Financial Regulation (Disclosure of Information) (Amendments) (Jersey) Regulation 201-

Information about the publication of Ministerial Decisions

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.

Ministers are elected by the States Assembly and have legal responsibilities and powers as “corporation sole” under the States of Jersey Law 2005 by virtue of their office and in their areas of responsibility, including entering into agreements, and under any legislation conferring on them powers.

An accurate record of “Ministerial Decisions” is vital to effective governance, including:

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
providing a record of decisions and actions that will be available for examination by States Members, and Panels and Committees of the States Assembly; the public, organisations, and the media; and as a historical record and point of reference for the conduct of public affairs

Ministers are individually accountable to the States Assembly, including for the actions of the departments and agencies which discharge their responsibilities.

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While there is a presumption toward publication to support of transparency and accountability, detailed information may not be published if, for example, it would constitute a breach of data protection, or disclosure would prejudice commercial interest.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 14 January 2013:

Decision Reference: MD-E-2013-0003

Decision Summary Title :

Financial Regulation (Disclosure of Information) (Amendments) (Jersey) Regulation 201-

Date of Decision Summary:

09/01/2013

Decision Summary Author:

Director,

Finance Industry Development

Decision Summary:

Public or Exempt?

Public

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

N/A

Written Report

Title :

Financial Regulation (Disclosure of Information) (Amendments) (Jersey) Regulation 201-

Date of Written Report:

09/01/2013

Written Report Author:

Director,

Finance Industry Development

Written Report :

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Subject:

The Financial Regulation (Disclosure of Information) (Amendments) (Jersey) Regulation 201- (the “draft Regulations”)

Decision(s):

The Minister approved the draft regulations and instructed they to be lodged au Greffe for debate by the States at the earliest opportunity.

Reason(s) for Decision:

The draft Regulations make amendments to four regulatory laws administered by the Jersey Financial Services Commission (the “JFSC”):-

Banking Business (Jersey) Law 1991
Collective Investment Funds (Jersey) Law 1988
Financial Services (Jersey) Law 1998
Insurance Business (Jersey) Law 1996

(together, “the regulatory laws”)

Each of the regulatory laws provides that non-public information that the JFSC obtains in the course of carrying out its functions is to be treated as ‘restricted information’ and may only be disclosed by the JFSC to third parties in certain circumstances prescribed in the regulatory laws. These circumstances are colloquially referred to as ‘information gateways’.

The drafts Regulations amend the regulatory laws to enhance the existing information gateways.

Resource Implications:

There are no financial or manpower costs for the States as a result of this decision.

Action required:

That the Regulations are lodged au greffe for debate by the States at the earliest opportunity.

Signature: Senator A.J.H.Maclean

Position: Minister for Economic Development

Date Signed:

Date of Decision (If different from Date Signed):

Financial Regulation (Disclosure of Information) (Amendments) (Jersey) Regulation 201-

MINISTER FOR ECONOMIC DEVELOMENT

REPORT ON:

Financial Regulation (Disclosure of Information) (Amendments) (Jersey) Regulation 201- (the “draft Regulations”)

The draft Regulations make amendments to four regulatory laws administered by the Jersey Financial Services Commission (the “JFSC”):-

Banking Business (Jersey) Law 1991 (the “BB(J)L”)
Collective Investment Funds (Jersey) Law 1988 (the “CIF(J)L”)
Financial Services (Jersey) Law 1998 (the “FS(J)L”)
Insurance Business (Jersey) Law 1996 (the “IB(J)L”)

(together, “the regulatory laws”)

Introduction

The release of restricted information by the JFSC other than under an information gateway would constitute a criminal offence (for example, see Article 37 of the FS(J)L).

The presence of information gateways in the regulatory laws is in recognition of the fact that there will be circumstances when it is appropriate for the JFSC to pass restricted information to a third party. For example, the JFSC regularly uses information gateways to pass restricted information to:

an equivalent regulator (such as the United Kingdom’s Financial Services Authority) to assist in the exercise of its supervisory functions;
the police or the Attorney General to assist in the investigation of a suspected criminal offence;
a person appointed by the JFSC (such as a lawyer or a forensic accountant) to assist the JFSC with an investigation it is carrying out;
the public (via the JFSC’s website) to show whether a person is registered (i.e. licensed) by the JFSC to carry on financial services business.

The draft Regulations seek to enhance the existing information gateways.

It is proposed that the regulatory laws be amended by means of the Regulations to enable the JFSC to disclose restricted information, in prescribed circumstances, to:

supervisors of securities markets (such as the Channel Islands Stock Exchange);

the European Banking Authority (“EBA”), the European Insurance and Occupational Pensions Authority (“EIOPA”), the European Securities and Markets Authority (“ESMA”) and the European Systemic Risk Board (“ESRB”); and

Jersey authorities with licensing, registration or consent functions (such as the Population Office).

It is also proposed that the Regulations would amend the regulatory laws to allow the JFSC to make public the fact that a person was previously registered (or equivalent) (i.e. supervised by the JFSC) under one of the regulatory laws and what, if any, conditions had been attached to such registration.

Gateway to supervisors of securities markets

In many jurisdictions supervisors of securities markets (e.g. supervisors of stock exchanges) perform licensing (or quasi-licensing) functions to enable firms, or individuals, to carry on activities (in many cases as “members” of the relevant market) connected with the listing or trading of securities on the market. Common examples include the authorisation of firms to act as sponsors and market makers.

In addition, supervisors of securities markets may also undertake vetting activities prior to admitting a security (e.g. shares of a company) to the ‘Official List’ of the market or to trading on the market. Once a security has been admitted to trading a supervisor of a securities market may also undertake ‘market surveillance’ to ensure that there is no abuse of the market’s trading rules.

The regulatory laws presently contain information gateways to what is termed a ‘relevant supervisory authority’. This is defined as an authority (outside Jersey) that discharges any function that is the same as, or similar to, a function of the JFSC. However, the JFSC has come across instances where, because of the structure of the supervisor of the securities market and/or the manner in which it is given its supervisory responsibilities, it does not meet the current statutory definition of a ‘relevant supervisory authority’. In such cases, the JFSC is unable to pass restricted information across.

This lacuna means that the JFSC is currently unable to pass restricted information to a number of supervisors of securities markets. Two examples close to Jersey are the Channel Islands Stock Exchange and the London Stock Exchange. To address this lacuna, it is proposed that the regulatory laws are amended to introduce an information gateway to a supervisor of a securities market which is defined in the draft Regulations.

The draft Regulations amend the regulatory laws to provide that the use of the information gateway to a supervisor of a securities market would be subject to the same safeguards that already apply to the passing of restricted information to a ‘relevant supervisory authority’.

The draft Regulations amend the regulatory laws to provide that the JFSC should be able to take into account (among others) the same factors as those specified in the regulatory laws when the JFSC is considering whether or not to disclose restricted information to a ‘relevant supervisory authority’.

Gateway to the European Union Supervisory Authorities and the European Systemic Risk Board

On 1 January 2011 the European Union (the “EU”) established what it refers to as “the New European System of Financial Supervision”. As part of this, the EU established on a statutory basis, the ESRB, the ESMA, the EBA and the EIOPA. The latter three are collectively referred to as the European Supervisory Authorities (the “ESAs”).

In the hierarchy of EU financial supervision, the ESAs sit above the 27 national regulators of the EU. The objective of the ESAs is to protect the public interest by contributing to the short, medium and long-term stability and effectiveness of the EU financial system.

Whilst the day-to-day supervision of financial service providers remains with the 27 national regulators, the ESAs play an active role in the EU financial supervisory architecture. For example, the ESAs attend “regulatory colleges”. These are coordinating bodies for those regulators which supervise entities that operate in more than one EU Member State. (Incidentally, because a number of EU banks have operations in Jersey, the JFSC also attends a number of these EU regulatory colleges.)

In addition, the ESAs have significant statutory powers which they can invoke in emergency situations. These include instructing national regulators and/or regulated firms to take, or refrain from taking, certain actions.

The ESRB sits above the ESAs and is responsible for the macro-prudential oversight of the EU financial system in order to contribute to the prevention or mitigation of systemic risks to financial stability in the EU.

Whilst it is possible that, in certain circumstances, an existing information gateway in the regulatory laws may be able to be used by the JFSC to pass restricted information to the ESAs or the ESRB, it is considered appropriate that an explicit information gateway should be put in place to put the position beyond doubt. This is considered particularly important for a number of reasons:

As mentioned above, the JFSC already attends EU regulatory colleges at which it may need to disclose restricted information.
Many financial service providers in Jersey (banks, but also other types of entity) operate in a number of EU Member States and, as a result, circumstances may arise in which an ESA would have a legitimate interest in restricted information that the JFSC holds in order to carry out its functions;
To meet certain ‘third country’ requirements in a recent piece of EU legislation (the Directive on Alternative Investment Fund Managers (Directive 2011/61/EU)) and thus enable Jersey funds to continue to be sold into the EU, the JFSC will need to be able to pass restricted information to ESMA and/or the ESRB; and
An explicit statutory gateway will make it straightforward to demonstrate to the relevant EU authorities that the JFSC can pass restricted information to ESMA and the ESRB and thus meet that particular aspect of the third country requirements of the Directive on Alternative Investment Fund Managers, as referred to above.

Gateway to Jersey licensing authorities

Currently, the regulatory laws contain an information gateway that allows the JFSC to pass restricted information to assist an authority in Jersey where it is exercising a statutory function in relation to a person in respect of whom the JFSC also exercises a statutory function.

When that particular information gateway was put in place, it had been envisaged that it would be used by the JFSC to assist primarily Jersey authorities when they intend to licence, register or give some form of consent to a person (although the gateway was not designed for that exclusive purpose).

By way of example, it was envisaged that it could be used in circumstances where a person had applied to the Population Office for a ‘J or K category’ licence (consent) under the Housing (General Provisions) (Jersey) Regulations 1970 (the “Housing Regulations”) and the JFSC had restricted information on the person that would assist the Population Office in determining whether or not the granting of the licence would satisfy the “in the best interests of the community” test set out in the Housing Regulations.

The draft Regulations provide an information gateway from the JFSC to an authority in Jersey (e.g. a States Department) for the purpose of enabling or assisting that authority to exercise functions conferred on the authority by an enactment that requires or enables that authority to register, license, or give consent or some other form of authorisation or permission for such purpose as may be prescribed or specified in the relevant law.

Gateway to publicise former registrations

In each of the regulatory laws there is an existing information gateway that enables the JFSC to make public the fact that a person is currently registered (or currently holds a permit/certificate, as appropriate) under the relevant regulatory law and, at its further discretion, to disclose any conditions that are attached to such registration.

However, each relevant gateway does not allow the JFSC to make public a former registration and any conditions that were attached thereto.

To address this anomaly the Regulations [4(a), 11(a), 16(a) and 20(b)] would amend the information gateway in the regulatory laws to enable the JFSC to make public a former registration (or the former holding of a permit/certificate, as appropriate), with or without the additional disclosure of any conditions that were attached thereto. It is expected that the disclosure by the JFSC of conditions that were attached to a registration would be on an exceptional basis only.

Consultation

In June 2012 the JFSC publicly consulted on a draft of the Regulations. Responses to the consultation were supportive. The JFSC has published a Feedback Paper summarising the comments received (most of which related to how the gateways would be used in practice) and the JFSC’s responses thereto.

Both the Consultation Paper (No. 3 of 2012) and the associated Feedback Paper can be downloaded from the JFSC’s website (www.jerseyfsc.org).

Financial and manpower implications

There are no financial or manpower implications for the States of Jersey that would arise from the adoption of these Regulations.

Director, Finance Industry Development

7 January 2013