Legal and regulatory framework
The legislation is principally contained within the following laws:
Financial Services (Jersey) Law 1998;
Insurance Business (Jersey) Law 1996; and
Banking Business (Jersey) Law 1991.
The related Codes of Practice are sector specific. In combination, the laws and Codes of Practice cover a diverse range of regulated financial services including investment business, trust company business, fund services business and deposit-taking business.
Role of the JFSC
In essence the JFSC is the guardian of the island’s reputation in financial services. The stated purpose of the JFSC is to maintain Jersey’s position as an international finance centre with high regulatory standards and the Codes of Practice are key tools helping it to achieve its aims.
Codes of Practice
The Codes of Practice set the standard and establish the principles for the conduct of business, as well as the basic requirements for how regulated businesses conduct their internal affairs. Amongst a number of common core principles, the Codes of Practice in particular state that a regulated person must:
conduct its business with integrity;
be transparent in its business arrangements; and
deal with the JFSC in an open and co-operative manner.
It is worth noting that there is a requirement on regulated businesses for candour and co-operation in its relationship with the JFSC and, for example, a general duty to advise the JFSC as it becomes aware of any matter that might reasonably be expected to affect its registration. Establishing an open, transparent relationship with the regulator helps ensure a regulated business meets the expectations of the JFSC. That relationship also helps if things go wrong.
JFSC sanctions
The JFSC has a responsibility to oversee the activities of all regulated businesses and will periodically undertake inspections and respond to complaints where they arise. However, it’s far better if the regulated business has of its own volition self-reported any failings together with a remediation plan.
Where appropriate, the JFSC will try to ensure that contraventions or instances of misconduct are rectified in conjunction with the person concerned and will try to agree the implementation of a remedial action programme. Sometimes this could include either private or public written statements, “naming and shaming” being part of the JFSC’s deterrent arsenal.
For more serious breaches of law and/or regulation, the JFSC has the power to issue a direction or condition on the regulated person’s licence requiring them to take or not to take certain action. Serious beaches can also lead to refusal or revocation of licences. In the most serious of cases, the JFSC may bring civil or criminal proceedings through the courts.
In recent years, the JFSC has also had the power to impose its own civil penalties on registered persons at the following levels: (1) up to 4% of ‘relevant income’ up to a maximum of £10,000 (2) up to 6% of ‘relevant income’ up to a maximum of £4,000,000 (3) up to 8% of ‘relevant income’ up to a maximum of £4,000,000. Again this is a useful deterrent which can be employed by the JFSC.
Conclusion
Whilst thankfully rare, the JFSC has shown that it is willing to take a robust and thorough approach when investigating the activities of those businesses that fall foul of the applicable law and regulation. In particular, its recently acquired powers to impose civil penalties are a significant weapon in the JFSC’s armoury and allow it to seek a much quicker resolution than pursuing a regulated person through the courts. They also provide valuable protection to all those who deal with regulated businesses and allow Jersey to maintain its reputation as a thriving and internationally renowned finance centre.
