Navigating the GFSC’s Evolving Enforcement Landscape: Key Takeaways for Financial Services Businesses

The Guernsey Financial Services Commission (GFSC) recently updated its “Explanatory Note on the Investigation and Decision-Making Process Relating to the Use of Enforcement Powers” (the DMP Note) and issued a comprehensive “Explanatory Note on the Commission’s General Approach to Enforcement and Enforcement Measures” (the EM Note).

THE LIMITS ON THE GFSC’s POWERS

The GFSC is a statutory creation. Unlike most companies, which generally enjoy the powers of a natural person (subject to their constitutional documents), the GFSC’s powers are strictly limited to those conferred by statute. As someone who was heavily involved in drafting an earlier version of the DMP Note, I view the continued evolution of the GFSC’s processes as a positive development.

The few changes to the DMP Note and the introduction of the EM Note reflect the GFSC’s recognition that it must act strictly within its statutory remit, as interpreted by the Guernsey Courts.

Both Explanatory Notes include a general statement about how the GFSC seeks to exercise its powers and the factors it considers when making any regulatory decision. These statements reaffirm the GFSC’s risk-based approach and its preference for addressing contraventions or misconduct through ordinary supervisory processes—an approach that is not new.

When deciding whether to exercise an enforcement power, the GFSC will consider the seriousness of the contravention or misconduct and “all relevant circumstances”. These include the potential consequences of exercising the power, particularly in cases where the impact could be severe (e.g., licence suspension or revocation).

The clear articulation of the GFSC’s mandated regulatory objectives is a helpful reminder of the lens through which all enforcement actions must be considered. These objectives include:

• Countering financial crime;
• Ensuring the protection of the public; and
• Protecting and enhancing the reputation of the Bailiwick as a financial centre.

This final objective supports the GFSC’s ability to impose sanctions with a deterrent effect and to signal that regulatory breaches are taken seriously. Notably, previous judicial decisions have confirmed that the GFSC does not need to establish actual or material harm to the public interest or the Bailiwick’s reputation before imposing sanctions[1].

THE DMP NOTE – UNDERSTANDING THE INVESTIGATION AND DECISION-MAKING PROCESS

The DMP Note has been amended to incorporate guidance from the Royal Court and reflect the GFSC’s operational experience.  It is a useful reminder of what can be expected if an Enforcement Division investigation is instigated.  The DMP Note applies exclusively to decisions made under the Enforcement Powers Law and therefore does not extend to all enforcement measures outlined in the EM Note.

While the DMP Note is described as a guide rather than a prescribed process, the GFSC indicates it will only depart from it in “exceptional circumstances”. Even then, the GFSC remains bound by legal obligations, including statutory requirements, principles of natural justice, and human rights protections.

The Executive Review of a matter by the Supervisory Division prior to referral to the Enforcement Division is not new. Nor is the reminder that referral to the Enforcement Division will not necessarily result in the imposition of enforcement measures.

Consideration by the Decision Maker

Some timeframes for actions by Senior Decision Makers (SDMs) have been extended—presumably one of the changes in response to “operational experience”. It is hoped that SDMs will now be better positioned to meet these revised timeframes, and that the extensions will not diminish their sense of urgency or deprioritise timely decision-making.

Key features of the decision-making process reinforce that it is regulatory and administrative in nature, rather than judicial:

• Oral evidence may be presented at meetings convened to respond to a “minded-to” notice (MTN), but this is not automatic. A party must apply within seven days of receiving the MTN, outlining the nature of the evidence they want a named witness to present. The decision-maker will then determine whether to allow it.
• If oral evidence is permitted, another party will only be allowed to test that evidence by asking questions if the decision-maker deems it necessary in the interests of justice.
• The Enforcement Division is not required to present or prove its case to the SDM.
• The SDM must independently determine the factual basis for any findings on the balance of probabilities.

Imposition of sanctions

While there have been minor updates throughout the DMP Note, the most significant change appears in Section 14 (Sanctions). In most cases, sanctions will not be imposed until 28 days after the written decision is issued. This allows affected parties time to exercise their statutory appeal rights and seek a stay of enforcement.

The Flowchart

Unfortunately, the appended flowchart in the current DMP Note is less helpful than in previous versions. Formatting issues have obscured key information, and it is hoped the Commission will address these in the published version.

In the meantime:

• The options available at the first Case Review Panel (CRP) stage should include the ability to proceed to the next phase of the decision-making process or to enter into settlement discussions.
• Settlement may occur at any stage after the provision of case material.

THE ENFORCEMENT MEASURES NOTE – UNDERSTANDING THE RANGE OF THE GFSC’S SANCTIONING POWERS

While the EM Note does not introduce new sanctioning powers, it usefully consolidates all existing sanctions available to the GFSC and identifies the legislative basis for each. These powers are derived from a range of Laws, including:

• The Financial Services Business (Enforcement Powers) (Bailiwick of Guernsey) Law, 2020 (the Enforcement Powers Law),
• The individual supervisory laws, and
• The Bailiwick’s companies and limited partnerships laws.

The EM Note outlines the relevant legislative provisions, including thresholds for imposing specific measures and their consequences. When imposing enforcement measures, the GFSC may only consider factors specified in the applicable Law. In some cases, the Law permits consideration of “any factors it considers relevant”, but this is not universally the case.

The note also provides valuable insight into the GFSC’s general approach to exercising specific powers. It highlights conduct that may trigger enforcement action—such as failure to cooperate with supervisory investigations or to complete remediation programs—and outlines presumptions the GFSC may apply in certain scenarios. For example, there is a presumption in favour of publication when a disqualification order is made.

This article does not attempt to summarise the entire 80-page EM Note, but some key points regarding commonly imposed sanctions are highlighted below.

Prohibition Orders

The EM Note outlines three scenarios in which the GFSC will generally consider imposing a prohibition order on an individual:

• Misconduct or failure to meet the “fit and proper” requirements under the minimum criteria for licensing by board members or individuals in senior roles;
• Conduct by any individual that has caused or is likely to cause reputational damage to the Bailiwick; and
• Situations where an individual poses a risk to customers or the public.

Discretionary Financial Penalties

The GFSC has decided that it would not be appropriate to prescribe fixed penalty amounts for specific regulatory breaches.  Instead, it will assess the appropriate level of penalty in each case by applying the applicable statutory criteria and referring to the Schedule of Bandings set out in the EM Note.  This approach is consistent with the GFSC’s established practice.

The criteria the GFSC must consider are reflected in the “issues” identified in the published schedule of bandings.  However, the schedule is only a guide—each case is assessed on its own merits. As seen in previous enforcement actions, aggravating and mitigating factors are taken into account. The financial position of a firm or individual may justify a reduced penalty, while the need for deterrence may support a more severe sanction.

Public Statements

The section on public statements opens with the assertion that the GFSC “will always seek to impose a public statement following the Enforcement Process”. While this may appear to be an absolute position, any blanket approach that disregards the statutory requirement to assess the appropriateness of publication on a case-by-case basis would be ultra vires—beyond the scope of the GFSC’s lawful powers.

A more accurate interpretation of this opening statement is that, absent exceptional circumstances, the GFSC is likely to consider it appropriate to exercise its broad discretion to issue a public statement. This reflects the Commission’s emphasis on transparency and deterrence, while still acknowledging the need to comply with the legal framework governing such decisions.

The EM Note reiterates that public statements may still be issued even where a matter is resolved by settlement. It also outlines what we can expect to see in a public statement, including:

• The identity of the subject(s),
• The relevant circumstances and breaches, and
• Any sanctions imposed.

Historically, the GFSC often published public statements immediately after a final decision. However, this practice—offering limited time for subjects to consider appeal rights—has been criticised. The EM Note now clarifies that publication will generally be delayed until the appeal period has expired. An exception may apply where immediate publication is necessary to protect the public or the Bailiwick’s reputation.

Once issued, public statements are unlikely to be removed unless exceptional circumstances arise.

NEXT STEPS

If you would like a briefing on specific aspects of the EM or DMP Notes, please reach get in touch via the details below.

Our legal team brings deep, practical experience across the full regulatory lifecycle. From advising on licence applications and navigating supervisory reviews to managing complex enforcement proceedings, we understand the GFSC’s expectations and processes inside and out. We work closely with clients to provide strategic, pragmatic guidance that helps mitigate risk, respond effectively to regulatory scrutiny, and maintain strong relationships with the regulator.

[1] GFSC v Domaille & Ors [2024] GCA 003