Draft Financial Regulation (Miscellaneous Provisions) (Jersey) Law 200-
European Convention on Human Rights
In accordance with the provisions of Article 16 of the
Human Rights (Jersey) Law 2000 the Minister for Economic Development has made
the following statement –
In the view of the Minister for Economic Development
the provisions of the Draft Financial Regulation (Miscellaneous Provisions) (Jersey)
Law 200- are compatible with the Convention Rights.
(Signed) Senator P.F.C. Ozouf
REPORT
PROPOSALS TO CHANGE LAWS BY WHICH THE FINANCE
INDUSTRY IN JERSEY IS REGULATED TO ACHIEVE GREATER CONSISTENCY WITH CURRENT
INTERNATIONAL STANDARDS
This draft Law amends the 4 Laws that are the principal basis of the regulation of the financial services industry in the Island –
· Collective Investment Funds (Jersey) Law 1988 (“CIF”)
· Banking Business (Jersey) Law 1991 (“BB”)
· Insurance Business (Jersey) Law 1996 (“IB”)
· Financial Services (Jersey) Law 1998 (“FS”)
Together, these Laws are referred to as the “Regulatory Laws”.
The changes being made by this draft Law are a continuation and conclusion of those made by a separate amending Law for each of the Regulatory Laws, that were adopted by the States of Jersey in September 2007 and came into force earlier this year.
The objectives of the changes are to ensure that the regulation of financial services in the Island is consistent with international best practice, and are also consistent across all sectors of the industry.
The combination of all the changes forms part of the efforts of the Jersey Financial Services Commission (the “Commission”) to update the Regulatory Laws in preparation for the International Monetary Fund (“IMF”) assessment later this year.
The range of changes may be grouped into the following categories –
1. New or altered provisions in the Regulatory Laws that would have been included in the earlier amendments had it not been for the time constraints that necessitated deferring action on them to a later date.
2. Adjustments to earlier amendments as a result of practical considerations that arose after they had been made or brought into effect.
3. Changes of a “housekeeping” nature that are considered necessary or desirable to avoid difficulties arising in the future.
Deferred
Amendments
By far the largest proportion of the proposed changes affects the provisions in all of the Regulatory Laws relating to the disclosure of restricted information, which is information relating to the business or other affairs of any person obtained under or for the purposes of the relevant Law. It is an offence under each of the Laws for anyone to disclose such information without the consent of the person to whom it relates and, where applicable, of the person from whom the information was received. However, the Laws also provide limited exceptions to this general rule: for example, the exchange of restricted information between regulatory authorities is permitted where it is to allow those authorities to discharge their regulatory functions.
A comprehensive review of these provisions across the Regulatory Laws identified both a wide disparity between the Laws and a number of omissions. The changes proposed by this Law seek to address both issues and, at the same time, to improve the drafting of this aspect of the Laws. The more significant changes made are –
· To permit disclosure to any person exercising a statutory function in relation to a person in respect of whom the Commission also has a statutory function. This provision is to allow the appropriate communication between the Commission and such persons/bodies as other supervisory bodies under the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008; the Driver and Vehicle Standards Department (in connection with permissions to issue motor insurance); the Data Protection Commissioner; and the UK Take-over Panel, which will be acting in respect of Jersey companies under a separate Law recently adopted by the States. The phrasing of this provision has also sought to provide for any need to exchange information with other regulatory bodies that may be established in the future, such as a Gambling Commission or Charities Commission.
· To extend the present ability for the Commission to make disclosures necessary to discharge its functions under the Laws so that the same gateway is available to anyone acting on behalf of the Commission and to anyone who is appointed under an enactment by the Commission, the Court on the application of the Commission, or by the Minister.
· To extend the ability for the Commission to make disclosures to the auditor of a registered person or of a formerly registered person, so that such disclosures may be made also to the auditor of someone who appears to have been acting in contravention of the requirement to be registered. In all cases, the disclosure must be in the interests of the clients or customers of the business.
· A new provision for disclosures to be made to a body that oversees the conduct of professional persons (such as accountants) to enable that body to exercise its regulatory functions. This will allow the Commission to refer matters of concern regarding a member of such a body that come to light as a result of the Commission carrying out its functions.
· New express provision for the Commission to make disclosures to such organisations as the IMF where it is necessary to enable or assist the conduct of a review of the Island’s compliance with international standards. A similar provision is also made in relation to the Comptroller and Auditor General conducting a review of the Commission.
· The Laws allow the Commission to require compliance with such conditions as it considers to be appropriate before restricted information is passed to certain persons. It is proposed that this discretionary power be extended to most other circumstances for the disclosure of restricted information.
· The introduction of a new power for the States to make Regulations that change the provisions relating to the disclosure of restricted information.
Several of the deferred amendments involve introducing into some of the regulatory laws (typically the BB and IB) powers and other provisions that are already available in the other Laws. Such changes to achieve consistency across all Laws chiefly involve the ability for the Commission to apply to the Royal Court in certain circumstances for it to make orders for supervision, restraint or for conditions to apply; to require that investors disadvantaged by the actions of the registered business be restored to their former position; or for injunctions or other remedial orders.
The IB is also presently the only one of the regulatory Laws that does not provide for the Commission to appoint an inspector without an application to the Court, or for an officer or agent to enter premises at a reasonable time to obtain information or documents.
In the BB the definition of “former registered person” is to be modified for its application to certain provisions. The definition includes the criterion that the former registered person has a continuing liability for deposits taken whilst it was registered. This unnecessarily limits the circumstances when the Commission is able to use some of its powers, such as the ability to require the provision of information or documents, or to carry out investigations; and the application of other provisions such as the offence of providing the Commission with false or misleading information.
Under the BB and IB at present, there is no requirement, as there is in the other two Laws, for an applicant for registration or permit, as applicable, to notify the Commission of any material changes there may be whilst the application is being considered. The draft Law seeks to add this obligation.
Adjustments to previous Amendments
Two small but important amendments to be made to CIF correct omissions from the body of previous amendments that resulted in functionaries being regulated under the FSL and the introduction of certificates for unclassified funds. The change to be made under Article 3 of the draft Law will make it clear that the functions of the Commission under CIF extend to regulating certified funds, as well as permit holders. The other omission to be corrected is for the Minister to have the same powers to make Orders that exempt a person or class of person from the requirement to hold a fund certificate as are presently available for exemptions from the requirement to hold a permit.
Under each of the Laws, the Commission has wide powers to issue directions. The previous amendments to each Law added clarification that this power included the ability to issue a direction that restricted a person’s involvement in any particular business or the finance industry in Jersey, even to the extent of a complete prohibition (a “banning direction”); and the ability to require a business to be wound up. Whereas most directions take effect immediately (with appropriate safeguards in place), it was intended that for the type of direction described above there should be a delay of at least one month (and longer if the decision is appealed) before it comes into effect. Provisions of the draft Law add this protection that was inadvertently omitted from the previous amendments; at the same time it allows that the delay may be reduced only at the option of the subject of the direction or by an Order of the Court on the application of the Commission.
A further proposed change to the provisions relating to banning directions is the introduction of a new offence, that of knowingly allowing a person to act in defiance of a banning direction. At present such an act would constitute an offence under the aiding and abetting provisions in each Law, but it is suggested that it is desirable for there to be more transparency by introducing an offence directly related to the act. A person found guilty of such an offence would be liable to the same penalty as at present under the aiding and abetting provisions.
The previous amendments made important changes to the provisions for the issue of public statements, including the introduction of a right of appeal, an associated requirement for the Commission to issue prior notice of a decision to issue a public statement, and a power for the Commission to reduce the notice period below one month where there was an over-riding justification to do so. The circumstances in which a public statement may be made include the need to issue a warning of unauthorised business. The draft Law proposes small but important changes to the criteria to be satisfied when such conditions exist, particularly allowing the Commission to take account of the protection of potential clients, investors, etc., (rather than just the wider public). Similarly, the draft Law proposes that the Commission be allowed to take into account the interests of actual or potential clients, investors, etc., in deciding whether or not to reduce the period of the notice that is given.
Housekeeping
changes
In each of the Laws, the definition of Money Laundering Compliance Officer and Money Laundering Reporting Officer is to be changed so that they have the same meaning as in the Money Laundering (Jersey) Order 2008. That Order had not been made when the definitions were introduced to the Laws through the previous amendments.
The draft Law proposes to amend the provisions in each of the regulatory Laws relating to the existing enabling power for the States to make Regulations to establish a compensation scheme in relation to the financial services sector regulated by that Law. The proposed amendment will elaborate on that power by giving examples of what may be included in the Regulations.
Each of the Laws provides for the Minister to make Orders, as well as for the States to make Regulations. However, in CIF, BB and IB, transitional, consequential, incidental or supplementary provisions may only be included in Regulations. The draft Law proposes to add the same power in respect of Orders.
Financial and manpower implications
This Draft Law will have no implications for the financial or manpower resources of the States.
European Convention on Human Rights
Article 16 of the Human Rights (Jersey) Law 2000
requires the Minister in charge of a Projet de Loi to make a statement about
the compatibility of the provisions of the Projet with the Convention rights
(as defined by Article 1 of the Law). On 28th July 2008 the Minister for Economic
Development made the following statement before Second Reading of this Projet
in the States Assembly –
In the view of the Minister for Economic Development
the provisions of the Draft Financial Regulation (Miscellaneous Provisions)
(Jersey) Law 200- are compatible with the Convention Rights.
Explanatory
Note
This draft Law amends the Collective Investment Funds (Jersey) Law 1988 (“CIF”); the Banking Business (Jersey) Law 1991 (“BB”); the Insurance Business (Jersey) Law 1996 (“IB”) and the Financial Services (Jersey) Law 1998 (“FSL”). The Laws are referred to collectively as the “regulatory Laws”.
The amendments achieve consistency and greater flexibility across the regulatory Laws in a number of areas, in particular in relation to the provisions for disclosure of information.
The draft Law is divided into 5 Parts. Parts 1 to 4 each amend one of the regulatory Laws.
PART 1 – AMENDMENTS TO CIF
Article 1 is an interpretation provision.
Article 2 amends Article 1 (the definition Article) of CIF by amending the definitions “money laundering compliance officer” and “money laundering reporting officer” to refer to compliance officers and reporting officers appointed under the Money Laundering (Jersey) Order 2008.
Article 3 amends Article 2 of CIF so that the Commission’s functions are extended generally to certificate holders in relation to unclassified funds.
Article 4 amends Article 8 of CIF to enable the Minster to exempt by Order persons or classes of persons carrying on the business of an unclassified fund from the requirement to hold a certificate.
Article 5 amends Article 8E of CIF by making provision in relation to individuals or companies involved in activities related to running the business of a collective investment fund so that directions banning such persons from carrying on such activities or requiring them to take specified steps such as winding up the fund do not take effect until at least one month after notice of the direction is given. (The period may be longer than one month if there is an appeal against the direction or a later date is specified in the notice and there are provisions for an earlier period to apply if the Commission agrees with the person concerned or the Court so orders.)
Article 6 amends Article 12 of CIF by setting out provisions that may be included in Regulations establishing a compensation scheme for collective investment funds. The power to make such Regulations is already included in CIF- this amendment elaborates on this by giving examples of what may be included.
Article 7 amends Article 13 of CIF by making it an offence for a person to allow an individual to act contrary to a “banning” direction, that is, a direction banning an individual involved in activities related to running the business of collective investment fund from carrying on such activities.
Article 8 amends Article 17 of CIF by allowing the Commission to make a public statement in respect of any person who appears to the Commission to have previously held himself or herself out as being a functionary, fund service provider, or holder of a permit or certificate holder. The existing provision extends only to persons who hold themselves out in this way at the time the public statement is made.
Article 9 amends Article 17B of CIF by allowing the Commission to take into account the interests of existing or potential participants in a collective investment fund or class of investment fund in deciding not to give at least one month’s notice of a public statement to the persons entitled to service of notice of the statement. The existing provision allows the Commission to take into account only the interests of the public.
Article 10 amends Article 20 of CIF by extending the power to make transitional, consequential, incidental or supplementary provisions to Orders. The existing provision applies only to Regulations.
Articles 11, 12, 13, 14 and 16 amend Articles 27, 28, 29, 30 and 31 respectively of CIF in relation to disclosure of information. The amendments streamline the current provisions; make them consistent with disclosure provisions in the other regulatory Laws and make them more flexible.
Article 15 inserts a new Article 30A into CIF to give the States a Regulation making power to add further persons or bodies to or by whom disclosure may be made or to amend the circumstances in which disclosure may be made.
Article 17 amends Article 34 of CIF to extend the circumstances in which the Royal Court can make an order following an application by the Commission to include breach of condition and the kinds of order that can be made. Such orders include making a collective investment fund business subject to such supervision, restraint or conditions as the Court may specify and directing the parties concerned to transfer assets to restore them to a previous position.
PART
2 – AMENDMENTS TO BB
Article 18 is an interpretation provision.
Article 19 amends Article 1 (the definition Article) of BB by amending the definition of former registered person so that, for specified Articles in BB, it is not a requirement to have a continuing liability in respect of a deposit in order to fall within the definition. The amendments also amend the definitions “money laundering compliance officer” and “money laundering reporting officer” to refer to compliance officers and reporting officers appointed under the Money Laundering (Jersey) Order 2008.
Article 20 amends Article 9 of BB by requiring an applicant for registration to inform the Commission of any changes relevant to the application while waiting for its determination by the Commission. This is to bring the BB in line with the other regulatory Laws.
Article 21 amends Article 18 of BB by making provision in relation to persons involved in running a deposit-taking business so that directions banning such persons from carrying on such activities or requiring them to take specified steps such as winding up the business do not take effect until at least one month after notice of the direction is given. (The period may be longer than one month if there is an appeal against the direction or a later date is specified in the notice and there are provisions for an earlier period to apply if the Commission agrees with the person concerned or the Court so orders.)
Article 22 substitutes Article 19 of BB so as to extend the kinds of order that the Court can make following an application by the Commission. Such orders include the circumstances in which the Court may make a deposit-taking business subject to such supervision, restraint or conditions as the Court may specify and directing the parties concerned to take steps to restore them to a previous position.
Article 23 amends Article 19A of BB by making it clear that that the Commission’s powers to amend a code of practice include revoking, varying, amending or adding to it.
Article 24 amends Article 21 of BB by making it an offence for a person to allow an individual to act contrary to a “Banning” direction, that is a direction banning an individual involved in activities related to running a deposit-taking business from carrying on such activities.
Article 25 amends Article 37 of BB by setting out provisions that may be included in Regulations establishing a compensation scheme for a deposit-taking business. The power to make such Regulations is already included in BB – this amendment elaborates on this by giving examples of what may be included.
Article 26 inserts a new Article 37B into BB to give the Court a new power, on application by the Commission, to issue an injunction and remedial order if there has been breach of specified provisions of the BB or conditions, directions, Regulations or Orders made or issued under the BB.
Articles 27, 28, 29, and 31 amend Articles 43, 44, 45 and 46 respectively of BB in relation to disclosure of information. The amendments streamline the current provisions; make them consistent with disclosure provisions in the other regulatory Laws and make them more flexible.
Article 30 inserts a new Article 45A into BB to give the States a Regulation making power to add further persons or bodies to or by whom disclosure may be made or to amend the circumstances in which disclosure may be made.
Article 31 substitutes Article 46 apply Articles 42 to 45 to information supplied to the Commission by an overseas supervisory body.
Article 32 amends Article 47 of BB by broadening the powers that may be exercised to assist a supervisory authority outside Jersey where the Commission has refused or revoked a registration or attached conditions to a registration. These powers include court orders that subject a deposit-taking business to supervision, restraint or conditions.
Article 33 amends Article 48 of BB by allowing the Commission to make a public statement in respect of any person who appears to the Commission to have previously been carrying on a deposit-taking business. The existing provision extends only to persons who are carrying on such a business at the time the public statement is made.
Article 34 amends Article 48B of BB by allowing the Commission to take into account the interests of persons who have transacted or may transact deposit-taking business with a person in deciding not to give at least one month’s notice of a public statement to the persons entitled to service of notice of the statement. The existing provision allows the Commission to take into account only the interests of the public.
Article 35 amends Article 51 of the BB by extending the power to make transitional, consequential, incidental or supplementary provisions to Orders. The existing provision applies only to Regulations.
PART 3 – AMENDMENTS TO IB
Article 36 is an interpretation provision.
Article 37 amends Article 1 (the definition Article) of IB by amending the definitions of “money laundering compliance officer” and “money laundering reporting officer” so that they have the same meaning as in the Money Laundering (Jersey) Order 2008.
Article 38 amends Article 6 of IB by requiring an applicant for a permit to inform the Commission of any changes relevant to the application while waiting for its determination by the Commission. This is to bring the IB in line with the other regulatory Laws.
Article 39 amends Article 8A of IB by making provision in relation to persons involved in running an insurance business so that directions banning such persons from carrying on such activities or requiring them to take specified steps such as winding up the business do not take effect until at least one month after notice of the direction is given. (The period may be longer than one month if there is an appeal against the direction or a later date is specified in the notice and there are provisions for an earlier period to apply if the Commission agrees with the person concerned or the Court so orders.)
Article 40 amends Article 10 of IB to enable an officer or agent of the Commission to enter premises to obtain information or documents where the appropriate notice has been served on the occupier of the premises. This is to bring the IB in line with other regulatory Laws.
Article 41 amends Article 11 of IB to give the Commission the power to appoint persons to investigate and report to it on a permit holder’s insurance business. The existing provision requires the Commission to make an application to the Court for such an appointment.
Articles 42, 43, 44, 45 and 46 amend Articles 30, 31, 32, 33 and 34 respectively of IB in relation to disclosure of information. The amendments streamline the current provisions; make them consistent with disclosure provisions in other regulatory Laws and make them more flexible.
Article 47 inserts a new Article 32A into IB to give the States a Regulation making power to add further persons or bodies to or by whom disclosure may be made or to amend the circumstances in which disclosure may be made.
Article 48 amends Article 36 of IB by making it an offence for a person to allow an individual to act contrary to a “banning” direction, that is, a direction banning an individual involved in activities relating to running an insurance business from carrying on such activities.
Article 49 inserts a new Article 36A and Article 36B. Article 36A gives the Court a new power, on application by the Commission, to issue an injunction and remedial order if there has been breach of specified provisions of the IB or conditions, directions, Regulations or Orders made or issued under the IB. Article 36B extends the kinds of order that the Court can make following an application by the Commission. Such orders include making an insurance business subject to such supervision, restraint or conditions as the Court may specify and directing the parties concerned to transfer assets to restore them to a previous position.
Article 50 amends Article 37 of IB by setting out provisions that may be included in Regulations establishing a compensation scheme for insurance business. The power to make such Regulations is already included in IB- this amendment elaborates on this by giving examples of what may be included.
Article 51 amends Article 41 of IB by extending the power to make transitional, consequential, incidental or supplementary provisions to Orders. The existing power applies only to Regulations.
Article 52 amends Article 42 of IB by making it clear that that the Commission’s powers to amend a code of practice include revoking, varying, amending or adding to it.
Article 53 amends Article 43 of IB by allowing the Commission to make a public statement in respect of any person who appears to the Commission to have previously carried on insurance business. The existing provision extends only to persons who are carrying on an insurance business at the time the public statement is made.
Article 54 amends Article 43B of IB by allowing the Commission to take into account the interests of persons who have transacted or may transact insurance business with a person in deciding not to give at least one month’s notice of a public statement to the persons entitled to service of notice of the statement. The existing provision allows the Commission to take into account only the interests of the public.
PART
4 – AMENDMENTS TO THE FSL
Article 55 is an interpretation provision.
Article 56 amends Article 1 (the definition Article) of FSL by amending the definitions of “money laundering compliance officer” and “money laundering reporting officer” so that t