• Licence Requirements

The MFSC Investment Services Guidelines include Financial Resources Requirements applicable to investment services providers.  There are four categories of investment services licence holders.  The category of a licence holder reflects the services provided.

Category 1 licence holders are authorised to provide any Investment Service (as defined by the Guidelines) but not to hold or control clients' money or assets nor to deal for their own account nor underwrite. (This category does not include managers of Collective Investment Schemes.)

Category 2 licence holders are authorised to provide any Investment Service and to hold or control clients' money or assets, but not to deal for their own account or to underwrite.

Category 3 licence holders are authorised to provide any Investment Service, to hold and control clients' money or assets, and to deal for their own account and to underwrite.

Category 4 licence holders are authorised to act as trustees or custodians of Collective Investment Schemes.

The Financial Resources requirement for each category includes a Net Tangible Assets Requirement and an Expenditure-Based Requirement as follows:
 

Category	Net Tangible		Assets Requirement	Expenditure-Based Requirment*
	LM	Approx. GBP Equivalent	Approx. USD Equivalent
1	20,000	30,280	51,000	25%
2	50,000	75,700	127,500	25%
3	300,000	454,200	765,000	25%
4	2,000,000	3,028,000	5,100,000	0%

*Liquid capital should exceed the higher of Lm 5,000 (approx.  GBP 7,570 / USD 12,750) and the percentage (as noted in the table) of the previous year's annual expenditure.

The Guidelines also require a licence holder to maintain proper accounting records with regard to proprietary transactions, assets and liabilities, as well as to transactions effected on behalf of a customer.

Basic Principles

The Guidelines enumerate the basic principles that investment services providers are to follow in the handling of clients' investments.  The principles are intended to protect clients' money in the event of the insolvency of the licence holder and to ensure that a liquidator would be unable to claim against clients' money as part of the general assets of the licence holder.  The Guidelines also include the basic principles applicable to the handling of customers' assets to ensure that adequate arrangements are maintained and that assets are properly recorded, identified, segregated and controlled.  The principles ensure that the assets and the customers' interests (in the assets) are safeguarded.

Conditions

The MFSC will attach to a licence certain conditions relating to the conduct of the investment services business of the licence holder.  The conditions are designed to protect customers.  Different standards are applicable in dealing with private customers and non-private (experienced or professional) customers.

• In general, the conditions require the licence holder to act honestly and fairly and with due skill, care, diligence and integrity in the best interests of its customers.
• The conditions require disclosure of relevant material information to prospective and actual clients in a way which is fair, clear and not misleading.
• The investment services business must be conducted pursuant to a written agreement with each client.
• The licence holder must have adequate internal compliance and control procedures.
• The conditions generally require record-keeping sufficient to demonstrate compliance with the regulations and the individual licence conditions.
• The licence holder must submit Annual and Interim Returns.
• Professional Indemnity Insurance (except for Category 1 Licence Holder) and policies are mandatory.