First names group player protection trust slides v1 04 01 14 3mm

THE POWER OF TWO

P L AY E R PROTECTION TRUST

Capital Treasury Services

R E G U L AT I O N IN THE INDUSTRY P L AY E R F U N D P R O T E C T I O N

A quote from the Online Gambling Regulations Act 2001 regarding the protection of player funds.

“The “ conditions of a licence shall include conditions requiring the holder of the licence to provide such security (real or personal or both), and to maintain such deposits and reserves, as are specified in or determined in accordance with the licence for the payment of debts arising out of online gambling conducted by him”

CURRENT TRUST STRUCTURE EXISTING MECHANISM

THE COMMISSION

T H E O P E R AT O R There is a regulatory requirement to maintain assets security in order to maintain deposits and reserves for the provision of Player Fund Protection.

The Isle of Man Gambling Supervision Commission has no direct oversight and is reliant on regular reporting from both the Operator and Trustees.

THE TRUST The structure put in place is to ensure that Player Funds are segregated for other operational elements of the Operators’ business.

REPORTING Reporting lines are dependent on both the Operator and Trustees channels of communication to the Commission which may be monthly or as infrequent as quarterly.

FEES These are often charged back to the Operator by the Trustee as the funds received are purely to cover player protection liabilities.

P AY M E N T S

INVESTMENT Without the intervention of skill asset managers little or no return can be generated from the current segregated funds.

Payments will be made using third-party banking systems and will be reliant on internal payment processes which could be subject to delays.

IF IT’S NOT BROKEN WHY FIX IT? P L AY E R F U N D P R O T E C T I O N

Segregated accounts, bank guarantees and insurance are currently acceptable under the regulations, but there are disadvantages to these methods.

“Little “ or no return can be generated from the current segregated funds” “Segregated “ funds could be subject to legal challenges as regards to beneficial ownership”

“Methods “ such as insurance and guarantees are a sunk cost for operating companies” “Segregated “ accounts offer no protection against fraud for either the players or the operating company”

P L AY E R PROTECTION TRUST THE NEW TRUST MECHANISM

T H E O P E R AT O R This new structure ensures that the Operator has peace of mind in the knowledge that their regulatory obligations towards Player Fund Protection have been fully met.

THE COMMISSION The Isle of Man Gambling Supervision Commission will have complete transparency for both reporting and payment authorisation should the need arise.

THE TRUST Trust structure put in place to protect and manage Player Funds.

INVESTMENT This new structure allows for the underlying funds to be invested in multi-currency cash-based solutions, or other alternatives once agreed between the Commission and Trustees, creating returns for the Operator.

FEES Trustee fees are covered from the investment returns of the assets held on account.

P AY M E N T S O L U T I O N REPORTING Full access to the online reporting mechanism ensures that the Operator, Commission and the Trustees have 24/7 access at all times providing complete transparency.

The online solution ensures that all payment requests create automated trigger events which are cross-checked against agreed mandates for payment amounts and frequency.

This instils complete transparency between Operator and the Commission.

P L AY E R PROTECTION TRUST A D VA N TA G E S

The advantages which can only be attained through a Player Protection Trust.

“Ownership “ of player funds is clearly removed from the company, legally and beneficially” “Independent “ control of the player funds is seen as the gold standard by regulators”

“Provides “ an excellent marketing opportunity as players will be reassured that their deposits are secure” “This “ mechanism can generate a greater commercial return than a simple segregated account, ensuring there is no net cost to the company meeting its obligations to protect player funds”

MONITORED TREASURY POOL INTERNAL MECHANISMS

P AY M E N T S O L U T I O N The Monitored Treasury Pooled Account is accessed through the online Payment Solution.

This gives access 24/7 from anywhere in the world with an internet connection.

The system will monitor incoming payments and automatically allocate monies received into the Monitored Treasury Pooled Account directly into a Cash Liquidity Account for each Operator and each subsequent currency.

FEES Should investment returns fall short a de-minimus may need to be made.

INVESTMENT A cash-only investment solution that maintains a high level of credit quality, asset security and minimal volatility whilst tracking UK, US and European base rates.

THE COMMISSION The Isle of Man Gambling Supervision Commission have full oversight for reporting and payment authorisation on all Operators’ Monitored Treasury Pooled Accounts.

REPORTING MECHANISM In addition to the Operator, the Commission and Trustees will have full 24/7 oversight on all Operators’ accounts that are designated for player fund protection through the Payment Solution.

T H E O P E R AT O R

The Player Protection Trust delivered by the First Names Group wraps around the Monitored Treasury Pooled Account providing full access to payment authorisation and reporting.

The client by whom online gambling is conducted and who holds a current gaming licence issued by the Commission and who is required to provide for protection of Player Funds.

Capital Treasury Services

THE POWER OF TWO THE BENEFITS In our view, this addresses many of the concerns that have been discussed over the last 12 months, in particular: Cost to the Operator: There is no net cost to the Operator – the charges of the Trustees are paid from their returns on the deposits. In fact, the First Names Group is of the view that by working with Capital Treasury Services we can generate a surplus over and above our own charges and actually produce revenue for participating operators.

Flexibility: Operators are not forced to collateralise above a level that is convenient to them; some Operators who currently protect player deposits maintaining capital adequacy ratios would find this attractive, as would those who maintain segregated funds which deliver little or no financial return. As previously mentioned the collateralisation is something which the Commission can determine should they believe a particular operating company justifies a higher or lower level.

Security: In our opinion (supported by discussions with a number of law firms) ‘segregated’ trust status accounts are by no means copperbottomed because they remain under the legal ownership and direct control of the operator. They are also open to challenge in other ways and there is plenty of case law on this. That creates, in times of fiscal stress upon an operator, a significant conflict of interest within the governance of the operator as between the survival of the operator and the interests of the players.

The Commission wishes to ensure that an ailing Operator might find the temptation to dip into the ‘segregated’ customer deposit account too much to resist. The independent trustee accountable to the Commission solves these difficulties in a definitive way. The desires of any liquidator to protect the creditors of the company should not be underestimated also, and a transfer of legal and beneficial ownership to third party trustees offers substantially enhanced protection over a simple segregated account.

Capital Treasury Services

THE POWER OF TWO ONLINE BENEFITS

CASH LIQUIDITY BENEFITS

Online payment solutions enable businesses to access and control cash quickly and efficiently around the world. Our appointed Treasury Services Provider has developed a secure, cost-effective solution for global investment and payment needs.

Additional flexibility is afforded internally within the Monitored Treasury Pooled Account with two-day liquidity and a return on the invested cash assets.

Within the rated liquidity account is the option to take advantage of longer dated cash investments which although will affect liquidity will also increase returns.

View balances and transactions or issue payment instructions on the Monitored Treasury Pooled Account

Banking Instrument

Liquidity Account Highly diversified portfolio

Cut transaction costs by using a single point of access to local clearing systems in the overseas markets where you operate

Level of Risk

Single issuer

Investment Choice

Investor selects limited Actively managed, number of maturities diversified treasury and investments pool of investments

Upload balance and transaction information directly into your accounting systems – reducing delays and costly mistakes caused by re-keying data

Credit Quality

Credit rating of institution

Credit rating on whole treasury pool

Liquidity

Restrictive unless overnight deposits used

Two days

Cost

May be expensive operationally

Discounted due to economies of scale

Help improve your overall cash position using the most up-to-date account information Free up administration teams to concentrate on growing and developing the business

The Liquidity Account provides asset security through its segregated account structure keeping the assets clear of any balance sheet exposure.

In addition the asset credit quality is maintained by only investing in A or higher rated issuing institutions.

The structure is also independently rated by Standard & Poor’s on a monthly basis ensuring that these strict investment guidelines are adhered to.

Capital Treasury Services

www.firstnames.com

Isle of Man International House Castle Hill Victoria Road Douglas Isle of Man IM2 4RB T / +44 1624 630600 F / +44 1624 624469 iom@firstnames.com Relevant companies within First Names Group are regulated as appropriate by the Isle of Man Financial Supervision Commission, the Jersey Financial Services Commission and the British Virgin Islands Financial Services Commission. Full details of the companies regulated can be found at: www.firstnames.com/legal Capital Treasury Services Limited is a member of the Capital International Group.

Capital Treasury Services Limited is licensed by the Isle of Man Financial Supervision Commission.

Registered Address: Capital House, Circular Road, Douglas, Isle of Man, IM1 1AG