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Finance Industry Legislation: Maintainance - Law drafting instructions

A formal published “Ministerial Decision” is required as a record of the decision of a Minister (or an Assistant Minister where they have delegated authority) as they exercise their responsibilities and powers.

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  • demonstrating that good governance, and clear lines of accountability and authority, are in place around decisions-making – including the reasons and basis on which a decision is made, and the action required to implement a decision

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The Freedom of Information Law (Jersey) Law 2011 is used as a guide when determining what information is be published. While there is a presumption toward publication to support of transparency and accountability, detailed information may not be published if, for example, it would constitute a breach of data protection, or disclosure would prejudice commercial interest.

A decision made 21 July 2014:

Decision Reference: MD-C-2014-0134

Decision Summary Title :

Law drafting instructions for routine maintenance of the laws that regulate the finance industry

 

Date of Decision Summary:

8 July 2014

Decision Summary Author:

 

Director,

Finance Industry Development

Decision Summary:

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

N/A

Written Report

Title :

Law drafting instructions

 

Date of Written Report:

24 June 2014

Written Report Author:

Director,

Finance Industry Development

Written Report :

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Subject: Jersey Financial Services Commission (“JFSC”): law drafting instructions for routine maintenance of the laws that regulate the finance industry.

Decision(s): The Deputy Chief Minister confirmed that he was content for the law drafting instructions regarding routine maintenance of the laws that regulate the finance industry to be passed by the JFSC to the Law Draftsman for action.

Reason(s) for Decision: The attached law drafting instructions propose ‘maintenance’ amendments to the laws listed below to address certain minor operational issues, inconsistencies and lacunae that have been identified by the JFSC in the course of using the legislation in its day-to-day regulatory activities. The laws referred to are the:

 

  • Banking Business (Jersey) Law 1991
  • Collective Investment Funds (Jersey) Law 1988
  • Financial Services (Jersey) Law 1998
  • Insurance Business (Jersey) Law 1996
  • Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008

 

(Together, “the regulatory laws”).

Resource Implications: There are no significant resource implications identified.

Action required: The Director, Finance Industry Development, to provide confirmation to the Law Draftsman that the Chief Minister is content for the attached law drafting instructions to be submitted to the Law Draftsman.

Signature:

 

 

 

Position:

 

 

Deputy Chief Minister of Jersey

Date Signed:

 

Date of Decision (If different from Date Signed):

 

 

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Finance Industry Legislation: Maintainance - Law drafting instructions

LAW DRAFTING INSTRUCTIONS

ROUTINE MAINTENANCE OF LAWS THAT REGULATE THE FINANCE INDUSTRY

 

(the “Commission”)

 

 

LAW DRAFTING INSTRUCTIONS

 

 

IN THE MATTER OF -

ROUTINE MAINTENANCE OF LAWS THAT REGULATE THE FINANCE INDUSTRY.

 

THE INSTRUCTIONS COMPRISE AMENDMENTS TO –

Collective Investment Funds (Jersey) Law 1988;

Banking Business (Jersey) Law 1991;

Insurance Business (Jersey) Law 1996;

Financial Services (Jersey) Law 1998; and

Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008;

including legislation made under these laws.

 

 

Commission Reference: I&P/P27-003-11

Date: 24 June 2014

 

Drafting Instructions prepared by:

 Stephen de Gruchy (Policy & Strategy Division)    

Tel:  01534 822110

Email:  s.degruchy@jerseyfsc.org

 

 

For the avoidance of doubt the instructing Officer is the Chief Minister’s Department Financial Services Unit and all correspondence with the Law Draftsman should be cced to a relevant officer from the Financial Services Unit  
GLOSSARY OF TERMS

 

 

It is not intended that the meanings given below should necessarily be, or become, formal definitions: they are provided only to assist in simplifying these instructions and in making them clear.

 

 

BB(J)L

Banking Business (Jersey) Law 1991

CIF(J)L

Collective Investment Funds (Jersey) Law 1988

FS(J)L

Financial Services (Jersey) Law 1998

IB(J)L

Insurance Business (Jersey) Law 1996

SB(J)L

Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008

key person

has the meaning assigned in Article 1 of each of the regulatory laws.

licence

Means:

  • a registration granted in accordance with Article 9 of the BB(J)L;
  • a permit granted in accordance with Article 7 of the CIF(J)L;
  • a certificate granted in accordance with Article 8B of the CIF(J)L;
  • a registration granted in accordance with Article 9 of the FS(J)L;
  • a permit granted in accordance with Article 7 of the IB(J)L;  and
  • registration granted under Articles 14 or 15 of SB(J)L.

principal person

  • with respect to the BB(J)L means a director, controller and manager as defined in Article 1 of the BB(J)L;
  • with respect to the CIF(J)L and FS(J)L shall have the meaning assigned to it in Article 1 of the respective law; and
  • with respect to the IB(J)L means a chief executive and shareholder controller as defined in Article 1 of the IB(J)L and any individual intending to act, or acting, as a director.

registered person

A person to whom a licence has been granted.

regulatory laws

the collective name for the BB(J)L; the CIF(J)L; the FS(J)L; the IB(J)L; and the SB(J)L.

  Page 1 of 16



LAW DRAFTING INSTRUCTIONS

ROUTINE MAINTENANCE OF LAWS THAT REGULATE THE FINANCE INDUSTRY

1                INTRODUCTION

1.1          The amendments proposed in these instructions are to address issues that have been identified in the course of the day-to-day regulatory activities under the regulatory laws.

1.2          Each section of this document provides the instructions relating to a particular topic, together with background information and the reason(s) for the change, as appropriate.

 

 

 


2                BANKING BUSINESS (JERSEY) LAW 1991 – REVOCATION OF REGISTRATION

Background

2.1          Article 10(3) of the BB(J)L sets out the circumstances in which the Commission may revoke the registration of a deposit-taker.

2.2          Currently, Article 10(3) does not provide for the Commission to be able to revoke a registration at the request of the registered deposit-taker. This means that where a deposit-taker voluntarily ceases to carry on business within the Island there is no explicit grounds in Article 10(3) for revoking their registration.

2.3          All of the other regulatory laws provide that the Commission may revoke a registration at the request of the registered person.[1]

Drafting Instructions

2.4          Please amend Article 10(3) of the BB(J)L so that the Commission may revoke a registration at the request of the registered deposit-taker (i.e. “person A” as referred to in that Article).

 


3                WITHDRAWAL OF DIRECTIONS

Background

3.1          All of the regulatory laws provide for the Commission to be able to issue a person with directions which, in summary, may require a person to take certain action or refrain from taking certain action.

3.2          Both the FS(J)L and the SB(J)L provide the Commission with an explicit power to withdraw a direction (Article 23(4) in each of those laws). However, the equivalent Articles in the BB(J)L, the CIF(J)L and the IB(J)L do not state explicitly that the Commission may “withdraw” a direction.

3.3          This may be the result of an oversight in drafting.

3.4          However, it could be that a view had previously been taken that the defined term, “vary”, which appears in Article 1 of the BB(J)L, the CIF(J)L and the IB(J)L (but, interestingly, not in the FS(J)L or the SB(J)L) covered the position because it states that the term, “vary”, should be interpreted to include (amongst other things), an action to “revoke” something.

3.5          Notwithstanding this, we believe that it would be better to amend the BB(J)L, the CIF(J)L and the IB(J)L to explicitly provide for a direction to be “withdrawn”. Doing so would avoid any possibility that “revoke”, as referred to in the definition of “vary” in the BB(J)L, the CIF(J)L and the IB(J)L, might not always be treated as analogous to “withdraw”, given that in the FS(J)L and the SB(J)L there are no references to “revoking” a direction but rather to the action of “withdrawing” a direction.

Drafting Instructions

3.6          Please amend the BB(J)L, the CIF(J)L and the IB(J)L to provide the Commission with an explicit power to “withdraw” a direction.

3.7          Our preference would be for this to be done by amending the following Articles to provide the Commission with the explicit power to withdraw a direction (and thus make the language consistent with Article 23(4) in each of the FS(J)L and the SB(J)L):

         BB(J)L: Article 21(4).

         CIF(J)L: Article 13(4).

         IB(J)L: Article 36(4).

3.8          An alternative would be to amend the definition of, “vary” in Article 1 of BB(J)L, the CIF(J)L and the IB(J)L to include a reference to “withdraw”. However, our preference would be for the approach described in paragraph 3.7 above so that the language of equivalent Articles in each of the regulatory laws is kept as consistent as possible.

 

 


4                PRINCIPAL PERSONS AND CONTROLLERS: EXCLUDING CUSTODIANS OF SHARES

Background

4.1          The FS(J)L, the CIF(J)L and the SB(J)L provides the Commission with certain powers over “principal persons” as defined in Article 1 thereof. Similar powers are granted to the Commission by the BB(J)L and the IB(J)L in respect of persons who are to become “controllers” or “shareholder controllers”.

4.2          One of the key categories of person covered by the definitions referred to in paragraph 4.1 above are significant beneficial owners/controllers in a regulated entity.

4.3          The drafting of the definitions referred to in paragraph 4.1 may currently result in persons who hold shares only in a custodial capacity for a beneficial owner being caught by the definitions. This is unnecessary: the Commission’s interest, from a regulatory perspective, is in the beneficial owner of the shares and not the custodian, where there is one.

Drafting Instructions

4.4          Please amend the definition of “principal person” in Article 1 of the FS(J)L, the CIF(J)L and the SB(J)L so that in relation to paragraph (b) thereof shares and voting power that a person holds is disregarded in the following circumstance:-

4.4.1              Shares held by a custodian or its nominee provided that the custodian or nominee is only able to exercise the voting rights attached to the shares under instructions given in writing or by electronic means.[2]

4.5          Please amend the definition of “controller” in Article 1 of the BB(J)L so that in relation to paragraph (e) thereof a person holding voting power in the following circumstance is disregarded:-

4.5.1              Voting power held by a custodian or its nominee provided that the custodian or nominee is only able to exercise the voting power under instructions given in writing or by electronic means.

4.6          Please amend the definition of “shareholder controller” in Article 1 of the IB(J)L so that a person holding voting power in the following circumstance is disregarded:-

4.6.1              Voting power held by a custodian or its nominee provided that the custodian or nominee is only able to exercise the voting power under instructions given in writing or by electronic means.

 


5                INSURANCE BUSINESS (GENERAL PROVISIONS) (JERSEY) ORDER 1996
(the “GPO”)

Background

5.1          There is an error in the long title of the GPO where it refers to the GPO being made in pursuance of Article 5(4) (amongst others) of the Insurance Business (Jersey) Law 1996.

5.2          This error appears to have crept in during the preparation of one of the periodic law revisions.

Drafting Instructions

5.3          Please correct the error by replacing the reference to Article 5(4) with a reference to, “Article 5(5)”.


6                COMMUNICATION BY AUDITORS WITH THE COMMISSION

Background

6.1          The following Articles in the CIF(J)L, the FS(J)L and the IB(J)L enable auditors and reporting professionals (see 7.1) in most cases to pass relevant information to the Commission without being in breach of any duty of confidentiality (but see section 8 of this paper):

         Article 32 CIF(J)L

         Article 18 FS(J)L

         Article 21 IB(J)L

6.2          There is a lacuna in each of those Articles that needs to be addressed.

6.3          A reporting professional can provide relevant information to the Commission in relation to a “registered person or of any principal person” [my emphasis]. However, those Articles do not provide for auditors to provide information in relation to ”principal persons”. This is an oversight that needs to be corrected.

Drafting Instructions

6.4          Please amend the following Articles to provide that auditors may also provide information relating to principal persons without being in breach of any duty to which the auditor may be subject:

         Article 32(2) CIF(J)L

         Article 18(2) FS(J)L

         Article 21(2) IB(J)L

 

 


7                REPORTS BY PROFESSIONALS IN CONNECTION WITH AN APPLICATION FOR A PERMIT/CERTIFICATE

Background

7.1          The FS(J)L (Article 8(5)), the BB(J)L (Article 9(7)) and the SB(J)L (Article 13(4)) provide the Commission with the power to require an applicant for registration to provide a report by an accountant or other qualified person (each, a “reporting professional”) on such aspects of the application information as the Commission may specify.

7.2          However, neither the CIF(J)L nor the IB(J)L contains a similar provision. This means that the regulatory laws are not consistent in an area where they need to be.

Drafting Instructions

CIF(J)L

7.3          Please amend Articles 6 [Application for permit] and 8A [Application for certificate] of the CIF(J)L to provide the Commission with the power to require the applicant to provide the Commission with a report by a reporting professional approved by the Commission on such aspects of the information provided under those Articles as may be specified by the Commission.

7.4          A consequential change will be needed to Article 32 [Communication by auditor and other persons with Commission] to provide that no duty to which a reporting professional appointed to make a report under Articles 6 or 8A (amended as requested in paragraph 7.3 above) may be subject shall be regarded as contravened by reason of his or her communicating in good faith to the Commission, whether or not in a response to a request made by it, any information or opinion on a matter to which Article 32 applies and which is relevant to any function of the Commission under the CIF(J)L.

7.5          Article 32 should be amended to apply to any matter of which the reporting professional becomes aware in his/her capacity as the person making the report and which relates to the business or affairs of the applicant or of any principal person in relation to whom his or her report is made.

 

IB(J)L

7.6          Please amend Article 6 [Application for permit] of the IB(J)L to provide the Commission with the power to require the applicant to provide the Commission with a report by a reporting professional approved by the Commission on such aspects of the information provided under that Article as may be specified by the Commission.

7.7          Article 21 [Communication by auditor with the Commission] of the IB(J)L will need the same consequential amendments referred to in paragraphs 7.4 and 7.5 above.

7.8          There is currently an omission from Article 21 of the IB(J)L to enable a reporting professional appointed under Article 10(1)(b) to communicate with the Commission without breaching any duty of confidentiality. [By way of comparison, see Article 18(1)(b) and 18(3) of the FSJL.] To ensure the IB(J)L is consistent with the other regulatory laws, please amend Article 21 to address this omission.


8                COMMUNICATION BY REPORTING PROFESSIONALS WITH THE COMMISSION: LACUNAE

Background

8.1          Article 18 FS(J)L, Article 34 BB(J)L and Article 32 CIF(J)L enable a reporting professional (amongst others) to pass relevant information to the Commission without being in breach of any duty of confidentiality.

8.2          However, those Articles have omissions from them which need to be addressed to ensure that they work as intended.

8.3          Currently, Article 18(3) of the FS(J)L only permits a reporting professional to communicate information to the Commission where it relates to the affairs of a registered person or any principal person thereof. This means that a reporting professional appointed under Article 8(5) to report in relation to an application for registration would not be able to communicate information to the Commission about the applicant or a principal person/proposed principal person thereof without a ‘guarantee’ of not breaching any duty of confidentiality. Article 18(3) needs to be amended so that a reporting professional appointed under Article 8(5) can communicate information in relation to the affairs of an applicant for registration or a principal person/proposed principal person thereof.

8.4          In relation to Article 34 of the BB(J)L there is an omission from paragraph (1)(b) which should, to be consistent with the other regulatory laws, also cross-refer to a reporting professional appointed to make a report under Article 9(7) of the BB(J)L.

8.5          In relation to Article 32 of the CIF(J)L there is an omission from paragraph (3) which should, to be consistent with the other regulatory laws, also make reference to a report relating to the principal persons of: the holder of a permit; a former holder of a permit; a person to whom a certificate has been granted; a fund service provider in relation to a certified fund or a former fund service provider in relation to a certified fund.

8.6          There is also a lacuna in the SB(J)L that needs to be addressed.  Like the FS(J)L (on which the SB(J)L was based), the SB(J)L provides for the appointment of a reporting professional. See Articles 13(4) and 30(9) of the SB(J)L. However, the SB(J)L does not contain an equivalent to Article 18 of the FS(J)L which it should do to allow reporting professionals to disclose confidential information to the Commission in appropriate circumstances, without breaching any duty of confidentiality.

Drafting Instructions

8.7          Please amend Article 18(3) of the FS(J)L so that Article 18 also relates to any matter of which the reporting professional becomes aware in his or her capacity as the person making the report and which relates to the business or affairs of the applicant for registration or of any principal person/proposed principal person thereof in relation to whom his or her report is made.

8.8          Please amend Article 34(1)(b) of the BB(J)L so that it also cross-refers to a person appointed to make a report under Article 9(7) of the BB(J)L

8.9          A consequential amendment to Article 34 of the BB(J)L will be needed to ensure that the matters to which the Article applies includes any matter of which a reporting professional appointed to provide a report under Article 9(7) becomes aware in his or her capacity as the person making the report and which relates to the business or affairs of the applicant for registration or an “associated body” in relation to the applicant. “Associated body” should be defined as any such body as is mentioned in Article 26(6)[3] (save that references to “registered person” therein should be construed as a reference to an applicant for registration).

8.10      Please amend Article 32(3) of the CIF(J)L so that it also makes reference to the principal persons of: the holder of a permit; a former holder of a permit; a person to whom a certificate has been granted; a fund service provider in relation to a certified fund or a former fund service provider in relation to a certified fund.

8.11      Please amend the SB(J)L by inserting an article equivalent to the current Article 18 of the FS(J)L (save for those parts relating to reporting by auditors), but amended to take into account the changes requested in 8.7 above. Whereas Article 18 of the FS(J)L cross-refers to a report on a “registered person”, this new Article in the SB(J)L would need to cross-refer to a “person carrying on a supervised business” (to reflect the language of Article 30(1) of the SB(J)L).

 

  Page 1 of 16

[1] CIF(J)L – Articles 7(7) and 8B(10); FS(J)L – Article 9(4); IB(J)L – Article 7(9); SB(J)L – Article 18(1).

[2] This text is based on the European norm as established by Article 9.4 of the European Union Directive 2004/109/EC.

[3] Note that the current Article 26 BBJL will be restructured by the Financial Regulation (Miscellaneous Provisions No. 2) (Jersey) Law 201- (adopted by the States on 4 June 2014). Consequently, the “associated bodies” referred to in paragraph 8.9 above as being in Article 26(6) BBJL will instead be replaced by references to the bodies referred to sub-paragraphs (j) and (k) of the ‘new’ Article 26(15) BBJL once in force.

 

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