Structure and Function
1st July 1999 marked the first anniversary of the Jersey Financial Services Commission (the "Commission"). The Commission is responsible for regulation, supervision and development of the financial services industry on the Island.
These functions were previously undertaken by the Finance and Economics Committee of the States of Jersey, through its executive arm, the Financial Services Department.
The Commission is a statutory body corporate, established under Article 2 of the Financial Services Commission (Jersey) Law 1998. The governing body comprises a board of 7 Commissioners under a chairman, including practitioners from within the finance industry, industry users and representatives of the public interest.
Guiding principles for the Commission are laid out in Article 7 of the Law and include a requirement that in exercising its function it shall in particular have regard to:
- Reduction of the risk to the public of financial loss due to dishonesty, incompetence or malpractice by or the financial unsoundness of persons carrying on the business of financial services in or from within the Island.
- The protection and enhancement of the reputation and integrity of the Island in commercial and financial matters.
- Safeguarding the Island’s best economic interest through the provision of effective commercial legislation and efficient registration services.
- Ensuring that the Commission remains at the forefront of international regulatory practice and that the finance industry generates income to support the economy of Jersey.
Financial Services and the Island’s economy
Jersey has an established history of financial security and stability featuring:
- A well managed economy
- Financial stability
- An excellent relationship between the authorities and the finance industry
- Rapid responses to changing market influences.
Finance is the largest of the Island’s industries. The contribution made by the different sectors of activity to the Island’s GDP in 1996 are estimated as follows:
Banks and finance business
Investment Income from Abroad Received by residents
Agriculture and Horticulture
The Edwards Review
The JFSC has undertaken detailed consideration of the recommendations made by Andrew Edwards in his Review of the Crown Dependencies, published by the UK Home Office in November 1998. Edwards, a former Treasury civil servant, acknowledged Jersey’s outstanding success as an international finance centre and noted the fact that the Island is built on a strong reputation for stability, integrity, competence and good regulation. The Edwards Report was a comprehensive description of Jersey’s ongoing relationship with the City of London.
Increasingly, Jersey is acting as a staging post for the global funds that pour directly into the City of London every day, thus adding to the health of the UK economy. Following publication of the Edwards Report, the Island’s Task Force asked the Commission to consider the Report’s conclusions, take action on matters within its own competence and give advice in other areas. In conjunction with the actions of this group, the Commission has itself undertaken detailed consultation with Jersey’s finance industry to consider the Report and the response to be made on those areas which fall within its remit.
The Authorities, in full consultation with the industry, have decided to accept the vast majority of Edwards’ recommendations. Jersey has a wide-ranging and detailed programme of regulatory reform, which arises both from our own agenda and our response to the Edwards Report. In doing so, they will ensure that Jersey continues to maintain the confidence of both the international marketplace and the international regulatory community as a secure and reputable place to do business.
The Commission’s Role and Remit
As part of our response to the Edwards Review the Commission has accepted that there should be no political representative on the Board. The former Chairman of the Board, Senator Frank Walker, has stood down in favour of Colin Powell OBE.
The Commission has also accepted that it should not be responsible for the promotion of the Island’s financial industry. A new independent body is to be established to take on this function and a Commission law amendment will be required to reflect this.
The Commission has introduced several important pieces of legislation in 1999.
To ensure that the Island maintains its effective stance against money laundering and financial crime, the Proceeds of Crime (Jersey) Law (1998) was enacted and became effective from 1 July 1999. The law is supported by detailed codes and guidance designed to meet international best practice.
The Investment Business (Jersey) Law (1998) extends regulation to all investment business, including dealing, investment advice and investment management. This law also came into effect from 1 July 1999 with a transitional period to allow all aspects of the codes of practices to be implemented by existing business.
A great deal of work has been completed on legislation relating to the supervision of company and trust service providers. A draft of a new law to regulate this important part of the industry was made available for comment and consultation and a Steering Group was set up to give technical and commercial guidance to the Commission. The Steering Group offered suggestions which were acknowledged. If agreed, this new piece of legislation will be brought into effect in 2000.
During the last quarter of 1999, a total of 709 new incorporations were registered with 18 reinstatements and 1,550 dissolutions. The number of Companies as at 31 December 1999 totalled 32,419, a net increase of 124 when compared to the same date in 1998. There were 234 incorporations for the month of January 2000 and 263 for the month of February 2000.
The International Stage
The UK Government is responsible for the Island’s international relationships but Jersey is consulted before any international agreement is reached which would apply to the Island.
Jersey is determined to play its full part in the international fight against financial crime and abuse of the financial system. The Commission frequently discusses regulatory issues with other supervisory authorities and co-operates in specific investigations. There are challenges being faced by Jersey and other finance centres. The EU, the United Nations, the OECD, the Financial Action Task Force and the Group of 7 Financial Stability Forum are all looking at finance centres like Jersey. The more light is shone on Jersey, the more the world can see the difference between the Island and the traditional image of offshore centres.
The Commission has engaged in extensive discussions with these organisations. We have attended their meetings and offered our advice. Of course, like any other jurisdiction with independence in its internal affairs, we reserve the right to disagree with recommendations where they conflict with our view of what is right and in our economic interests. There may be areas, for example, where Jersey must refuse to take action other than on a level playing field basis. We will robustly defend our position.
Jersey is not part of the European Union, being neither a separate Member State nor an associate member. The Island’s special relationship with the European Union is defined by a Protocol attached to the Treaty of Accession of the United Kingdom to the European Community.
Any change in these arrangements would require a Treaty amendment and this itself would need the agreement of all the Member States including the United Kingdom. No such amendment is in prospect or envisaged.
The insular authorities are also of the view that this relationship remains the best arrangement not only for the Island but also for the European Union. No change is therefore sought or expected.
Under the terms of the Protocol the Island complies with European Community Directives on trade in industrial and agricultural products. The Island is not subject to any European Community Directives or Regulations, existing or proposed, relating to European Monetary Union, Harmonisation of Direct or Indirect Taxation, Financial Services, Exchange of Information between Fiscal Authorities and Social Policy.
The Commission has overseen the introduction of a number of changes to prepare Jersey for the Euro. In November 1998, the States of Jersey approved regulations to deal with the conversion of the ECU to the Euro and the continuity of contracts expressed in the currency of one or more participating countries.
An amendment to the Companies (Jersey) Law 1991 was also passed by the States. It facilitates conversion to the Euro, where the share capital of a Jersey company is denominated in the currency of a participating country.
Jersey continues to maintain the confidence of both the international marketplace and regulatory community as a secure and reputable place to do business. We are better placed than ever before to capitalise on our position as a leading international finance centre.
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