The Financial Services Commission (Amendment) Bill, 2009 was passed by the House of Assembly on 11 August 2009 with significant amendments to the original Bill amending certain provisions in the Financial Services Commission Act, 2001 (No. 12 of 2001). In response to the 2004 Report of the International Monetary Fund (“IMF”) after its prudential visit to the BVI, the Bill seeks to address, among other things, the independence of the Financial Services Commission (“FSC”) as a regulatory body. Harneys welcomes the Bill and believe it will enable the FSC to improve its standing as an effective regulator.
The House of Assembly amended the Bill during its committee stage to address concerns raised by the financial services sector about the new duties imposed on authorized or registered agents. The Bill sought to address a perceived loophole in the current legislation whereby the FSC felt unable to take enforcement action against defaulting licensed entities due to the inadvertence of their registered agents. However, since their proposed section 54A went too far in its attempt to address this problem, the final Bill as passed by the House of Assembly does not have the strict liability provisions imposed on registered agents and provides immunity when they report a breach or offence committed by their licensees to the licensee or the FSC. Failure to comply may cause the registered agent to be subject to a fine not exceeding $25,000.00.
Another key aspect of the Bill is the requirement for the giving of reasons by both the Cabinet, in relation to removing members of the Board and the Managing Director, and the FSC in relation to all its decisions. This amendment is significant since under BVI law there is no requirement that reasons be given for administrative decisions. This should now bring greater transparency to the decision-making process by the FSC and greater independence to the FSC as a regulator. Similarly, transparency was a key issue with the IMF in its 2004 Report, and when the Bill receives the assent of the Governor it will require the FSC to publish its estimates, work plans, audited accounts, audited financial statements and annual reports to ensure greater accountability.
The Bill will also ensure that an individual who has been approved by the FSC as a compliance officer will also be deemed to be a senior officer of the regulated entity. Currently a compliance officer is not automatically a senior officer of the regulated entity and this would be important in relation to the draft Regulatory Code, 2008 to be issued under the Financial Services Act, 2001.
The Bill also seeks to clarify the enforcement powers of the FSC by inserting a new section 37(1A) to determine those persons against whom the FSC may take enforcement action. This includes taking enforcement action against any person who carries on unauthorized financial services business.
Additionally, the new section 40D(1) will allow for the suspension of a person who does not satisfy the FSC’s fit and proper criteria from performing any duty or function in, or in relation to, the regulated entity for a period determined by the FSC and additionally withdraw approval of that person where that person was subject to an approval by the FSC.
While the FSC has international obligations to collect and share certain statistical data, there is no legislative framework to maintain a repository of statistical data that does not identify the person to whom it relates. While information may be provided voluntarily at present, the Bill now provides a legislative framework to collect that data.
After the Bill receives the Governor’s assent it will bring significant changes to the FSC and its relationship with regulated entities as it prepares to improve its regulatory effectiveness in light of the IMF’s 2004 Report.