Constitution
The JFSC is a statutory body established under Article 2 of the Financial Services Commission (Jersey) Law 1998 (FSC(J)L) which provides that the JFSC shall be governed by a Board of Commissioners comprising persons with financial services experience, regular users of such services and persons representing the public interest.
Accountability arrangements
We are an independent body, accountable to the public through the Island’s elected representatives, namely the Chief Minister and the States of Jersey. The relationship with ministers is set out in a Memorandum of Understanding to ensure our independence, whilst facilitating effective dialogue and working practices. Article 12 of the Commission Law provides that the Chief Minister may give the JFSC general directions, subject to significant safeguards.
In 2017, an Article 12 Direction was issued in order for the Exchange of Information on Beneficial Ownership (BO) agreement with the UK to be implemented to allow the Island’s Joint Financial Crimes Unit (JFCU) to access to the JFSC’s relevant information and databases on Beneficial Ownership.
We produce an annual business plan and separately an annual report to inform members of the States Assembly and other stakeholders. We consult extensively on all proposals to create or amend laws and regulations, and provide feedback to explain how we have taken responses into account.
Governance arrangements
Our Board believes that high-quality, effective governance arrangements are essential for well-run organisations. As there are no comprehensive codes or standards for the governance of a financial services regulator, our Board believes that the UK Corporate Governance Code (Code) is an appropriate benchmark.
We comply with the vast majority of the high-level principles in the Code, where they can be applied to the JFSC. For example, there is a clear division of responsibility between the Chair and the Director General, no individual has unfettered power of decision-making, and there are transparent procedures for the appointment and re-appointment of Commissioners.
Delegation of powers
Our Board delegates its powers to the Director General and the Executive team, where possible, to ensure that the JFSC can act and respond without undue delay. However, in some areas the power of the Commissioners to delegate is restricted by legislation. For example, the Board acts in a similar manner to a tribunal in relation to contested enforcement cases. Consequently, our Board is more involved in some areas of detail than the Board of a listed or private company. We have published a full explanation about the ‘Delegation of Powers’ on our website.
Composition of the board and appointment of Commissioners
Our Board currently consists of the Chair, Deputy Chair and seven other Commissioners, including the Director General. A third of the Commission Board is female. All of the Commissioners are considered to be independent, with the exception of the Director General.
Board meeting and attendance
Our Board met seven times during 2020 to consider strategy, risk and regular business. From April 2020, in light of the pandemic, the Board met virtually. Our Board also met several times to review and consider enforcement settlement cases and contested matters.
In addition, Commissioners and the Executive team met for a virtual strategy day and participated in virtual events with fellow regulators, Industry representatives and Government ministers.
Regular discussions took place over the year with Government on significant financial services matters, the NRA, planning for the MONEYVAL assessment and Brexit preparations.
Board members always carefully consider the potential for conflicts of interest to arise and excuse themselves if any perceived or actual conflicts are identified.
The table shows the number of meetings attended by Commissioners against the number of meetings they were eligible to attend:
Covid-19
Commissioners closely supported the Director General to keep the JFSC operating as usual during the pandemic. They attended catch-up meetings and provided advice to assist the Director General in navigating the unprecedented situation in which the world found itself.
Commissioners continued to remain engaged in JFSC matters and attended all meetings virtually as they would have done under usual circumstances, despite the impact of the pandemic.
Conscious of the need for Jersey to provide a united response to Covid-19, the Chair and Director General engaged with the Government and Jersey Finance during 2020 to ensure that the Island remained resilient throughout.
Board activity
Our Board maintains overall responsibility for the JFSC’s governance, setting its strategic aims and supporting their implementation by the Executive leadership team, and holding the Executive accountable, within the scope of the FSC(J)L, for the powers granted to the JFSC under that Law. The Board also oversees the running of the Board Committees.
Our Board plays a key role in listening to Industry to understand current trends and international developments. An independent stakeholder engagement survey was conducted in 2020 to inform the Board of improvements that could be made to our interaction with Industry. The Board fully supports strategic engagement with Industry bodies.
A number of presentations were made to the Board by the Executive during 2020 about how we supervise businesses, in particular the various financial sectors we oversee, policy development, and Registry matters. The Board has particular responsibility for the use of the JFSC’s enforcement powers.
The Board worked closely with the Executive Board during 2020 in order to progress the JFSC’s Strategic Roadmap. This required a number of detailed Project Initiation documents being carefully considered and approved by the Board before any major projects and capex spend could progress, including the Registry Programme, Risk Model Phase II, Portal Project and Supervision Business Transformation project.
The Board monitored the JFSC’s preparations for the forthcoming MONEYVAL assessment by means of regular updates from the Executive regarding the JFSC’s Financial Crime Prevention Capability Programme.
Enforcement matters
The Board spent significant time on a number of enforcement matters that arose through the application of the JFSC’s decision-making process and civil financial penalty cases. Such cases tend to be highly complex and involve the actions of regulated persons over a considerable period of time.
Board effectiveness review
An external Board evaluation, undertaken independently by Satori, helped the new Chair to assess what improvements could be made to Commission Board activity, effectiveness and composition.
The terms of reference for all Board Committees were revised during 2020 to ensure that they fell in line, where appropriate, with guidance issued by the Chartered Governance Institute.
Nomination Committee
The Nomination Committee was formed in September 2020. Its first task was to review the composition of skills on the Commission Board and succession planning, for both the Board and the Executive team. This includes maintaining an appropriate balance of on- and off-Island Commissioners.
The Nomination Committee reviews the structure, size and composition (including the skills, knowledge, experience and diversity) required of the Board. It makes recommendations to the Board for any changes. Creating an inclusive environment where all types of diversity are valued is important to the JFSC.
The Nomination Committee oversees the recruitment process for Commissioners and the appointment of the Director General’s direct reports to ensure it is in accordance with the Jersey Appointments Commission’s guidelines.
Audit Committee
The Audit Committee’s principal activities are to monitor internal financial control systems and to work with the Executive and the external auditors to ensure the quality of the management financial reports and the annual accounts.
The Committee reviewed the management accounts, annual capital and revenue budgets, and the draft annual reports and accounts. It recommended the annual report and accounts and the auditor's letter of representation to the Board for its approval. It reconsidered the appointment and independence of the auditors and reviewed their reports at the completion of their audit work. The Committee discussed in detail a number of accounting issues, including sums retained from the annual return fees not claimed by Government.
Legal Proceedings Committee
The Legal Proceedings Committee's terms of reference are set out on our website. Its role is to bring skills and experience to legal matters and potential litigation arising from enforcement cases.
The Committee considers whether the JFSC will initiate or defend any legal proceedings arising from any law under which the JFSC has statutory powers. The Committee takes into account potential legal costs when making decisions. The Committee met once during 2020.
Remuneration Committee
The Remuneration Committee is responsible for keeping under review the fees paid to the Chair and other Commissioners and the pay and bonus arrangements for the Director General and JFSC staff. The Committee oversees the bonus structure and its alignment to the JFSC’s performance management framework.
The Committee paid close attention to staff working conditions and welfare during 2020, in response to the Covid-19 pandemic.
Risk Committee
While responsibility for risk and risk management remains with the full Board, the Risk Committee oversees and guides the Executive Risk Committee as the JFSC further develops its risk-based supervision strategy (and its management of operational risk). The Risk Committee advises and partners with the Executive in fulfilling the Executive’s accountability to the Board regarding risk management.
The main focus of the Risk Committee’s work in 2020 was the launch of the JFSC’s risk model and governance; developing the format for operational risk reporting; and considering the development of risk appetite statements.
Commissioner remuneration
Commissioners receive a fixed annual amount. No additional amounts are paid for participating or chairing sub-committees, dealing with enforcement cases or attending to other matters.
Fees paid to Commissioners were not increased in 2020.
Director General remuneration
Martin Moloney was not paid any fees in his capacity as a Commissioner but rather was paid as an Executive Director in his capacity as Director General. For 2020, he received £300,958 (2019: £241,324 pro rata) which comprises fixed remuneration: £261,362 (2019: £257,500) and variable remuneration: £39,596 (2019: £23,185).
Auditors
BDO LLP (Auditors) undertook the annual audit as approved by the Audit Committee in November 2019.
Responsibility of the annual report and accounts
This annual report and accounts comply with the requirement in the FSC(J)L to produce an annual report to the Chief Minister and to be presented to the Members of the States no later than seven months after the end of the financial year.
The statutory obligations on the Commissioners are not extensive, requiring only that the annual accounts are prepared in accordance with generally accepted accounting principles and show a true and fair view of the surplus or deficit for the period and state of affairs at the period end. The Commissioners have elected to prepare the financial statements in accordance with Financial Reporting Standard 102 (FRS102), the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland.
Taking into account general practice, the Commissioners confirm that they are responsible for:
- keeping adequate accounting records sufficient to show the financial position within a reasonable period of time;
- safeguarding the assets and for taking reasonable steps for the prevention and detection of fraud and other irregularities;
- preparing the financial statements in accordance with applicable laws and regulations
- selecting suitable accounting policies and applying them consistently;
- making judgments and accounting estimates that are reasonable and prudent;
- preparing the accounts on a going concern basis unless it is inappropriate to presume that the JFSC will continue in business.
The Commissioners have considered the financial statements on pages 85-88 and are satisfied that they show a true and fair view of the deficit for the year and the JFSC’s financial position at 31 December 2020.
The Commissioners have considered the annual report and, taken as a whole, confirm that they believe the it is fair, balanced and understandable.
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For and on behalf of the Board of Commissioners
L Roe
Commission Secretary
6 May 2021
PO Box 267
14-18 Castle Street
St Helier
Jersey
Channel Islands
JE4 8TP