Annual Report 2012 - the Jersey Financial Services Commission

EnforcementThose that seek to evade regulatory oversight of theiractivities by conducting financial services business whilstnot registered with the Commission often pose a significantthreat to investors. Due to the very real risks associated withthose that conduct unauthorised financial services business,the Commission will continue to give priority to investigatingsuch cases.The Enforcement Division is responsiblefor work relating to the aim of theCommission “to identify and deter abusesand breaches of regulatory standards”.The increase in enforcement cases in 2011 carried on into2012, with 103 new cases during the year, comparedagainst a five year average of 89 new cases per annum.Such an increase continued to place a strain on resourcesand resulted in the recruitment of two additional staff to dealwith the workload.As a general trend, the Enforcement Division has seen anincrease in more complex and demanding cases, includingsignificant issues in the larger local financial institutions.Working with a registered person to achieve complianceand safeguarding investors’ interests continues to be amajor part of Enforcement’s work. Much of this is achievedthrough working cooperatively with the registered person.In the most serious cases, Enforcement undertakesculpability reviews of individual conduct to determine if themisconduct warrants the issue of a public statement andany consequent directions restricting or preventing anindividual from working in the Industry.The Commission recognises the importance of applyingsufficient checks and balances when considering the use ofsuch powers and has developed a robust process which ispublished in the document entitled “a Guidance Note to theDecision-Making Process”. Any affected person who feelsthat the Commission has acted unreasonably in the use ofsuch powers is entitled to appeal to the Royal Court.No appeals to the Royal Court were made in 2012.Receiving good quality intelligence to identify misconducthelps direct the Commission to a specific problem oftenresulting in swift and focused intervention. In 2012, theCommission received approaches from 14 whistle blowerseither through the use of the Commission’s whistle blowingline or through direct personal contact.“Settlement agreements have provedto be an effective and cost efficientmethod of dealing with seriousregulatory misconduct...”Settlement agreements have proved to be an effective andcost efficient method of dealing with serious regulatorymisconduct and 10 agreements were concluded during theyear. Such agreements are subject to strict parametersissued by the Board of Commissioners and are also subjectto an annual audit.A consultation paper on the introduction of a civil penaltyregime was published in April 2012. The feedback provedto be fundamental in shaping the Commission’s thoughtson the structure of a civil penalty regime. The feedbackprovoked a great deal of discussion by both the Executiveand the Board of Commissioners, culminating in thepublication of a feedback paper. It is anticipated that afurther round of consultation will take place once a draftlaw is available.Giving feedback to the Industry on trends and developmentsis regarded as an important part of Enforcement’s role.During the course of the year, Enforcement participated inseveral seminars organised by the Industry and hosted itsown lunchtime seminar. A similar seminar will be heldin 2013.22 | ANNUAL REPORT 2012