In this edition
Issue Number 23 - October 2011
The Annual Regulatory Meeting of the UK Crown Dependencies
The Annual Regulatory Meeting of the UK Crown Dependencies took place on 12 October 2011. The meeting provides a forum for members of the Boards of the financial services regulators in Guernsey, the Isle of Man and Jersey to meet and discuss common issues affecting the Crown Dependencies and to share their regulatory knowledge and experience.
On this occasion the meeting was chaired by Mrs Rosemary Penn, Chairman of the Isle of Man Financial Supervision Commission. Discussions focussed on international regulatory developments and the potential impact of these on the three jurisdictions. They included the impact of Basel III and initiatives being progressed by the G20 and Financial Stability Board. They also covered the review of the Financial Action Task Force’s Recommendations on countering money laundering and terrorist financing.
The ongoing global challenges for the financial services sector and their impact on business were reviewed, and the need for regulators in each of the three jurisdictions to continue to work closely was recognised as imperative to manage the impact of the increased risks arising from the wider financial turbulence.
The Chairmen of the regulatory bodies issued a joint statement saying that:
“The meeting provides an important forum for the Boards in each of the jurisdictions to meet and collectively discuss key issues affecting them. The ability to learn from each other at Board level and to work together on common areas has been very beneficial and has ensured that we maintain our excellent working relationship especially during this time of significant change within the financial services sector.”
Guidance on Proliferation and Proliferation Financing
On 13 October 2011, the Commission published new guidance on its website regarding Proliferation and Proliferation Financing. The guidance has been produced in an effort to raise awareness and understanding of Proliferation and Proliferation Financing matters.
Proliferation financing is the act of providing funds or financial services which are used, in whole or in part, for the manufacture, acquisition, possession, development, export, transhipment, brokering, transport, transfer, stockpiling or use of nuclear, chemical or biological weapons and their means of delivery and related materials (including both technologies and dual-use goods used for non-legitimate purposes), in contravention of national laws or, where applicable, international obligations.
The Commission therefore considers this guidance relevant to all those it regulates or supervises.
Click here to access the new guidance on Proliferation and Proliferation Financing.
The Personal Questionnaire Project and Planned Changes to Data Collection
The Commission continually looks at ways of improving efficiency and is currently focussing its attention on the way it collects information from Industry and how it processes this information.
The first project on this theme relates to Personal Questionnaires (“PQ”). The Commission processed approximately 1,400 PQ Forms (i.e. new individuals) and Additional Appointment Forms (i.e. people changing roles) during 2010.
The Commission has identified several areas of improvement within this PQ process, including a clear opportunity to apply what has become commonly used technology (i.e. Web enabled technology) with respect to gathering PQ data.
The following is a summary of the benefits this project should bring to Industry:
- speeding up the Commission’s PQ response times, from receipt of a PQ to the issue of a ‘no objection’ letter or a request for further information;
- the removal of any steps or questions in the current PQ form process that provide minimal value or are not relevant to a particular PQ application; and
- the potential to provide Compliance Officers with access to a restricted area of the Commission’s website, which will contain certain information on the regulated entity and the associated principal and key persons.
This article seeks to provide an early communication to Industry on the PQ project, to be followed up by presentations to interested parties and an invitation to Industry representatives to join a working party to work with the Commission as it progresses with this project. Should you wish to register an interest at this stage, or wish to ask any questions in this regard, please contact Eric Dolan; firstname.lastname@example.org or telephone 822130.
Review of Financial Advice (“RFA”)
On 3 August 2011, the Commission published a Position Paper on the review of financial advice. The paper is the first step in a review of how investment advice is given in Jersey and follows a similar exercise undertaken by the UK Financial Services Authority (“FSA”) entitled the Retail Distribution Review (“RDR”). The Commission invited comments and responses to the Position Paper by the end of October this year.
Commenting on the launch of the position paper Mike Jones, Deputy Director of Securities at the Commission, stated:
“The key driver for this review is consumer protection. A guiding principle of the Commission is to reduce the risk to the public of financial loss. We hope that this review will result in higher standards of investment advice and limit the potential for mis-selling.“
John Harris, Director General of the Commission, also added:
“We take the view that the changes we are proposing should be acceptable to industry and understood in the wider context and that the end result will be increased transparency for consumers. This will also tie in with our other consumer protection initiatives such as the launch of our Protect Your Money website.”
In summary, the Commission’s intention is to replicate a number of the FSA’s proposals including the requirements for a higher level of qualifications for those giving investment advice and the discontinuing of commission based remuneration. The Commission will allow an extra year for implementation after the FSA’s deadlines and will consult with industry over the details of the proposals. The Commission intends that any amendments to the regulatory framework, as a result of the RFA, will take effect from 1 January 2014.
The Commission considers that increasing professional standards together with new adviser charging requirements will contribute significantly to the reduction of risk to the public of financial loss due to incompetence, dishonesty or malpractice of investment advisers carrying on business in or from within Jersey. Further, these measures will protect and enhance the reputation of Jersey in commercial and financial matters.
The Commission has sought to introduce various measures in an effort to generally improve the quality of investment advice since the introduction of the Financial Services (Jersey) Law 1998. Despite that, there have been a number of enforcement cases in connection with the provision of investment advice, including the Alternate Insurance Services Limited case, which has been the subject of a public statement by the Commission. Examinations of investment advisers and mystery shopping exercises have also highlighted the need for improvement in the advice process.
A series of consultation meetings will be held with an industry working party, and presentations to industry as a whole are in train to finalise the details of the Commission's proposal. The working party will be formed from members of key professional bodies (such as the Personal Finance Society, the Jersey Bankers Association and the Chartered Institute for Securities and Investment), Jersey Finance Limited, direct industry representatives together with representatives from the Commission.
Consultation and Feedback Papers
On 16 August 2011, the Commission issued two Feedback Papers on:
- Consultation Paper No. 5 2009: Certified Fund Prospectuses; and
- Consultation Paper No. 7 2009: Codes of Practice for Certified Funds.
Feedback Paper on Consultation Paper No.5 2009: Certified Fund Prospectuses
This Feedback Paper provides the Commission’s response to Industry’s comments on the proposals to improve disclosure in prospectuses for all types of certified fund. It is intended that the improved disclosure will be effected by:
- introducing a new Order: the Collective Investment Funds (Certified Funds - Prospectuses) (Jersey)
Order 201-(the “Prospectus Order”);
- amending the Companies (General Provisions) (Jersey) Order 2002 (the “General Provisions Order”);
- revoking the Collective Investment Funds (Unclassified Funds) (Prospectuses) (Jersey) Order 1995.
The intention is for the Prospectus Order and amendments to the General Provisions Order to become effective six months after the Prospectus Order is made by the Minister for Economic Development.
Feedback Paper on Consultation Paper No. 7 2009: Codes of Practice for Certified Funds
This Feedback Paper provides the Commission’s response to Industry’s comments on the proposal to introduce Codes of Practice for Certified Funds (the “Certified Fund Codes”). The key benefit of the introduction of Certified Fund Codes is the simplification of administrative processes whilst maintaining the regulation of fund service providers and certified funds in a manner that is consistent with international standards.
The intention is for the Certified Fund Codes to be introduced during Quarter 1 of 2012.
Copies of the two Feedback Papers, along with revised versions of the Prospectus Order and the latest draft of the Certified Fund Codes can be viewed on the Commission’s Website by utilising the hyperlinks above.
Annual Administration Fees for all types of Limited Partnerships
On 10 October 2011, the Commission published Consultation Paper No. 5 2011 regarding Annual Administration Fees for Incorporated Limited Partnerships; Separate Limited Partnerships; and Limited Partnerships.
The Commission invites comments, in writing, from interested parties on the proposals included in the consultation paper and its likely impact on persons accessing partnership information held in Jersey and those registered for the partnership class of trust company business. Comments should be provided by no later than 11 November 2011.
A copy of the Consultation Paper can be viewed here.
Memorandum Of Understanding (“MoU”)
With the States of Jersey Police
The Commission and the States of Jersey Police (the “Police”) have entered into a MoU to establish a formal basis for co-operation, in particular in respect of the exchange of information to assist each other in carrying out their respective functions.
Whilst the Commission and the Police already have legal gateways to permit the exchange of relevant confidential information, the MoU formally records the type of information which they will pass to each other. The information that the Commission will pass to the Police will include that which indicates a significant financial crime may have been committed. The information that the Police will pass to the Commission will include that which indicates a significant breach of regulatory legislation or a binding regulatory requirement may have occurred.
The MoU also sets out a protocol for the establishment of joint Commission/Police case conferences where a person is suspected of committing both criminal offences and regulatory breaches. In addition, the MoU sets out a protocol for the joint execution of search warrants where the Commission has sought one from the Bailiff in order to obtain information to further a regulatory investigation.
In a joint statement, John Harris, Director General of the Jersey Financial Services Commission and Mike Bowron, Chief Officer of the States of Jersey Police, said:
“The Commission and the Police have long had a close and fruitful working relationship and we are therefore delighted to sign this Memorandum of Understanding which formally puts on record the circumstances in which our organisations will co-operate with each other and, in particular, sets out the type of information which we have agreed to pass to each other to assist in the carrying out of our respective functions.”
A copy of the Memorandum has been placed on the Commission’s website.
With the French Banking Regulator
The Commission and the French banking regulator, the Autorité de Contrôle Prudentiel (the “ACP”), have signed a MoU that will help facilitate co-operation between the two regulatory bodies.
The MoU provides a framework for the Commission and the ACP to exchange confidential regulatory information and co-operate with each other regarding the supervision and regulation of banking entities under their authority.
John Harris, Director General of the Commission, said:
“I am delighted to sign this Memorandum of Understanding with the ACP, which operates under the authority of the French Republic’s central bank, the Banque de France.
With two of the largest French banks having significant operations in Jersey, this MoU will assist the Commission and the ACP to maintain close co-operation and dialogue with each other and contribute to effective cross-border supervision.”
A copy of the MoU can be downloaded from the Commission’s Website by clicking here
The Commission now has MoUs (either on a bilateral or multilateral basis) with regulators in over 70 countries.
The Commission hopes that this Quarterly eNewsletter to the Industry is informative and useful. It welcomes any feedback on the eNewsletter. If you would like to comment on the content of this eNewsletter, or suggest subjects that you would like to be covered in future, please contact:
Chris Renault, Commission Secretary, on telephone +44 (0)1534 822066 or by email to email@example.com