or

(b) a person who has received or may reasonably expect to receive the benefit of services provided or arranged, or to be provided or arranged, by A when A is carrying on business regulated by the LCF Law.

The following businesses are, when carried on by way of business for, with or on behalf of a customer, "financial firm businesses" for the purposes of the LCF Law.

However, financial firm businesses are not subject to licensing under the provisions of the LCF Law as financial firm businesses where –

(a) they are carried on by a regulated business within the meaning of Part B of Schedule 1 to the LCF Law, or

(b) they constitute incidental and other activities within the meaning of Part C of Schedule 1 to the LCF Law.

1. Lending (including, without limitation, the provision of consumer credit or mortgage credit, factoring with or without recourse, financing of commercial transactions (including forfaiting) and advancing loans against cheques).

2. Financial leasing.

3. Operating a money service business (including, without limitation, a business providing money or value transmission services, currency exchange (bureau de change) and cheque cashing).

4. Buying, selling or arranging the buying or selling of, or otherwise dealing in, bullion or buying or selling postage stamps, except where –

(a) in the case of bullion, the business consists only of buying, selling or arranging the buying or selling of, or otherwise dealing in, bullion, where the value of each purchase, sale or deal does not exceed £10,000 in total, whether the transaction is executed in a single operation or in two or more operations which appear to be linked,

(b) in the case of buying postage stamps, the business consists only of buying postage stamps where the value of each purchase does not exceed £10,000 in total, whether the transaction is executed in a single operation or in two or more operations which appear to be linked, and

(c) in the case of selling postage stamps, the business consists only of selling postage stamps –

(i) where the value of each sale does not exceed £10,000 in total, whether the transaction is executed in a single operation or in two or more operations which appear to be linked, or

(ii) in the course of –

(A) a postal services business carried on under the authority of a licence granted under the Post Office (Bailiwick of Guernsey) Law, 2001, or

(B) a business authorised to sell postage stamps by the holder of a licence under that Law.

5. Facilitating or transmitting money or value through an informal money or value transfer system or network.

6. Issuing, redeeming, managing or administering means of payment; and "means of payment" includes, without limitation, credit, charge and debit cards, cheques, travellers' cheques, money orders, bankers' drafts and electronic money.

7. Providing financial guarantees or commitments.

8. Trading (by way of spot, forward, swaps, futures, options, etc.) in –

(a) money market instruments (including, without limitation, cheques, bills and certificates of deposit),

(b) foreign exchange, exchange, interest rate or index instruments, and

(c) commodity futures, transferable securities or other negotiable instruments or financial assets.

9. Participating in securities issues and the provision of financial services related to such issues, including, without limitation, underwriting or placement as agent (whether publicly or privately).

10. Providing settlement or clearing services for financial assets including, without limitation, securities, derivative products or other negotiable instruments.

11. Providing advice to undertakings on capital structure, industrial strategy or related questions, on mergers or the purchase of undertakings, except where the advice is provided in the course of carrying on the business of a lawyer or accountant.

12. Money broking.

13. Money changing.

14. Providing individual or collective portfolio management services or advice.

15. Providing safe custody services.

16. Providing services for the safekeeping or administration of cash or liquid securities on behalf of customers or clients.

17. Carrying on the business of a credit union.

18. Accepting repayable funds other than deposits.

19. Otherwise investing, administering or managing funds or money on behalf of other persons.

Part B of Schedule 1 to the LCF Law provides that the following businesses are "regulated businesses" and are not subject to licensing under the provisions of the LCF Law as financial firm businesses:

1. The carrying on of credit business or any other form of financial firm business by a person who holds a Part II licence under the LCF Law.

2. The carrying on of deposit-taking business within the meaning of the Banking Supervision (Bailiwick of Guernsey) Law, 2020 or any other form of financial firm business by a person who holds a banking licence under that Law.

3. The carrying on of –

(a) controlled investment business within the meaning of the Protection of Investors (Bailiwick of Guernsey) Law, 2020 or any other form of financial firm business by a person who holds a licence under that Law, or

(b) an authorised or registered collective investment scheme within the meaning of that Law.

4. The carrying on of long term business within the meaning of the Insurance Business (Bailiwick of Guernsey) Law, 2002 or any other form of financial firm business by a person who holds a licence in respect of long term business under that Law.

5. The carrying on of business as an insurance intermediary in respect of long term business within the meaning of the Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002 or any other form of financial firm business by a person who holds a licence to carry on business as an insurance intermediary in respect of long term business under that Law.

6. Acting as an insurance manager within the meaning of the Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002 or the carrying on of any other form of financial firm business by a person who holds a licence to act as an insurance manager under that Law.

7. The carrying on of regulated activities within the meaning of the Regulation of Fiduciaries Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020, in circumstances where the activities are prohibited except under the authority of and in accordance with the conditions of a fiduciary licence under that Law, or carrying on by way of business the activities described in section 3(1)(g) or (ab) of that Law or any other form of financial firm business, by a person who holds a fiduciary licence under that Law

Part C of Schedule 1 to the LCF Law provides that the following businesses are "incidental and other activities" and are not subject to licensing under the provisions of the LCF Law as financial firm businesses.

1. Any form of business falling within Part A of Schedule 1 to the LCF Law carried on in the course of carrying on the profession of –

(a) a lawyer, where such business is incidental to the provision of legal advice or services,

(b) an accountant, where such business is incidental to the provision of accountancy advice or services,

(c) an actuary, where such business is incidental to the provision of actuarial advice or services,

and for the purposes of this paragraph business is incidental to the provision of such advice or services if –

(i) separate remuneration is not being given for the business as well as for such advice or services,

(ii) such advice or services are not themselves a business falling within Part A of Schedule 1 to the LCF Law, and

(iii) the business being carried on is incidental to the main purpose for which such advice or services are provided.

(2) The carrying on of any form of business falling within Part A of Schedule 1 to the LCF Law –

(a) by way of the provision of in-house legal, accountancy or actuarial advice or services to any business falling within Part A of Schedule 1 to the LCF Law, or

(b) in the course of carrying on the profession (respectively) of a lawyer, accountant or actuary for any client carrying on such a business.

3. Activities constituting the restricted activities of dealing, advising and promotion for the purposes of Schedule 2 to the Protection of Investors (Bailiwick of Guernsey) Law, 2020 provided that –

(a) such activities are carried on by a person who is not incorporated or registered in the Bailiwick,

(b) such activities are carried on by a person who does not maintain a physical presence in the Bailiwick,

(c) such activities are carried on from a country or territory listed in Appendix C to the Commission's Handbook on Countering Financial Crime and Terrorist Financing,

(d) the conduct of such activities is subject to requirements to forestall, prevent and detect money laundering and terrorist financing that are consistent with those in the Financial Action Task Force Recommendations on Money Laundering in respect of such activities, and

(e) the conduct of such activities is supervised for compliance with the requirements referred to in item by a relevant supervisory authority.

4.  Any insurance business, within the meaning of the Insurance Business (Bailiwick of Guernsey) Law, 2002, which is –

(a) carried on by a person who holds a licence under the Insurance Business (Bailiwick of Guernsey) Law, 2002 solely to carry on general business within the meaning of that Law,

(b) carried on by a person who is not incorporated or registered in the Bailiwick,

(c) carried on by a person who does not maintain a physical presence in the Bailiwick,

(d) not managed in or from within the Bailiwick, and

(e) subject to authorisation and supervision by the United Kingdom Financial Conduct Authority.

5. Any form of business falling within paragraph 17, 19 or 20 of Part A of Schedule 1 to the LCF Law carried on in the course of carrying on the business of auditor, external accountant, insolvency practitioner or tax adviser, where the business concerned is registered under Schedule 5 to the Criminal Justice (Proceeds of Crime) Law.

Section 20 of the LCF Law provides as follows:

(1) A financial firm business (the "business in question") is exempted from the operation of section 16 and accordingly is not subject to licensing under the provisions of the LCF Law as a financial firm business where –

(a) the total turnover in respect of financial firm business of the person carrying on the business in question does not exceed £50,000 per annum,

(b) the business in question does not carry out occasional transactions, that is to say, any transaction involving more than £10,000, carried out by the business in question in the course of that business, where no business relationship has been proposed or established, including such transactions carried out in a single operation or two or more operations that appear to be linked,

(c) the business in question does not exceed 5% of the total turnover of the person carrying on the business,

(d) the business in question is ancillary, and directly related, to the main activity of the person carrying on the business,

(e) the business in question does not facilitate or transmit money or value by any means,

(f) the main activity of the person carrying on the business in question is not that of a financial firm business, and

(g) the business in question is provided only to customers of the main activity of the person carrying on the business and is not offered to the public.

(2) In addition, a financial firm business is not subject to licensing under the provisions of the LCF Law as a financial firm business where –

(a) it is carried on by a regulated business within the meaning of Part B of Schedule 1 to the LCF Law, or

(b) it constitutes incidental and other activities within the meaning of Part C of Schedule 1 to the LCF Law.

(3) In subsection (1)(b) "business relationship" means a continuing arrangement between the financial firm business in question and another party, to facilitate the carrying out of transactions in the course of such financial firm business.

Section 21 of the LCF Law provides as follows:

(1) Without prejudice to the provisions of section 20, sections 16 and 17 do not apply in relation to persons, business, services or transactions of a class or description specified for the purposes of the LCF Law by regulations of the States of Guernsey Policy and Resources Committee.

There are currently no such regulations in place.

Under the notice, the requirement to hold a financial firm business licence in accordance with Part III of the LCF Law is disapplied and the following do not require a licence under Part III of the LCF Law:

I. Persons who carry out lending to family members[1].

II. Persons who carry out lending to family members[2], where that entity is wholly owned by related family members (whether or not that credit is extended to the owners of that entity).

III. Persons who carry out lending to their registered directors, registered partners, registered shareholders, or beneficial owners[3].

IV. Registered directors, registered partners, registered shareholders, or beneficial owners who carry out lending to associated entities[4].

V. Persons who carry out lending to their employees[5].

VI. Guernsey trustees who carry out lending to named beneficiaries of the trust from which the credit is sourced.

VII. Persons who carry out lending and are administered by a licensee which holds a licence under the Protection of Investors (Bailiwick of Guernsey) Law, 2020. Note that this disapplication will only be available where either the extension of credit is ancillary to the main activity of the entity offering the credit facilities; or the extension of credit is one component of an investment, group, or holding structure of which the entity which extends the credit forms a part (where the primary purpose of such a structure is to hold underlying assets, act as a corporate group, or make one or more investments into underlying assets, by equity or by debt, but the primary purpose is not to act as a lender to unconnected third parties).

VIII. Persons who carry out lending and are administered by a licensee which holds a licence under the Regulation of Fiduciaries Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020. Note that this disapplication will only be available where either the extension of credit is ancillary to the main activity of the entity offering the credit facilities, or the extension of credit is one component of an investment, group, or holding structure of which the entity which extends the credit forms a part (where the primary purpose of such a structure is to hold underlying assets, act as a corporate group, or make one or more investments into underlying assets, by equity or by debt, but the primary purpose is not to act as a lender to unconnected third parties).

IX. Persons who carry out lending and are administered by a licensee which holds a licence under the Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002. Note that this disapplication will only be available where either the extension of credit is ancillary to the main activity of the entity offering the credit facilities, or the extension of credit is one component of an investment, group, or holding structure of which the entity which extends the credit forms a part (where the primary purpose of such a structure is to hold underlying assets, act as a corporate group, or make one or more investments into underlying assets, by equity or by debt, but the primary purpose is not to act as a lender to unconnected third parties).

X. Individuals, who are investors, who carry out lending to administered entities. Note that this disapplication will only be available where either the extension of credit is ancillary to the main activity of the individual offering the credit facilities, or the extension of credit is one component of an investment, group, or holding structure of which the individual which extends the credit forms a part (where the primary purpose of such a structure is to hold underlying assets, act as a corporate group, or make one or more investments into underlying assets, by equity or by debt, but the primary purpose is not to act as a lender to unconnected third parties).

XI. Persons who carry out lending internally, within the group structure to which they belong, where the lending entity which has an established place of business in the Bailiwick of Guernsey[6].

XII. Persons, whose established place of business is within the Bailiwick, who carry out lending to other entities whose established place of business is also within the Bailiwick[7]. Note that this disapplication will only be available where the extension of credit is ancillary to the main activity of the entity offering the credit facilities.

XIII. Entities holding a Part III VASP licence issued under the LCF Law.

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[1] In this case "family members" include "close relatives" of a person, as defined in the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020, and the "extended family" of a person, the meaning of which is provided in the States of Guernsey Guidance on housing.

[2] Ibid.

[3] Where "beneficial owners" has the definition given to it under paragraph 22 of Schedule 3 to the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999.

[4] Ibid.

[5] "Employees" means an individual who has entered into or who works under (or, where the employment has ceased, who worked under) a contract of employment: following the definition set out in the Protection of Investors (Bailiwick of Guernsey) Law, 2020.

[6] "Established place of business", in relation to a body, and without limitation, does not include an office in the Bailiwick at which is transacted only such administrative business as is necessary to enable that body to comply with the requirements of the Companies (Guernsey) Law, 2008, the Companies (Alderney) Law, 1994, the Partnership (Guernsey) Law, 1995, the Limited Partnerships (Guernsey) Law, 1995, the Foundations (Guernsey) Law, 2012, or any corresponding legislation in force in any jurisdiction outside the Bailiwick, following the definition set out in the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020.

[7] Ibid.