e business and Regulation in the Finance Sector

The Financial Supervision Commission

The Isle of Man Financial Supervision Commission ("the Commission") is committed to adhering to principles of regulation accepted in leading international financial centres, whilst also striving to maintain a level playing field with other jurisdictions. Indeed, its high but flexible standards of regulation over many years has done much to enhance the Island’s reputation internationally.

The Internet is a vitally important channel of distribution, especially for many Isle of Man institutions whose offshore clients can readily take advantage of the convenience provided by electronic commerce. The Electronic Transactions Act 2000, which came into force on 1st November 2000, provides an ideal platform for e-business to flourish on the Island, encouraging and facilitating the use of information technology by removing legal constraints affecting the use of electronic communications. Additionally, the pro-active stance of the Isle of Man Government is of great benefit to Island businesses.

Against this background, the Commission recognises that a key aspect of confidence in the Island's attractiveness as an e business centre is the regulatory approach to existing or prospective licenceholders who may be considering entering into e business, and also to new e-business propositions.

In principle, the Commission's policy towards the licensing of banking and investment businesses remains the same whether for e-business or traditional business. However, as a relatively new medium, e business has resulted in a change in focus to some of the traditional supervisory risk areas. Broad risk categories remain unaltered, but their importance and impact has changed dramatically. An example of this is systems dependency and security risk. To an Internet-based business, these risks have assumed very great significance.

The Commission has produced guidance notes for licenceholders and potential licenceholders, which provide further detail on some of the risk areas and other relevant areas to which any financial business contemplating using the internet ought to give careful thought. These guidance notes are available on request from the Commission's offices at the address below and also on its website.

The Commission will ensure that its regulatory approach is realistic and pragmatic, at the same time as taking full account of international standards as they continue to evolve. This is evidenced by the Commission’s current work in renewing and consolidating all its regulatory legislation to make it more user friendly and in the development of a regulatory regime for e-money businesses.

The Insurance and Pensions Authority

As regulator of the Island’s insurance and pensions sector, the mission of the Insurance and Pensions Authority (“the Authority”) is to ensure that the highest standards of conduct are maintained in all aspects of the business it regulates, whilst encouraging an environment within which that business can flourish.

The use of electronic methods of communication and service delivery within the sector continues to grow as businesses seek to take advantage of the cost savings that can be achieved, while providing a more efficient service to a potentially larger market. The reduction in barriers between Island-based businesses and their often geographically remote customers is a key driver behind the growth in e-business on the Island.

The challenge faced by the Authority in relation to e-business is in essence straightforward; that is to ensure that insurance and pensions business carried out via electronic means is subject to the same exacting standards of regulation as that transacted via more traditional channels. This must be achieved while retaining, for insurance and pensions providers, the key benefits that make the Island such an attractive jurisdiction.

With the electronic transactions legislation that is already in place, the Government's pro-active attitude towards e-business and world-leading technical infrastructure, the Island is in strong position to continue to grow as a centre for e-business. The Authority's aim is to maintain a regulatory framework that facilitates this development for the insurance and pensions sectors, as well as providing security for investors and preserving the Island's good standing as a financial centre. It is equally committed to ensuring that these regulations evolve in line with future e-business developments.