THE number of new investigations conducted by the Island’s financial regulator topped 100 last year as a record high was set, according to its annual report. And the Jersey Financial Services Commission’s enforcement division also dealt with an increase in the number of more complicated and demanding cases among the 122 it delved into last year. A total of 103 new cases were reported during 2012, which was up on the average of 89. At the end of the year, 30 investigations were outstanding and two of these were described as ‘major’ cases that continued into this year. And the report said that the commission had seen a significant increase in the number of cases emanating from larger local financial institutions.
Settlement agreements
The commission reached a record number of what are termed settlement agreements with those it investigated last year with a total of ten being concluded during the 12 month period. The JFSC say that such arrangements are subject to strict parameters and are also looked at during the annual audit of activity.
OTHER MATTERS
Non-Regulated Business
In the document, which has been issued as a report to States Members this week, the commission has expressed concern about Non-Regulated Business – people seeking to evade regulatory oversight of their activities by conducting financial business while not being registered with the JFSC to do so.
• “This often poses a significant risk to investors. Due to the very real risks associated with those who conduct unauthorised business, the commission will continue to give priority to investigating such cases,’ says the report.
Whistle-blowers
During the year, 14 whistle blowers came forward to report matters they believed were not right. Some used a special whistle blowers telephone line set up by the JFSC with the remainder making contact other ways.
Enforcement cost
The JFSC saw its expenditure on investigations and litigation nearly double with £745,000 spent in 2012 as compared to £398,000 a year earlier.
Funds
JFSC director general John Harris said that there were some cases of clients who suffered losses through impaired fund vehicles made worse by poor administration standards in a minority of registered firms.
Mr Harris said that some investors had lost out as they had trusted advisors in the pre-crisis years and bought risky products that were not properly explained to them.
But he said that they had signed all of the necessary documents.
• ‘Such misplaced trust, allied to the reality of contractual commitments made, pose real challenges to a regulator such as the commission, which does not have the capacity to intervene at the point of sale,’ he said.
AIFM Success
Meanwhile, elsewhere in the report the commission highlights the successful efforts that it has been involved with to ensure Jersey complies with the highest international standards and that Island firms are allowed to participate in international trade.
Among the successes was its work in negotiating the Island’s participation as a third country in the EU Alternative Investment Fund Managers Directive.
It also provided input to international working groups such as the International Organisations for Securities Commissions.
Moneyval success
And with the assistance of HM treasury, Jersey and the other Crown dependencies achieved membership of Moneyval.
Chairman Clive Jones said that this was a necessary step in being able to demonstrate to the IMF that Jersey’s anti-money laundering and counter terrorist financing standards were both appropriate and effective.
Warning!!
However, in the report’s section on corporate governance, the commission says that the current global political, economic and regulatory environment poses a future threat.
The commission says there is an increasing risk that Jersey’s ability to maintain its reputation and comply with international standards could fall below the level necessary to sustain sufficient high quality and profitable financial services business.
It also says the Island may not be able to achieve the necessary results in meeting international standards and could be subject to disapproval or indeed sanctions.
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