Gambling legislation reforms

General commentary on the descriptions of changes in this consultation

The commentary below focuses solely on the substantive changes currently proposed in the FSA Bill and the GSC Bill. In the interest of keeping this document concise, it does not generally address consequential or ancillary amendments made to support the implementation of those substantive changes.

Please note that the descriptions provided are of the proposals as they currently stand. These may be subject to revision following the outcome of the public consultation or during the legislative process in the branches of Tynwald.

As a general comment, the term ‘Commissioners’ (a reference to the GSC) has been changed to refer to the ‘Commission’ throughout the Act for consistency with other more gambling Acts. Resulting consequential amendments have been made throughout the Act.

Section 4 (Licensing of online gambling)

Several changes being made as follows:

• New subsection (1A) has been inserted in order to set out a clear basis for GSC to collect licence applications under OGRA using prescribed application forms, as well as a clear basis to require via the applications forms and application process the necessary information required to make a licensing application assessment under this section of the Act
   
• Subsection (2) is being replaced to include reforms designed to strengthen the GSC’s entry controls. The reforms rely on the newly added definitions of ‘controller’, ‘associates’, ‘beneficial owners’ and ‘senior managers’, and provide the GSC with sufficient basis to ensure that all of these entities can be scrutinised at the application stage, and to the newly re-formulated standard of ‘fit and proper’. The changes will read as follows:
   
  • (2) The Commission shall not grant a licence to any company unless it is satisfied:
     
    • (a) That the company is a fit and proper person to conduct online gambling of the description in question
       
    • (b) That any director of the company is a fit and proper person to act as such
       
    • (c) That any controller of the company is a fit and proper person to act as such
       
    • (d) As to the beneficial ownership of the share capital of the company
       
    • (e) That any beneficial owner of the company is a fit and proper person to be such an owner
       
    • (f) That any senior manager of the company is a fit and proper person to act as such
       
    • (g) That the company has adequate financial means available to conduct online gambling of the descriptions in question.; and
       
    • (h) That any online gambling is being or will be conducted in a manner consistent with the regulatory objectives set out in section 5 (regulatory objectives) of the Gambling Supervision Act 2010
  • (2A) In assessing whether the Commission is satisfied as to the requirements in subsection (2), the Commission may have regard (among other things) to:
     
    • (a) The integrity, competence, financial standing, structure and organisation of the company
       
    • (b) The integrity, competence and financial standing of any other person mentioned in subsection (2), as the context requires
       
    • (c) The business the company proposes to carry on or is carrying on
       
    • (d) The money laundering risk or the financing of terrorism or proliferation risk
       
    • (e) The integrity of any person who is an associate of the company or an associate of any other person mentioned in subsection (2)
  • (2B) The Commission may, after consulting the Treasury, issue written guidance setting out the criteria that it will normally apply in assessing whether it is satisfied as required by subsection (2)

Notably these changes refer to a new standard of character assessment, which is ‘fit and proper’. This is being rolled out as the standard of character assessment required under applications made to the GSC, and is inline with that of other regulators such as the Financial Services Authority.

The GSC will be issuing guidance in due course which will set out how the GSC will be assessing the ‘fitness and propriety’ characteristics of a company and its key officers. The main categories that will be considered as part of this assessment are an evolution of the existing ‘integrity’, ‘competency’ and ‘financial status’ components which are currently stated within OGRA and other Acts (see current sections 4(2), 10(3) and 11(1)(b) of OGRA for some examples).

The GSC will continue to assess against the fitness and propriety of these criteria for the stated cohort of individuals to whom the criteria applies, throughout the life of the licence. This is then overlayed by the requirements and obligations placed on the licence holder under the Gambling (AML/CFT) Act 2018.

• A right of appeal against any conditions imposed on a licence (other than conditions required under section 6(2) has been introduced. The Gambling (Amendment) Act 2006 has been amended in consequence

Section 7 (Duration of licences)

Section 7 is being amended to provide for a discretionary power for the GSC to consider and accept a notification received from a licence holder under the Act, of an intention to surrender their licence.

The envisaged licence surrender process will, in the normal course of events, entail the surrendering licence holder providing to the GSC a number of pieces of information, including:

• The reasons for the surrender of the licence
   
• The proposed date that the licence surrender should become effective from
   
• Business plans showing how the licence holder intends to wind down their business or the relevant parts of their business
   
• Any outstanding AML/CFT returns or quarterly returns
   
• Details of any unresolved complaints made against the licence holder
   
• Details regarding how the GSC may be able to access specified information (should it need to) after the licence has been surrendered
   
• (Where relevant) how the licence holder intends to return player funds, as well as any communications to players regarding the surrender of its licence

The licence surrender will then become effective on a date agreed by the GSC.

The GSC may, on a case by case basis, impose conditions on surrendering licence holders which will persist beyond the surrender of the licence, such as a requirement to retain or otherwise provide for some kinds of information to be accessible to the GSC.

Any decision by the GSC to not approve a surrender, require the licence holder to take certain actions before a licence surrender becomes effective, as well as any conditions the GSC may seek to place on the licence holder that will remain effective post-surrender, will be subject to a right of appeal.

A new regulation making power has also been considered in order to create summarily triable offences in connection with the licence surrender process, and these if introduced would be subject to Tynwald’s approval. No regulations under this proposed regulation making power are currently envisaged however, with the power being retained as an option in the future should the licence surrender process require.

Under current provision, a licence surrender becomes effective on notification to the GSC. This section has been re-worked as provided above in an effort to create a more uniform and orderly licence surrender process. This will seek to prevent potential abrupt exits from the industry. Such exits may cause detriment to players and business partners alike, and as such the change aligns with the GSC’s objectives to ensure that players are protected from harm and that gambling being conducted from the Island is conducted in a fair and open way for players of such licence holders. It will also ensure that any outstanding business with the GSC, such as outstanding compliance matters can be closed off before the surrender of the licence becomes effective.

Section 9 (Variation and transfer of licence)

New paragraph (1A) being inserted in order to set out the basis for GSC application forms and the information that we collect in respect of an application made under this section.

An amendment has been made to sub-paragraph (3) in order to make clear that the GSC’s power to vary the conditions of a licence, includes the ability to impose additional conditions.

The variation of a licence under this section (including imposition of new conditions, cancelling of conditions or varying of conditions) is now also subject to a right of appeal. The Gambling (Amendment) Act 2006 has been amended in consequence.

Section 11 (Duties of the Commission)

Section 11 amended in order to bring within scope the GSC’s duty to investigate the F&P and financial standing of a licence holder as follows. This replaces the previous wording which only referred to the Board investigating the ‘character and financial status’ of the applicants. This forms part of the standardisation of the character qualities that the GSC will be assessing companies and its key officers against under the Act.

Section 13 (Cancellation etc of licence)

Section 13 has been amended as follows:

• The ground relating to cancelling a licence in relation to failure to comply with directions has been expanded to include failure to comply with directions issued under new section 15A
   
• A new ground has been included at subsection (4)(g) in order to clarify that the GSC may consider suspending or cancelling a licence in circumstances where a licencee has made significant and uncommunicated changes to its business model. This ground is intended to cover circumstances where a licensee makes material changes to their business which depart substantially from the business that the GSC initially licensed them to conduct or the business that the GSC would have been most recently aware of through communication or a routine inspection, and such a change has been made without bringing to the attention of the GSC. A suspension or cancellation on this basis would already fall within the scope of section 13(1), however the aim of this new addition is to clearly drive home the expectation that material changes of this nature which are not communicated to the GSC may be viewed as a cause for concern by the GSC. An associated definition of ‘business model’ has been introduced in new subsection (9)

Section 15A (Directions)

A new power to issue directions to the holder of a licence has been included. A direction is a tool which compels the holder of a licence to undertake specified actions in order to correct a failure identified in their compliance with their obligations under OGRA or under the conditions of their licence.

A direction under this section may:

• (a) Require the holder of a licence to comply with a request for information under paragraph 3 (requests for information for regulatory inspection purposes) of Schedule 2 (inspection and investigation)
   
• (b) Require the holder of a licence to take such action in respect of the holder’s business as is specified in the direction
   
• (c) Impose such requirements as are necessary to secure that any business carried on by the holder of a licence is in whole or in part suspended or discontinued; or (this subsection is intended to work in tandem with the regulations under section 7 which provides for a minimum window of time before the surrender of a licence becomes effective. The directions, during the surrender window will allow the Commission to control the actions that a licence holder must take before the surrender of the licence becomes effective)
   
• (d) Where a holder of a licence intends to surrender a licence, require the person to take such action as is necessary to secure that any business carried on by the holder is in whole or in part discontinued and wound up, and the direction must include a statement of the reasons for its issue

Non-compliance with a direction may be taken into account by the GSC when considering whether to take any of the further actions cited within subsection (4), namely, suspending or cancelling a licence, a variation of the licence (including by adding new conditions), issuing a further direction under section 15 (control of management, advertisement etc).

In the case of a direction which relates to the surrender process of a licence however, non-compliance will be considered a criminal offence, by virtue of the fact that none of the previously cited consequences would be particularly effective in the case of a licence holder that is in the process of surrendering its licence.

Section 21 (Regulations)

Amendments have been made to section 21, which provides a range of vires for regulations to be made under OGRA. The amendments have been made with a view to securing within scope of vires the effect and provision of some of the regulations issued under OGRA. Such additional vires include a bespoke power for regulations to:

• Prescribe standards in respect of systems and software and for licence holders to achieve compliance with such standards
   
• Require the Commission to keep registers and make them available to the public
   
• Make any provision necessary for the Commission to secure compliance with any requirements imposed elsewhere in Manx law which relates to the processing and protection of personal data
   
• Sub-delegate any function or matter further to any person or body specified in the regulations. This includes sub-delegating a power, duty or discretion
   
• Prescribe that holders of a licence comply with any such other standards, rules, regulations, codes or guidance as are in operation from time to time

Section 21B (Registers)

Provides a power for the GSC to maintain registers, including of former licence holders and for these registers to be made available to the public. The same logic is behind this, in that section 21 provides power for the Treasury to, by regulations, require the GSC to create and maintain such public registers. Section 21B provides for the GSC to be able to create and maintain such public registers of its own volition, without having to be told to do so via Treasury regulations.