States must reshape the GFSC to revert to regulation rather than persecution

I UNDERSTAND that you will shortly be debating the powers of the Guernsey Financial Services Commission and offer you my thoughts.

I was in business as a professional fiduciary on the island and elsewhere for more than 35 years. I can remember the time before there even was a GFSC, then later, there was Mr Riley and a secretary, then Mr Roper with a small staff and gradually, like Topsy, the commission has grown to what it is now.

Guernsey has an enviable track record for providing high quality financial services around the world and the received wisdom is that the island’s success is due to quality regulation. I disagree, it is my opinion that the relative absence of scandal concerning the island is not, primarily, due to enlightened regulation but down to the basic integrity of the businesses and senior personnel operating them. There may have been a few bad apples in the past but they were quietly weeded out by Messrs Riley and Roper who had no need for self-aggrandisement because their reputations spoke for them.

All businesses compile what is referred to as a business risk assessment – it seems to me that the biggest risk to most of the island’s financial services businesses and, indeed, the island’s reputation now, is the GFSC itself.

The commission is out of control, has no responsibility to anyone and is not overseen in any meaningful way. It is staffed, by and large, by people who have no experience or understanding of actually operating the businesses it seeks to regulate but who, nonetheless, have the powers and seemingly limitless confidence to tell those businesses how they should operate.

This is wrong, complaints against the GFSC are investigated by the GFSC itself or, more likely, ignored, and any dispute with the GFSC comes down ultimately to a question of who has the deepest pockets, and the GFSC have apparently limitless amounts of other people’s money to spend and an attitude that they must win at all costs regardless of the real importance of the matter.

The legal profession, with one or two exceptions, will not rock the boat for fear of retaliation against their own fiduciary divisions and the trade associations will not stick their heads above the parapet because of similar fears. This has led to the GFSC becoming more and more dictatorial and intransigent and ultimately to the valid comments made by the Right Honourable Hazel Marshall KC, Lieutenant Bailiff, in the recent published case. It’s a shame that such clarity of thought and independence for which the British justice system is rightly revered has not always been apparent locally.

Instead of saying that an eminent judge with a track record which speaks for itself doesn’t know what she is talking about, the GFSC should look to its own actions and realise that it is its own behaviour which has brought about this situation.

The Frankenstein monster which is now the GFSC has created complex and legally-based systems for persecuting the industry which has been the mainstay of the island for a very long time. As has been said, it writes its own laws, decides how they should be interpreted, sits as judge, jury and executioner on purported infringements of them, without any responsibility for its own mistakes:

n The purported ‘Independent Decision Maker’ policy is a farce – the supposedly independent decision maker invariably parrots the GFSC’s own report, often copying word for word.

n Statements made in support of the accused are disregarded – I have knowledge of a situation where the compliance director of a major island finance business was dismissed as an ‘unreliable witness’ simply because his opinion was different from that of the commission, notwithstanding that he remained suitable to continue in his post.

n I have personal knowledge of a complaint made by a client involving financial loss by theft perpetrated by the service provider which was not investigated.

Everybody makes mistakes – it’s often said that ‘the man who never made a mistake never made anything’, the important thing about mistakes is that they are corrected. We now have a situation where an inconsequential mistake by a senior officer in a financial services business can mean the end of a career, financial ruin, destruction of reputation and even bankruptcy. Such a system serves no useful purpose. Pilots sometimes say: ‘Experience is what you usually get about 15 seconds after you really needed it’ but experience will include the odd mistake and the knowledge gained will strengthen the business going forward. The present system ensures that nobody will survive long enough to become experienced.

Guernsey has a lot to be proud of, the island has provided high quality service to international clients since the 1960s but bear in mind that it is the businesses who choose to operate from the island that actually do that and not the island itself – those businesses can move. I urge you, ladies and gentlemen to seize the opportunity to revert the system to regulation rather than persecution before the island’s finance industry is irreparably damaged, and the goose that lays the golden eggs chooses to lay them in another jurisdiction.

Christopher H Shaw BSc, FCA

Ferter Farmhouse

Glentrool Forest

South Ayrshire

KA26 0SR

Editor’s note: In March 2021, Mr Shaw was fined £100,000 and prohibited from holding senior roles within the financial services sector in Guernsey for 10 years following enforcement action by the GFSC.