The Jersey Financial Services Commission's (the Commission) consultation paper on amendments to the Codes of Practice, which was published in July 2017, closed last week. The changes proposed could have an impact on all Jersey regulated financial services businesses, including:
- A broad new definition of "complaint" to include "any oral or written expression of dissatisfaction".
- An end to the exemption from compliance with the Outsourcing Policy for money service businesses.
- The minimum regulatory capital for a custodian/depository to a closed-ended fund to raise from £10,000 to £250,000.
Once issued, businesses are only likely to have a two-month period before they will have to comply with the amended Codes.
Regulated businesses should start to consider how the proposals could affect their business and practices in advance of implementation.
The proposed changes are largely aimed at bringing Jersey in line with international regulatory standards.
We have set out the main proposals below, including:
- The inclusion of a definition of “complaint”, in the context of the Codes' complaint systems and procedure requirements, which appears to broaden current practice. Whereas currently "complaint" is not defined in the Codes, under the updated Codes it will mean "any oral or written expression of dissatisfaction, whether justified or not, from, or on behalf of, a person about the provision of, or failure to provide, a service that relates to the [regulated] business carried on by the registered person". Such a definition could add an extra administrative burden on regulated businesses, which would have to keep a closer eye on outside communications at all levels of their business, categorise them and deal with them accordingly.
- Notification to the Commission of any decision of its auditor to qualify its audit report or to raise a matter of emphasis.
- Clarification that “risk”, in the context of having adequate risk management systems and making notifications to the Commission under the Codes, refers to all risks that a registered person faces, or may face, rather than just, for example, AML/CFT risks.
- Obtain consent from the Commission prior to the implementation of a plan to cease business.
- A strict requirement to use the Commission’s online portal where stipulated.
Fund Business Code
- The requirement for a custodian/depository to a closed-ended fund to have a minimum regulatory capital of £250,000, whereas the current requirement is £10,000. Although in practice closed-ended funds tend not to appoint a separate custodian/depository, for those Jersey custodians/depositories that do act in relation to a closed-ended fund, the uplift to their minimum regulatory capital would be significant and potentially a significant drain on resources.
Money Business Code
- The need for money service businesses to comply with the Outsourcing Policy, whereas they are currently exempted. Many money service businesses will not be aware of the detailed requirements of the Outsourcing Policy and may need to put in place appropriate oversight arrangements and policies.
Trust Business Code
- When forming entities, businesses to understand and document the rationale for each such formation.
- The disclosure of terms and conditions to the customer.
- Clarification that “becoming aware”, in the context of notifications to the Commission, applies from the point at which the business knows, or has reasonable grounds for believing, that the particular matter has occurred or may be about to occur, even where it is outside of the business' control.
Trust Business and Investment Business Codes
- Maintenance of documented systems, controls and procedures for reconciling movements in their assets.
The expected two-month implementation window does not give regulated businesses a significant amount of time to comply with the changes.
Any business that has not yet started to consider how it would comply should start doing so.