The Isle of Man financial Services Authority and the Isle of Man Office of Fair Trading have recently issued a consultation on crowdfunding which included consultation on other legislative changes.
These other legislative changes centre around proposed changes to the Regulated Activates Order, Financial Services (Exemptions) Regulations and Financial Services (Fees) Order.
One of these changes relates to exemptions applicable to the regulated activity when a person is acting as a director by way of business.
Pursuant to the Financial Services Act 2008 and Regulated Activates Order made thereunder, acting as a director by way of business is a regulated activity. As such an individual must obtain a licence from the Isle of Man Financial Services
Authority to carry out this activity, unless they are exempted from such regulation. Such exemptions are provided for within the Financial Services (Exemptions) Regulations 2011 (as amended).
Currently, exemptions include an exemption for Directorships ‐ de minimis activities, which provide an exemption for an individual from the requirement to hold a financial services licence if that individual acts as director of no more than 10 companies.
The Financial Services (Exemptions) Regulations 2011 also includes an exemption for Group officers. This exemption exempts an individual who is an officer of a company which is part of a group, for any company which is a member of that group. Under this exemption, the number of groups is limited to 3 and each group counts as of one the de minimis directorships (being not more than 10).
Accordingly, there could be a situation where an individual, working within the ambit of the various exemptions, greatly exceeds 10 directorships.
This is highlighted in the consultation in which the Financial Services Authority have commented that it has become apparent that some individuals are taking advantage of not only of the above exemptions but other exemptions within the regulations which has resulted in some individual holding significant numbers of directorships by way of business, without a financial services licence.
The Financial Service Authority comment they this situation is perceived as being out with the original spirit and intention of the legislation.
With this in mind, the consultation suggests that the use of exemptions should be restricted. The proposal is that the exemption for Group officers, the number of directorships relating to groups, be reduced from 3 groups 1 group (which will count as one of the de minimis directorships). Also any directorships falling within the exemption relating to domestic services, will also be counted within the de minmius 10 directorships or less.
It is thought likely that these changes will mean that some individual will fall within the ambit of requiring a licence issued by the Financial Services Authority and as such a transitional provision has been included which requires an application to be made to the Isle of Man Financial Services Authority by 30th November 2016.
It would be interesting to see what effect the proposed amendments to the exemption regulations would have in practice.