Jersey Financial Services launches "Protect Your Money" website

On 14 March 2011, the Commission launched its new Website containing information aimed at helping consumers better understand the risks and opportunities associated with various types of investments and financial products.

One of the Commission’s key aims in launching this Website is to provide unbiased educational material that will help create more knowledgeable and vigilant investors.  The Commission also hopes that the Website will help the public to develop greater resistance to scams and fraudulent investment schemes, and empower consumers to take informed investment decisions and be responsible for them.

John Harris, Director General of the Commission, said:
“The global economic turmoil of the past few years and the increasing complexity of financial products has strengthened the argument for providing consumers with financial education to improve overall financial literacy.”

“Given these challenges and the fact that one of the Commission’s key purposes is reducing risk to the public of financial loss, our desire to seek to increase financial literacy levels among consumers of financial services products is greater than ever.”

The Website goes under the branding of Protect Your Money. This name was selected as the winning entry in a competition for Commission employees asking them to suggest names for an investor education initiative.

Regulatory bodies and other organisations around the world are increasingly working to help individuals improve their financial knowledge and how they manage their personal finances and plan for the future.  Many of these initiatives seek to reach out to sectors of the community that are seen as most vulnerable with regard to knowledge of financial matters and scams.

In summing up the Commission’s objectives in developing and launching the new Website, Mr Harris said:
“As a regulator, a lot of our time is engaged in investigating mis-selling of financial products.  With the creation of the Protect Your Money website, we are aiming to help empower consumers in the hope this will prevent what you could call mis-buying”.

“Effective investor education work allows consumers to plan more appropriately for their future and to feel more confident about investing in financial products.  Increased levels of investor confidence should also benefit the firms that provide investment advice and financial products to consumers.”

“Since more knowledgeable consumers are able to make informed choices about financial products and investments, our investor education initiative should also help us achieve the critical goal of protecting investors.”

The content of the Website is focused initially on matters relating to investments, insurance and banking products, together with information designed to increase awareness concerning scams and providing consumers with tips about what to do and to look out for when seeking financial advice.  The Website’s content will be developed to include material related to other aspects of finance and items such as case studies and video clips.  The new Protect Your Money Website can be found at www.protectyourmoney.je

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Registry Consultation Papers

The Commission issued the following Consultation Papers on 9 and 22 March respectively.

Consultation Paper No.1 2011
Companies (Amendment No.5) (Jersey) Regulations 2011
Registration and Process Fees for Mergers.

To view Consultation Paper No.1 2011 please click here.
Comments should reach the Commission or Jersey Finance Limited by 8 April 2011.

Consultation Paper No.3 2011
Incorporated Limited Partnerships (Jersey) Law 201- and Separate Limited Partnerships (Jersey) Law 201-
Registration and Process Fees for Incorporated Limited Partnerships and Separate Limited Partnerships

To view Consultation Paper No.3 2011 please click here. 
Comments should reach the Commission or Jersey Finance Limited by 19 April 2011.

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Forthcoming Consultations

The Commission would like to inform Industry about some of the projects that are likely to be consulted on during 2011, which are:

• Proposals to introduce civil penalties for breaches of the Commission’s Codes of Practice (the “Codes”).
• Proposals to change the Codes following the completion of the Commission-wide project to ensure that the provisions within the various Codes are consistent, with any variances in Codes being on an exception basis with appropriate rationale.
• Proposals to introduce a consistent regime that will allow the Commission to object to the appointment (and continued appointment) of auditors of persons that are supervised under the four Regulatory Laws.
• The implementation of a new Accounts Order under the Banking Business (Jersey) Law 1991 and connected revisions to the Banking Business (General Provisions) (Jersey) Order 2002.
• A review of the various TCB Exemption Orders to ensure that they remain fit for purpose, amended as necessary and combined into one Order.
• The introduction of new Codes for Funds and the revision of the Prospectuses Order.
• Monitoring the implementation of the UK’s Retail Distribution Review and issuing a position paper setting out the Commission’s own proposals in response, including consequent revisions that may be appropriate for our own regulatory regime, focusing on competence standards for investment advisers and commission payments.
• The continuing contribution by Registry to consultations on relevant enacted and draft legislation, such as new intellectual property laws and amendments to the Companies (Jersey) Law 1991 and the Control of Borrowing (Jersey) Order 1958.

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Banking Division Update

1. Bank Licensing Policy
Two sets of changes have been made to the Bank Licensing Policy, which was re-issued on 15 March 2011, following informal consultation with registered banks.  One set mirrors the changes recently made to the Licensing Policy relating to the Financial Services (Jersey) Law 1991 in respect of applicants associated with higher risk jurisdictions, whilst the other set is designed to establish the flexibility of approach that was intended when the Bank Licensing Policy was last amended in 2009.

2. Consultation Paper on Large Exposure requirements
A Discussion Paper was issued in September 2010 to all banks incorporated in Jersey on proposed changes to regulatory requirements relating to Large Exposures (“LEs”), to which seven banks responded.  Matters raised have now been addressed to respondents' satisfaction and the proposals varied to reflect these outcomes. A Consultation Paper on Large Exposures was issued on 18 March 2011.  Comments should reach the Commission or Jersey Finance Limited by 17 June 2011.  Please click here to view Consultation Paper No.2 2011.

The original fundamental change was designed to address a key recommendation of the 2009 IMF report concerning the historic blanket exemption applied to exposures of under 12 months maturity to banks and sovereign states. These will now become subject to annual concession limits.  The main changes to the original proposals emanating from feedback on the Discussion Paper clarify that exposures to high quality banks are excluded from the 800% aggregate limit for total LEs and permit, without prior authorisation, short term LEs on correspondent bank accounts created by unforeseen receipts from customers.

3. Prudential reporting
Banking would like to remind readers of the need to comment on material movements and unusual items.  The Schedule of Memoranda should be completed for items where further detail is specifically required and the following elements should always be included:

• Material changes to the bank’s balance sheet. As a guide, "material" is generally considered to be a movement in an item of 10% or more, where the item constitutes over 5% of the balance sheet footings.
• Material changes to the bank’s regulatory capital.
• Where fields are denoted as “Detail” items, the Schedule of Memoranda should identify items exceeding 5% of the total for that item.
  

Reference paragraph 1.3 of the Schedule to the Banking Codes, a commentary should be sent with the hard copy of the return, explaining all movements that a bank considers to have been material or unusual.

4. 2011 examination programme
In addition to focused examinations organised on a case-of-need basis, the Banking Division will conduct themed examinations focussing on prudential reporting and data security. Jersey banks with branches or subsidiaries located in the Isle of Man will have those operations visited in the week commencing 4 April 2011.

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Insurance Business (Jersey) Law 1996 - Licensing Policy

On 11 February 2011, the  Commission issued an updated version of the Licensing Policy in respect of those activities that require a permit under the Insurance Business (Jersey) Law 1996 (the “IB(J)L”).  The Licensing Policy was previously issued on 7 April 2009.

On 17 December 2010, the Commission issued an updated Licensing Policy in respect of those activities that require a registration under the Financial Services (Jersey) Law 1998 (the “FS(J)L”).  The changes to this Policy were in relation to the additional risks posed to the Island by higher risk jurisdictions.  The changes to the IB(J)L Licensing Policy are similar to those made to the FS(J)L Policy, with the substantive changes located as follows:

Section 4 - “General” and Section 11 - “Transparency of Ownership”, which set out the Commission’s requirements in terms of the ownership of an insurance business.

Section 9 - “Structure” and Section 10 - “Systems and Controls”, which set out the requirements where an applicant intends to provide services to customers who are themselves connected with a higher risk jurisdiction.

Section 12 - “Managed Insurance Businesses”, which sets out the factors that the Commission will consider in the context of an application from an applicant wishing to operate as a managed insurance business

The updated IB(J)L Licensing Policy can be viewed on the Commission’s website by clicking here.

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Findings of Mystery Shopping Exercise

On 2 February 2011, the Commission published a report of its findings from a second mystery shopping exercise on the suitability of advice and sales process provided by regulated investment advisers during 2010.

John Harris, Director General of the Commission, said,
“In July 2008, the Commission issued revised Codes of Practice for Investment Business and we decided to repeat the mystery shopping exercise to see how the Codes are being followed in practice and whether lessons had been learned from the previous mystery shopping exercise.”

The mystery shopping exercise was conducted on behalf of the Commission by Deloitte LLP and GfK Mystery Shopping, who recruited individuals to undertake the mystery shopping fieldwork.

The report covers a programme of mystery shopping which was based on two scenarios.  These scenarios were for a potential investment of a lump sum of £120,000 or for a ‘health check’ of the mystery shopper’s current financial position including existing financial products.  The Commission received 17 mystery shopping reports which were analysed against regulatory benchmarks.

In summing up the findings, Mr Harris said,
“It was pleasing to see that there had been a marked improvement in the number of firms sending out suitability letters and providing clear and customer friendly sales literature compared to the mystery shopping exercise undertaken in 2007”.

“However, there are still some areas for improvement in the advice process, in particular, transparency regarding fees, charges and commissions, comprehensively assessing the customer’s complete financial position and risk profile.  The focus of the meetings should be to independently assess the customer’s financial position and provide recommendations based on their needs, not on the selling of products.”

The report does not name those firms involved in the exercise.  However, the Commission has provided detailed feedback to each firm sampled.

A copy of the report is available on the Commission’s website by clicking here.

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Sanctions Guidance

On 14 January 2011, the Commission published new sanctions guidance on its website.  The guidance has been produced in an effort to raise awareness and understanding of sanctions matters.
In broad terms, sanctions obligations are applicable:

1. to all natural/legal persons and bodies located in Jersey or incorporated or constituted under Jersey Law; and
2. in respect of business done, in whole or in part, in Jersey.

The Commission therefore considers this guidance relevant to all those it regulates or supervises.

Where possible, the Commission will try to assist members of Industry with general sanctions queries. Please address any sanctions related queries by email to financialsanctions@jerseyfsc.org, having first checked to ensure that your question is not answered by the guidance.  The Commission will not be able to give fact specific or legal advice on sanctions matters.

Reports made pursuant to an obligation contained in sanctions legislation should continue to be sent to the Chief Minister’s Department by email to international@gov.je or in writing to
Chief Minister’s Department, International Relations, PO Box 140, Cyril le Marquand House, St Helier, Jersey, JE4 8QT.

The new sanctions guidance replaced the guidance published on the Chief Minister’s webpage. 
Click here to access the new sanctions guidance.

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