Jersey is soon to establish a self-standing commission to supervise and help develop the island's finance industry. Approval for the Financial Services Commission (FSC) was given by the States, Jersey's legislative body, in October 1995 and draft legislation is awaited.
The original target date for the introduction of the new body was 1 January 1998, but the considerable programme of financial services legislation on which Jersey has embarked in recent years has led to a backlog of work in the Law Draftsman's department and there may be a delay of six months to a year.
The regulation of Jersey's finance industry is currently the responsibility of the finance and economics committee – comprising States members – which for most purposes acts through the Financial Services Department (FSD).
The committee's supervisory role will be extended when three planned pieces of legislation come into effect. These are the Insurance Business Law, the General Insurance Intermediary Law and the Trust and Company Administration Law.
Under these laws, all those carrying on investment business, all insurance intermediaries and all those involved with the administration of companies and trusts will be required to register with the committee which, through the FSD, will take on an active supervisory role.
In addition, amendments to the Companies Law are planned to enable the incorporation of unlimited companies and companies limited by guarantee. Wide-ranging amendments to the existing collective investment fund legislation are also going to be introduced.
But why change the regulatory structure at a time of such expansion?
The first reason is financial: the freeing of the supervisory authority from the budgetary constraints placed on public administration. “It is important that the supervisory authority be able in future to recruit and retain persons who are at least as qualified and experienced as those working in the industry itself. Staff numbers should also adequately reflect the needs of this important industry and its supervision, but objectives in this area are unlikely to be compatible with those regarding staff numbers in the States as a whole. What is therefore needed is an autonomous supervisory body which would in the years that lie ahead have freedom and flexibility with regard to staff remuneration and numbers.”
The second reason given is the benefit to be derived from directly involving industry practitioners in the supervision of the finance industry through the appointment of representatives to the commission. “It is perhaps particularly important also to have at the top level persons expert in the industry who will be able to provide policy input at a very early stage with regard to the opportunities and vulnerabilities of the industry and how these should be translated into new legislation and supervisory policy.”
The proposals aim to ensure that Jersey's supervisory authority is appropriately staffed and resourced to accommodate new business proposals and to maintain high standards of business practice.
Under current proposals, the FSC will have corporate status and will comprise up to nine commissioners, five of whom will form a quorum.
Commissioners will be appointed by the finance and economics committee from three groups: financial practitioners; users of financial services; and those concerned with the protection of Jersey's reputation and its financial well-being. The aim will be to achieve a balance between the three groups. Commissioners will serve a three-year term.
It is intended that the commission will be self-financing, deriving its income from registration and licence fees, but it will be eligible for grants, loans and other forms of financial support from the States.
In return, the commission will be expected to make regular contributions to States revenues.
The finance and economics committee will remain responsible for Jersey's finance industry at the highest level, appointing commissioners and sponsoring legislation developed by the commission.
However, the FSC will replace the committee as the body primarily responsible for the promotion of Jersey as an international finance centre.
The proposals for the new commission have generally met with approval in Jersey and the FSC should be in place in time to take on the additional supervisory functions created by the legislation which is to be introduced over the next few years.