Jersey Financial Services Commission: Annual Report and Accounts 2014.

   Annual Report

2014

Full and active IOSCO member

OECD white list jurisdiction

 Top IMF rating from 2009 Financial

 Sector Assessment Program Report

Financial Stability Board Group 1

 jurisdiction

 27 AIFMD co-operation agreements

IACA Merit Award 2014

Introduction Annual Report 2014

The Jersey  

Financial Services  Commission

  The Jersey Financial Services Commission (JFSC) is the financial  services regulator for the Island of Jersey. It is responsible for:

a/ The supervision, authorisation, oversight and development    of financial services in or from within Jersey

b/ Providing the States of Jersey with reports, advice, assistance    and information in connection with financial services  

c/ Making recommendations for Laws and Regulations applying    to the finance industry  

 The Commission aims to:  

 Ensure that all authorised financial services and individuals  

  meet appropriate criteria and that we match international standards  

  of banking, securities, trust company business, and insurance regulation,  as well as anti-money laundering and terrorist financing defences

 Be effective in combatting terrorism and financial crime as part    of the wider international effort in this respect  

 Work closely with fellow regulators and law makers to ensure access  to efficient and effective markets for financial services

 Be an agile and thoughtful regulator in reducing risk to depositors  

  and investors whilst being proportionate so that the costs of regulation    do not outweigh their benefits

Annual Report 2014

  Annual Report

2014

p.01 Highlights of the year p.02 Annual Report 2014

01

Highlights of the year

2014  04 /  April

January 01 /

Memoranda of Understanding signed

  with CSRC** (China) and ESCA** (UAE)

  launched (enters into force)  May Review of Financial Advice (RFA)  05 /

February 02 /

New Executive Director appointments  to the JFSC

Annual Returns processed  06 /  June

*

March 03 /

Lord Eatwell appointed Chairman  of the JFSC

October 10 /

 07 /  July

Revised GIFCS*** Statement of Best  Practice for Trust & Company Service  Providers launched

AIFMD transitional arrangements end   November

11 /

August 08 /

MONEYVAL preparations begin in full. Civil Penalties legislation passed

Launch of Jersey Government

Financial Services Framework  12 /  December

In 2014, the following supervisory September

09 /   visits were undertaken:

20  36  11

17  42  48

Civil Penalties legislation lodged   Banking  20 with States of Jersey. Preparatory   Funds  36   work begins for MONEYVAL    Insurance  11   AML/CFT evaluation ITnCvBe s t m e n t  B u siness  1472

AML Unit  48

TOTAL  174

*    Jersey company renewals

    FwuitnhdGs orev eg rimnme  erenvt i ae nwd s lcaoupnec ha egdreed   2015

**   China Securities Regulatory Commission

and Emirates Securities and Commodities

Authority

***   The Group of International

Finance Centre Supervisors

View from the top Chairman s Statement

Appointment as Chairman

  I was appointed Chairman of the Jersey Financial Services Commission (JFSC) in June 2014. I was delighted and honoured. Delighted, because I have been given the opportunity to assist Jersey to meet the many extraordinary challenges that financial markets pose today. Honoured, because I will be leading an outstanding team of professionals, committed to fulfilling the regulatory mission they have been given by the States.

Change is taking place in (at least) three areas:

a/ The structure of financial markets is undergoing rapid change

An important development is the growth  The application of technology is also

of shadow banking, i.e. the performance of changing the structure and operation of banking functions by non-banks, such as financial markets most visibly in the rise asset managers and insurance companies. of crypto-currencies (the Commission has A corollary of the growth in shadow banking authorised one of the first Bitcoin funds), has been the growth of bond markets,  but in a wide range of market and product sovereign and corporate. Bond markets  structures too. These are just a couple of can be very volatile in the face of interest  examples. Many more are likely to follow as rate changes hence the market tantrum  the changing structure of financial markets of May 2013 when Ben Bernanke signalled  relocates risk possibly in a manner that

the approach of QE tapering. The prospect will affect Jersey financial entities in ways of increases in interest rates led to a rush  not previously encountered. In addition,

to cover potential losses in bond markets,  there is the changing balance of economic with significant turmoil in Asian markets.  strength between West and East that Systematic risk is no longer the sole  poses entirely new challenges for effective preserve of leveraged banks.  regulation for example with respect to Unleveraged institutions can create  the exercise of due diligence in regulating systemically unstable positions too.  prospective financial flows from unfamiliar

jurisdictions.

Today the JFSC faces the challenge of change. It is a truism that the

world of finance is characterised by rapid innovation sometimes that  b/ Financial regulation is changing

innovation is driven by the desire to enhance micro-efficiency, sometimes

in response to regulatory change (a process that tends to create its own  elseIn rwhesponse tere, and o rin tegulathe lighory changes t of major  rdifferegulatences beory regimes (for etween the nexample, the w regulations in circular dynamic). But what has been generally true, is even more true  structural changes underway in the  the US and those in the EU) create potential

today. One of the consequences of the financial crisis of 2008 has been  industry, the Commission is undertaking  market realignments via regulatory arbitrage the generation of fundamental changes in financial institutions and the  a fundamental review of the approach to  that may pose significant challenges to behaviour of financial markets. The significance of these changes for  banking rour changes wegulation. The first tranche oere published in a Policy f  regulation in Jersey and create opportunities.

financial services and for the economy as a whole is, to be frank,  Statement last year, the key change  The Commission approaches these

as yet not fully understood.  being the abolition of the old mechanistic  changes with a determination to implement

 top 500 rule, and its replacement with  a regulatory regime that best serves the

a licensing policy based on an assessment  economic interests of Jersey. That means

of risk. ensuring that the financial services industry

in Jersey has access to markets around the

In other areas of financial regulation the  world. Without an internationally respected extension of quasi-extra-territorial regulation regulatory regime in the Island, doors will be in terms of demands for equivalence, or of  slammed shut on Jersey industry.

truly extra-territorial rulings as in the case

of FATCA, inevitably changes the dynamics

of financial market development, and

therefore financial regulation in Jersey.

And diverse structures within the new

c/ The relationship between regulators and governments is changing Role of the Board

However, not all these changes are in  As far as Jersey is concerned developments the same direction. In many of the major are, if anything, moving in the opposite economies, governments attempting to direction. Whilst the Government remains manage systemic risk in the financial services committed to the independence of the sector, have ceded powers to regulators.  JFSC, it is seeking a closer consultative For example many of the powers that the  relationship with the regulator in the

2013 Banking Act gives to the Bank of England furtherance of economic objectives in would in the past have typically been exercised this small, highly specialised jurisdiction. only by elected politicians. Regulators that

have previously been endowed solely with  The scale, scope and pace of all these what were seen as technical powers  changes, and the risks and opportunities of micro-prudential regulation are now  embodied in them, pose major challenges, required to take the highly politicised  particularly in the context of the limited decisions that macro-prudential regulation resources available to the Commission. demands. The tentative steps being taken Meeting these challenges will require

by the Financial Policy Committee of the  that the Commission is a thinking regulator, Bank of England indicate an awareness  that is it must be agile and inquisitive.

that this could be a political minefield.

A thinking regulator

A thinking regulator is a regulator  But for this to succeed there

that persistently confronts the challenges  must be commitment on both sides.

posed by change. The Commission has  The Commission is keen to listen, but the formerly, perhaps, been overly devoted to  Industry must be prepared to speak, and examining the success or otherwise of past  to speak openly and frankly.

operations. This is, of course, necessary,

since lessons are learned from the past.  To be thinking and agile the JFSC must be But too much time examining reports ,  an inquisitive, research-oriented regulator, and too little devoted to future challenges,  and therein lies a dilemma. The Commission and even speculative argument, does not  simply does not have the resource, and make for a Commission that can appreciate  given the size of the jurisdiction, cannot the opportunities that the changing financial have the resource, that enables it to pursue environment presents.  a significant research agenda within the

Commission itself. However, the senior

It is this thinking approach that is necessary executive team now has the numbers

if the regulator is to be agile. It is inevitable  and skills to be effective collators and

in an innovative industry such as financial  interpreters of research, and the staff as services that even a successful regulator is  a whole embodies a wealth of day-to-day 10 metres behind the market in a 100 metre  experience and expertise. Their approach race. The point is not to fall even further  has been to identify and engage with behind. Instead the goal should be to  creative thinkers, leverage the enquiries understand the significance of new  of others and focus it through the lens developments, and decide on the appropriate,  of the Commission.

well-founded response within a reasonable

period. It is not the task of the regulator to  It is this thinking approach that will

be a financial entrepreneur, or to attempt  characterise the Commission in coming

to guide financial market development  years. In implementing our regulatory though the regulator may have an important  regime the Commission will continue

role to play in Government policies to aid  to focus on remediation as a means of financial market development. It is the task  securing compliance, with enforcement

of the JFSC to listen to the concerns and  as a necessary last resort.

insights of the regulated community, and

to provide an environment that encourages

innovations that are compatible with the

overall objectives of the Commission.

The Board has its role to play too,  Over the past year, two new

and, fortunately, it has the right mix of  Commissioners have been appointed. long-term skills to meet the challenges  Peter Pichler has worked for many years including the unexpected events that  in the financial services industry in Jersey, will undoubtedly occur.  and brings a wealth of on-Island practitioner

expertise to our deliberations. Peter replaces My analysis of the challenges faced by  John Mills who retired from the Commission the Commission has been distilled into a  in October after five years of first-class service Change Programme, details of which are  to the Commission. Our new off-Island

set out in the Business Plan published in  Commissioner is Simon Morris, a partner January. The Change Programme will  at the international law firm CMS Cameron demand resources. One of the major  McKenna with many years of experience tasks facing the Board over the next year  in matters of financial regulation.

is therefore to oversee the implementation

of the programme whilst maintaining  My appointment as Chairman followed the effective business as usual. retirement of Clive Jones in November 2013.

Clive guided the Commission through the

It is the role of the Board to assess, inform,  stormy waters of the financial crisis with interpret, anticipate and advise. The Executive great skill, foresight and good humour.

is accountable to the Board, and hence the Jersey has every reason to be very grateful Board must assess performance and further to him. The gap between Clive s retirement the development of the Executive. The Board and my appointment was filled by the

has a wealth of experience that it brings to   Deputy Chairman, John Averty. In what inform the operations of the Commission.  was a challenging time for the Commission, In particular it must assist the Executive  John guided us with his customary dexterity and staff in interpreting the complexities of  and aplomb. I, and Jersey, owe him a

the rapidly changing international financial  considerable debt of gratitude.

environment, helping the Commission

to anticipate events and maintain the  As I mentioned at the beginning, I am momentum of regulatory innovation.  particularly honoured to be associated

These are key dimensions in which the  with the first class staff at the Commission, Commission serves the financial services led by our outstanding Director General, industry in Jersey, pursuing our goal of  John Harris . My thanks go to all of them. ensuring that Jersey firms have access

to markets around the world.

 Setting strong

r egulatory standards to support and strengthen Jersey s i nternational

r eputation

Delivering against our objectives

Director General s   Statement

Introduction

  The Commission can look back on 2014 as a busy and productive year. It brought a noticeable additional focus on investment in the future of the organisation to complement the preponderant attention on management of risks presented by licensed firms within the Island which characterised the financial crisis years from 2008 to 2013. This is not to say that vigilance in respect of the challenges thrown up by Jersey s varied and dynamic financial services sector was noticeably relaxed.

The degree of financial, operational and reputational risk overall

has arguably diminished little if at all even as somewhat improved economic conditions have returned. Nonetheless the Commission began a process in 2014 of seeking to upgrade its own capabilities in systems, people, communications, project management and working practices at the same time as maintaining a strong supervisory and, where needed, enforcement presence. To succeed in achieving more with the same underlying resource involves a stretching programme of change and investment within the Commission, co-existing with a refined supervisory model to support our risk-based approach to managing the various challenges with which we as a supervisor are faced. In this respect 2014 was the beginning of what will be

a significant journey.

The supervisory approach

The pace and rhythm of supervisory  Such upstreaming may of course continue oversight in 2014 was for the most part  into the non-ring-fenced portion of the parent largely unchanged from previous years.  Group, but either this or more funding for

A comprehensive on-site visit programme  other Group assets imply a change in the risk was maintained, complemented by a range profile for us as Jersey based bank supervisors. of off-site analytical and intelligence based The latter part of 2014 saw the beginnings activities across all regulated sectors.  of each bank affected by these changes However, some changes have been made  (of which there are 5 in the Jersey context)

to the way we operate our risk model as  outlining their proposed solutions and this

a basis for judging the nature, periodicity  will come into sharper focus in the year ahead. and degree of intervention within different

sectors. Thus acceptable risk tolerances by  A second visible market structure

sector have been more subtly differentiated  development in 2014 has been the acceleration for likelihood and impact. For example AML/ of the changing profile of ownership in the CFT risk within banking and trust company  trust sector. This has seen increasing private businesses is being looked at more closely  equity group acquisition of some Jersey

than say within the investment business  based trust operations, coupled with a

sector where the focus will, for the  relative consolidation of mid-size firms foreseeable future, be on misselling. merging together for greater critical mass

and operating efficiency, together with a This is but one example of our acceptance  relative withdrawal by some major banks that supervision needs, to some degree,  from the sector altogether (reflecting the move

to be more selective than before without  worldwide in banking toward simpler and nevertheless losing the benefit of visibility  less geographically diverse operating models). i.e. a still high number of on-site activities

overall. We strive also to be more intelligence Then there is the owner-managed part

led as a basis for intervention and also to  of the sector which has been numerically structure such presence in the marketplace  important but which over time has diminished to reflect differing outcomes. In 2014 a few  in numbers as a consequence of merger and

 deep dive style visits, particularly to firms  exit activity. Some further change in this sub- holding a number of different licences,  sector was seen in 2014 but a significant were undertaken with the use of greater  number of such Jersey origin firms remain. Commission resource, drawn from a number As with many of our oversight activities, our of supervisory teams and deployed over  skills and experience as a supervisor of all

a longer period, leading to a better overall  these very different trust company operations understanding within the JFSC of the firm  have had to flex to accommodate differing in question. In addition we have seen the  demands and needs during the past 12 months market structure changes already apparent  and this is likely to be a continuing trend. within certain sectors at the beginning of

the year accelerate. In banking, structural  A third market structure development reforms are now with us, most notably in  has been the growing trend of substantial respect of the proposals for ring-fenced  hedge fund operations locating in full or in banks in the UK. The UK decision not to permit part to Jersey. Whilst a very welcome boost non-EEA subsidiaries and branches of major to the makeup of the Jersey based financial UK banks to be within the ring-fenced bank  sector, such funds present the need for perimeter has important implications for the a well coordinated supervisory approach traditional upstreaming model deployed by working with fellow regulators charged with such Jersey based entities. It means a  oversight of such firms operations within diversification of the operating model they  their own jurisdiction. We need in addition to have traditionally followed towards a more  hone our own understanding of these firms matched asset and liability approach,  within Jersey. Again this significant change with excess liquidity arising from Jersey s  in the make-up of the fund management predominant international deposit gathering sector seen through 2014 means in effect role being used for a variety of asset funding for us at the Commission a move towards activities, as opposed to being simply  more home supervision in this sector, upstreamed to the parent bank.  with attendant needs to be met in our

own resource and expertise base.

Other Achievements

As in any year, to record everything    The Commission began preparations in achieved in the preceding 12 months would  earnest for the forthcoming MONEYVAL likely be a long list and so inevitably there is  evaluation of the Island s capabilities

a requirement for some selective highlights  in AML/CFT including some significant in the space available. However, in addition changes to local legislation, not least

to the range of supervisory activities already the passage in Jersey s States Assembly noted, together with the launch of the  of primary legislation to enable the Change Programme, 2014 was notable Commission to levy Civil Financial

in a number of other ways.  Penalties as one of its available

sanctioning measures in future

We saw the full implementation of the  Enforcement actions

Securities Interests Register in the

Companies Registry, which pleasingly

attracted international recognition

in the form of an IACA Merit Award.

The Registry also took further strides

towards a technologically more efficient

paperless interface with users and

reconfigured working practices to assist

in the implementation of the jurisdiction s

Sound Business Practice Policy (i.e. greater

focus on the use of Jersey companies and

other legal vehicles to manage reputational

risk) where the Registry has a front line role.

Whilst the need to take Enforcement action

is always regrettable, the past 12 months

have seen several lengthy and challenging

cases come to their conclusion with Public

Statements issued by the Commission.

An additional 11 Public Statements were

issued covering a range of matters requiring

a regulatory response in the form of sanctions,

often involving the restriction of future

employment of individuals within the    A significant increase in the number Jersey financial sector.  of fund applications seen by our Funds

The Commission works hard to try to avoid  Authorisation team culminating in the

The Change Programme such actions, vastly preferring a remediation volume of Assets under Management

approach wherever possible. By this we mean (AuM) in the jurisdiction within Collective As the Chairman has noted in his  It then entails a greater focus on  that when we do identify problems our initial  Investment Schemes of varying types

comments this year, the demands on  information management within the  preferred approach is to work together with  rising by 19% to a total of £228 billion. regulators everywhere are changing  JFSC both as a necessary discipline in itself  the firm in question to address the issues seen

rapidly and significantly. Recognising this,  and with an eye to forthcoming Freedom  and to reach a positive outcome for all parties. A number of other achievements

the Commission has embarked upon a  of Information legislation applying, in part,  However, the safety and soundness of the  and important areas for focus for the

Change Programme of its own to respond  to the Commission from January 2016.  market overall and the need for maintenance Commission over the past 12 months

to such demands.  Underpinning all of this is a commitment  of Jersey s reputation in financial and  are covered elsewhere in these pages.

to review and refresh how we invest in,  commercial matters, together with the

This began to gather pace towards the  develop and reward our staff without  degree of co-operation or otherwise of firms

end of 2014 in its initial analysis and design  whom no programme of change can  and individuals where problems are found,

phase and can be articulated as a step  succeed. The implementation of our  means that such an approach is not always

change in electronic enablement of our  Change Programme forms an important  possible or practical. In such instances the

information relationship with our supervised  part of the recently published 2015 Business  Commission has not shied away from

firms. It also reflects a decision to review and Plan and will necessarily be an important  necessary action and will continue to

where necessary reform our supervisory  part of this review in 12 months time. adopt that policy stance going forward.

package, itself built on a commitment to  A number of other major activities in 2014

revise and refine our risk model and risk  are worthy of mention;

management processes generally.

A Question of Culture

A theme I have attempted to develop in my  Certain Enforcement actions seen within comments this year is one that focuses on the Jersey, some of which came to conclusion  changing demands on regulators worldwide, in 2014, reinforce this view. In the final with the JFSC being no exception. This echoes analysis, whilst much is and will be demanded the Chairman s analysis across the wider  of regulators in ensuring the safety and international front and with such a demand  soundness of the financial system and  

for change impacting on the supervisor s  conduct within it, there will never be  priorities, focus and availability of skills  sufficient resource available to conduct  comes a need for the regulatory community  such oversight in a way that guarantees  

to depend more than ever on the conduct of  zero failure or even minimal failure within  business within regulated firms themselves  the financial sector.  

if such challenges are to be met.  

Accordingly, there is now more than  

Thus we can say that our reliance on  ever a need for dialogue and an agreement  corporate culture, governance, internal  between the regulator and the regulated  controls, compliance within firms and  about standards, conducts and ethics  contributions from outside parties such as about, if one prefers, what good looks  their external auditors has never been greater. like within regulated financial services  As a supervisor we therefore recognise that with our respective activities and focuses  we need to understand the culture and attitude targeted accordingly and something akin  of our firms more quickly and more deeply to a partnership taking shape or at least a  than ever before and refine our whole approach meeting of minds about what we need to  to oversight accordingly. However, no supervisor do to rehabilitate financial services as a  can be effective in a vacuum. What is still  social good in the minds of many after  required, some eight years after one of  the recent years of seemingly endless  

the greatest financial crises the world has  problems. The JFSC is committed to such  ever seen, is a step change in the conduct  an approach and will build on the base of  of business within firms, with revelations  2014 to work with its regulated community  about the nature of misconduct at the  to achieve such an outcome which must  time of the crisis still surfacing.  be in the interests of us all.

Conclusions

As mentioned in my opening lines, it has  Once again, I would like to record my  

been another busy and challenging year for  sincere appreciation and thanks to the  

the Commission, yet one I believe of progress  Executive Directors and to our staff, at all  and commitment to change in a world, which levels and in all roles, who, in their public  clearly accommodates less and less those  spiritedness, industrious endeavour and  who may wish to stand still. This is certainly unflagging commitment, ably discharge  

a theme developed in the Chairman s remarks the Commission s duties on behalf of the  above and in my statement I hope I have  Island. In my view there has never been a  been able to describe an organisation  more challenging yet interesting time for  beginning to recognise and respond to the  regulatory bodies in financial services than  call to change embodied in his overview  over recent years and in those to come.  

of the changing environment in which  As a team we look forward to continuing to  we must function as a regulatory body. make a telling contribution to Jersey s future  

as a mature and well-regulated international  In our work as the Executive and staff of the  finance centre, capable nonetheless of  

JFSC we are fortunate to have the support  responding to new, innovative and  

and expertise of our Board of Commissioners, challenging thinking in today s rapidly  

led by our new Chairman, Lord Eatwell, who  changing international financial markets. succeeded Clive Jones in June 2014, and who

has certainly set a strong lead in refining our  

changing mission and priorities.  

U  nderstanding   our markets two the Island ealth businesses and almost half oJersey banks ins prvestment fund and privovide significant support f their ate  £51.5 billion oin Ststerling arerling rea, with £80.8 billion in oeflecf deposits arting Jersee denominaty s role in the ther ed

deposit base arises from Jersey and UK  currencies, principally Euro and US Dollars. resident depositors.

a/ Jersey and UK  47%

b/ Other EU Members  9%

b c f a

d e

  The financial services sector is the dominant industry in Jersey and accounts for some 40% of the Island s Gross Value Added (GVA) and 22% of employment.

Jersey provides a diversified range of financial services to both  g/ Others  9%

domestic and overseas customers serving both retail and wholesale   markets. The primary sectors are banking, investment funds and  The banks predominantly lend their funds Banking activities are under pressure

private wealth management supported by insurance broking  to their parent entities whether in the UK or throughout the world. Two factors in

and investment business services. elsewhere. However, local banks also provide particular are likely to give rise to change in finance to support the Island s investment  the Island s banks over the next few years.

funds, private wealth businesses and  Firstly, the UK government has decided to

local economy.  require its domestic banks to ring-fence UK depositors which will give rise to structural

Average regulatory capital held by Jersey  changes in the way in which their Jersey Banking banks was 15.4% of risk weighted assets  activities are owned and managed. It seems

in the year end of 2014.  likely that their Jersey operations will take on There were 26 banking institutions holding Total employment is believed to exceed  more risk by diversifying their asset bases.

33 Jersey banking licences at the end 2014,  4,500. The majority of licences were  The overall size of the banking industry

with the total value of deposits remaining  held by groups headquartered in the  has continued a long term contraction with  Secondly, all banks are facing intense

relatively stable exceeding £130 billion.  EU, particularly the UK.  the consolidation of the industry, some of  pressure to deliver efficient services

which resulted from the financial crisis and  in a digital age and this may be felt more

meant a persistent reduction in the number  acutely by Jersey bank operations serving

of banking groups providing services to  an international deposit base where the

a/ UK  11

b domestic and overseas customers.  timely adoption of digital services may

provide opportunities as well as threats.

c e g

a Jersey is keen to ensure that effective

d

competition exists and that the Island s

f banks are able to provide efficient and

relevant services to a global customer base. The JFSC has recently revisited

its bank licensing policy to ensure that

g/ Asia  1

potential applications are not deterred by

an unnecessarily rigid rule based approach to assessing licence applications.

Investment Funds

There are 485 licensed fund services The Island counts in excess of 1,300 regulated businesses providing a range of services,  funds; the net asset value of funds serviced including investment management and  in Jersey grew by £36bn, from £192bn to administration, to a large and diverse  £228bn, during 2014.

range of collective investment funds.

Dec 2010  Dec 2011  Dec 2012  Dec 2013   Dec 2014

The overall picture is of increasing  2014 saw the end of transitional periods complexity of fund structures and an  under the AIFMD in many EU member increase in alternative asset classes  states. Jersey s wide network of co-operation including hedge funds complementing the agreements saw more than 60 managers Island s experience in specialist classes such  using private placement to market more

as property, hedge funds and venture capital.  than 180 funds into various EU jurisdictions.

Trust Company Business

Jersey was the first country in the world to regulate trust businesses. There were 186 trust company businesses at December 2014.

Full licences 101

Managed trust companies 16

Class O (firms providing certain services to Jersey resident  09

  customers with limited control of customer assets)

Class G (primarily individuals providing director services) 60

101  16  09  60

Jersey TCBs manage a variety of asset  The sector trend is one of local consolidation classes on behalf of their clients: ranging  with the number of registered businesses from real estate to mineral rights to classical reducing but employment levels being equity and debt instruments. Executive share relatively stable. A number of businesses options schemes and pension plans are  are also expanding internationally either also common. The client base is equally  through organic growth or acquisitions diverse ranging from sovereign wealth  in the countries concerned.

funds to private individuals to family

wealth management offices.

Trust Company Business Ownership

Bank owned  26 Other financial institution 14 Owner managed  54

Private equity  9 Investment Business

Legal/accountancy 23

In December 2014 there were 90 licensed investment businesses conducting a range of activities including investment advice, discretionary investment management, dealing and custody services. Investment businesses range from small locally owned financial advisors to branches and subsidiaries of large multi-national financial services groups. The investment business sector services a diverse spectrum of local and international clients.

2014 saw a £1.4bn reduction (representing

2,963 clients) in Jersey s discretionary  

investment management activity; at  

31 December 2014 Jersey s investment   26  14  54  09  23 businesses provided discretionary services

to 11,664 clients with £20.8bn of assets

under management.

The investment business sector has experienced consolidation in recent years and, whilst there has been positive recent activity in relation to new licences, the Commission expects a further reduction in investment business registrations during 2015.

Profile by size (TCB employees) Dec 2014

Super large ( 50) 17 Large (31 - 50) 14

Medium (11 30) 34

Small (up to 10) 36

Total   = 101

17  14  34  36  101

Class G Individual Registrations 60 Class O Small Firms  09 MTCs (Managed Trust Companies)  16

Total   =  186

60  09  16 186

Insurance

There were a total of 180 insurance  There were a total of 130 insurance companies authorised to carry on  intermediaries authorised to carry on insurance business in or from within  general insurance mediation business in Jersey. The majority of these insurers  or from within Jersey. This total includes consisted of 170 non-resident companies  34 intermediaries that provide services on a (Category A permit holders) providing  cross border basis and 56 that only arrange insurance on a cross-border basis with  general insurance as an ancillary service to no physical presence in the Island primarily  their main non-insurance business activity via insurance intermediaries. The other 10  (e.g. travel insurance available from travel insurers are Jersey incorporated insurance  agents).

companies (Category B permit holders) that

include captive insurers providing insurance

for a diverse range of commercial risks

outside of Jersey.

p.21 p.22 Annual Report 2014

05

How it all comes together

How it all comes together

Mission Strategy

  Our mission, as set out in statute, is to maintain Jersey s position as an  Our regulatory strategy can be distilled  the potential for increased reputation risk

into three areas: market access, reputation and use our licensing powers to restrict international finance centre with high regulatory standards and to pay  management and loss minimisation.  developments where the threat to reputation

particular attention to our Guiding Principles of: risk may outweigh any expected benefits.

Jersey businesses provide services to a

 Reducing risk to the public of financial loss due to dishonesty,  diverse range of customers, the majority No system of regulation can ensure that

of which reside outside the Island and are  there are no failures. Our approach is to

  incompetence, malpractice or the financial unsoundness of  subject to laws and regulations in their home balance reducing risk to depositors, investors   financial service providers territories. Some of those territories operate and society with a regulatory environment

regulatory regimes that require foreign  for financial services businesses that is services providers to be subject to regulatory proportionate as well as meeting international environments broadly equivalent to their  standards. Our philosophy is that business own. Our strategy is to ensure that our own  should be managed so as to get it right first laws and regulations track international time. Thus we like to see businesses with standards to ensure that Jersey business  high standards of governance, effective can access those markets. An example  systems of internal control and a supportive of our market access work is the AIFMD  compliance culture so that they are able project that we have undertaken over  to identify and quickly correct their own the last two years.  shortcomings.

 Countering financial crime both in Jersey and elsewhere

In addition to our regulatory mandate we seek to provide efficient

and reliable registry services operating in the public interest.  Jersey relies heavily on its reputation to  Our registry programme is to prioritise

be able to offer financial services products  those services that are necessary to

and solutions throughout the world. The JFSC support our regulatory objectives, such has a key role to play in protecting that  as the register of companies including reputation whilst not curtailing unreasonably beneficial owners, and then leverage

the opportunities for businesses to develop  our detailed knowledge, experience and new markets, products and services.  infrastructure to provide registry services

for departments of the States of Jersey.

Our policy is to support such developments whilst providing guidance on how reputation risk might need to be managed. We seek to balance the potential benefits to jobs and growth of any new licence application with

Regulatory Model

Our approach is to set robust regulatory to make interventions to bring firms within standards, against which firms will be  acceptable standards or, in extreme cases, assessed when applying to set up business  revoke their registration in order to protect in Jersey and throughout their relationship  industry, the public and the reputation with us. Where necessary, we are prepared  of Jersey.

Setting Regulatory Standards

We set strong regulatory standards to  Our standards require financial services afford adequate protection for investors  businesses to have set minimum levels of and depositors and match international capital and liquidity depending on the nature requirements so that Jersey s finance  and size of the business undertaken and to industry may continue to enjoy relevant  provide us with audited financial statements. market access. Sometimes our standards  We work with the UK Accountancy Recognised may temporarily differ from our competitors Supervisor Bodies and the UK Audit Inspection as a result of changes in international  Unit to have some of the audit work carried requirements but we aim to stay aligned  out in the Island inspected and we refer to by developing strong relationships with  them issues of potential non-compliance international standard setters and  with Auditing Standards.

keeping abreast of developments.

The senior management of firms is responsible We consult widely on all proposals to change for ensuring that they have appropriate Laws and Regulations and work closely with governance, systems and controls in place the industry to ensure that all of the relevant to manage their risks and adhere to our Laws and Regulations are well understood  regulatory standards. This includes having and capable of implementation on an  a locally-based Compliance Officer who is efficient and effective basis so that they  responsible for supporting management achieve their objectives and command  and providing assurance to the managing the respect of depositors, investors and  body that the firm continues to meet our financial services businesses.  requirements. Firms are required to notify

us if there are issues of non-compliance

with laws, regulations and practice.

Authorisation

Remediation and rehabilitation

Our codes of practice require firms to  In some instances, firms may have more notify us of compliance issues of which  fundamental issues to resolve. Typically we they become aware. We also identify issues will assess these firms as presenting higher through our supervisory activities.  risk to our regulatory aims and objectives Where firms are having difficulties in  and implement a more intensive supervision meeting our requirements, we will take into  programme to help them back towards full account how open and co-operative they  compliance with our standards. In severe are with us when we decide on the best  situations or where the firm is unwilling course of action to take. In all instances,  or unable to co-operate fully, we will take we will agree with firms how matters can be  enforcement action to mitigate risk. resolved and a realistic date for completing

agreed actions. We will monitor progress

being made through regular interactions

with firms.

Enforcement

The JFSC uses its enforcement powers  Early receipt of information about possible to improve regulatory standards through  non-compliance with Laws and Regulations credible deterrence and to reduce potential  is key to our ability to act effectively to prevent damage where firms or individuals pose an  or minimise damage or loss. The JFSC operates unacceptable threat. Our powers, which  a whistleblowing telephone line to provide a we have used where necessary, include  confidential communication route for those the ability to issue directions restricting  concerned that making a disclosure about activities or the employment of individuals;  possible non-compliance might have an making public statements and the withdrawal  adverse impact on them individually.

of a firm s licence. During 2014, we made good

progress towards implementing a Civil  We work closely with the States of Penalties regime to provide us with a  Jersey Police on matters including money wider range of options to ensure that our  laundering and drug trafficking. We have enforcement sanctions are commensurate  also established information gateways with with a firm s behaviours. overseas regulatory bodies for receiving and

providing information in respect of regulatory matters including suspicious activity.

As we place reliance on firms to implement  and their planned activities meet

appropriate governance, systems and controls our published licensing requirements.  Guidance, outreach and education

to manage their risks and meet our standards, This includes assessing whether firms

we undertake comprehensive checks on Principal and Key Persons are fit  We provide comprehensive written  Protect Your Money website and regular business applications to ensure that owners and proper. guidance to the firms we regulate,  presentations to members of the public

complemented by regular presentations  to help raise awareness of practical and seminars. Firms also receive regular  measures that can be taken to reduce

reports to help them understand trends  the risk of personal loss.

Supervision  and issues arising from supervisory visits.

Our involvement in Jersey s secondary We undertake desk-based and on-site  whistleblower mechanisms we employ.  As investors and depositors are responsible  schools programme continued with the

supervision work. The intensity with which  Issues identified are usually resolved  for their own due diligence and understanding notable success of Financial Education now each firm is supervised is based upon the  between supervision staff and a firm s  financial services they may wish to purchase, being formally included on the curriculum. risk we perceive that they present to our  management, although the JFSC has the  the JFSC provides resources such as the

aims and objectives. We are increasingly  option to refer the matter to the Enforcement

an intelligence-led regulator, reacting  team if a firm is unable or unwilling to address

swiftly to intelligence received from various  deficiencies within agreed timescales.

sources including other regulators and from

Registry business model International Standards Alignment

Our registry business was originally designed to maintain a register of Jersey companies and to assist our regulatory functions by maintaining information about those companies and their beneficial owners. This activity led us to develop extensive knowledge and experience of running

a registry to high standards of efficiency and effectiveness.

Recent years have seen a significant demand from financial services businesses for online and real time operation of such services and this has led us to develop an approach and an IT platform that meets these needs.

The development necessary to provide  This is the risk that the reputation of such services in a secure environment is  Jersey and compliance with international significant. Thus we are keen to explore  standards falls below the level necessary to how we maximise the benefits from that  secure sufficient high quality and profitable investment through using the same platform financial services business, and/or results in to provide registry services to third parties.  international disapproval and/or sanctions. Governments maintain a wide range of

registries to support the services they  The JFSC also considers this risk to supply to individuals and businesses  be increasing as a result of the current

and accordingly we act as partner with  global political, economic and regulatory the States of Jersey where mutual  environment. Over and above its usual benefits and cost savings may  activities, the JFSC has additionally

be achievable.  responded in this context in recent years by:

 Recruiting additional policy resources

 Improving its policy

prioritisation processes

 Engaging fully with government to

implement recommendations for agreed reform

 Investing additional resources into

MONEYVAL and AIFMD preparations

To mitigate this growing risk we work closely with international and UK partners so that we are aware of the latest thinking and likely developments in the foreseeable future. This enables the JFSC to determine its legislative priorities and if possible influence external policy makers to ensure that developments are practical and likely to be effective.

Principal risks and uncertainties Information Security

The Board discusses the risks and uncertainties facing the JFSC on a regular basis. Our agenda is influenced by global political, economic, legal and regulatory factors, as well as local considerations, the risks presented by regulated firms

and the operation of the JFSC itself.

The JFSC s risks are captured in a risk register, which is regularly reviewed by

the Executive, Audit Committee and Board. The review considers whether all our key

The risk of data loss, data theft and/or risks have been identified and assessed

data corruption as a result of unauthorised reliably, whether our mitigation response is

internal or external activities continues to appropriate and whether we are allocating

be a challenge for financial services and sufficient resources to those areas that

other sectors. The expanding reliance on present the greatest risks to our

internet technology and mobile/remote regulatory objectives.

working has inevitably expanded the scope

for cyber-attacks with the obvious potential Of the risks identified, the JFSC currently

consequences of reputational and/or financial considers the following to be the principal

loss. Information security risks pose a risks and has allocated significant resources

persistent threat to the reputation of the

to managing them.

Island, Jersey s financial services industry as well as to the Commission.

The Commission hosts extensive confidential information about individuals and businesses in order to perform its regulatory and registry obligations. In order to mitigate the risk of information security breaches, we utilise sophisticated technology and we have a dedicated team which constantly monitors the integrity and effectiveness of these defences. Every effort is made to stay current and to ensure a safe and reliable operating environment.

Money Laundering and Terrorist Financing

Jersey has a good track record in tackling

money laundering and terrorist financing. We seek to mitigate this risk through high

standards of knowledge, training and However, there is always a possible risk that  reporting of suspicious transactions by Jersey is linked with money laundering or  the business community, combined with terrorist financing to such an extent that it  an up to date regulatory environment. would damage the Island s reputation and  The JFSC also ensures that there are lead to loss of confidence in doing business  effective working relationships between in the Island.  the relevant agencies (JFSC, States of

Jersey Police, prosecuting authorities) The JFSC perceives this risk is increasing as  so that action is taken efficiently and

a result of heightened terrorist threats, the  effectively when a suspicious transaction increase in cyber-crime and the emergence  is reported.

of payment systems that avoid the use of

bank accounts. There is also potential for

higher threats to emerge from new markets

that Jersey firms are developing.

Strategic Planning and Execution

This is the risk that the JFSC does not We seek to mitigate this risk by

choose effective strategies or is unable  working closely with industry to improve to achieve its objectives resulting in public  our knowledge of likely developments financial loss and/or reputation damage  and by becoming more agile and forward to the JFSC and Jersey. looking so that we can effectively manage

change as it arises. To achieve this the The JFSC considers this risk to be  JFSC is seeking to improve the knowledge increasing because the full effects of  and skills of its workforce and restructure significant changes in financial services  the way in which it collects and utilises markets and international regulation on  information about businesses and markets. Jersey and the extent of disruption to

financial markets from new technology

are not yet fully understood.

How it all comes together

Registry Regulated Entities Companies Investment Business

Foundations Trust Company Limited Liability  Business

Partnerships General Insurance Limited Partnerships Mediation Business

Incorporated Limited  Money Service Business Partnerships Fund Services Business

Business Names or All Service Business Trademarks Banking

Security Interests Insurance

HR Communications ICT Operations Enterprise Risk Management PMO Facilities Board and Executive Support Finance Information Management Facilities

p.31 Divisional Reports p.32 Annual Report 2014

06

Divisional Reports

• Policy and Strategy Strategic Report

Working with international policy makers and governments In respect of banking policy, work    The team attended training (November

continued with the Isle of Man and Guernsey 2014 and March 2015) on conducting

regulators to address the package of new  mutual evaluations under MONEYVAL s   There are two teams within the Commission that manage and develop  standards under Basel III. Initial Discussion  fifth-round of assessments which

this area: Policy and Strategy and Financial Crime Policy.  Papers have been jointly issued on capital,  starts this year and which uses the

systemically important banks and leverage,  revised FATF Recommendations and The Policy and Strategy team liaise with HM Treasury, the Financial  with industry feedback generally positive. revised assessment methodology

A Discussion Paper on liquidity management

Conduct Authority, the European Securities & Markets Authority, the  will follow in 2015. Further, the JFSC has been   The JFSC has represented MONEYVAL European Commission and other key stakeholders, on major policy  involved in reshaping the Standardised  at a private sector forum organised by dossiers such as the Alternative Investment Fund Managers Directive  Approach to Credit Risk (currently under  the FATF

(AIFMD), Markets in Financial Instruments Directive II (MIFID2),  Basel II) through its membership (as a

Markets in Financial Instruments Regulation (MIFIR), European Market  Committee taskforce. Consultation with   Prplenary meeesentations hatings on financial inclusionve been delivered to

representative of the GIFCS) of a Basel

Infrastructure Regulation (EMIR) and Single Euro Payments Area (SEPA).  the Jersey banking sector on these matters and transparency of legal persons and We will continue to assess the impact of these Directives and Regulations, commenced at the end of 2014. legal arrangements

the appropriate proportionate response and the varying equivalence

issues for Jersey as a third country. Ionf oinrtdeerrn taot icoonnatl rsitbauntdeatrod tshaendde tvoeulonpdme ersnt tand In line with nethe Financial Crime Pw international standarolicy team has liaised ds,

the effect that changes in standards may  extensively with the World Bank concerning An application was made during 2014 to the European Commission  have on Jersey, the Financial Crime Policy  use of software and a methodology to

for an adequacy assessment under the Statutory Audit Directive, which  team also participates in the work of the  conduct a national money laundering and Financial Action Task Force (FATF) through  financing of terrorism risk assessment.

involved an assessment of the JFSC s information confidentiality rules  its membership of the Group of International This risk assessment, which is expected against EU standards. Finance Centre Supervisors (GIFCS). to start towards the end of 2015, will form

the basis for the continued development Memoranda of Understanding (MOUs) were signed with the Financial  of policy in this important area.

Services Board of the Republic of South Africa, the Emirates Securities  The Financial Crime Pparticipates in the mutual eolicy team acvaluation tively

and Commodities Authority, the Chinese Securities Regulator and the  processes and procedures of MONEYVAL -

Swiss Financial Market Supervisory Authority. The Commission continues  a body of the Council of Europe.

to actively work with other regulators. For example:

 The Financial Crime Policy team

We are proud of the constructive role we play in a number of international  participated in fourth-round mutual fora, especially given our relatively small size as a jurisdiction. Of particular  evaluations of two MONEYVAL

significance, is our membership of, and active participation in, the  members: a Baltic country and a

Balkan country. Whilst a substantial International Organisation of Securities Commissions (IOSCO), through  commitment of time is necessary in

their various policy and standards implementation committees.  order to take part in such assessments,

they provide an excellent opportunity for

JFSC staff to apply and improve their

knowledge of the FATF Recommendations

Keeping domestic laws, regulation and codes up to international standards

A number of important policy initiatives  Assistance has also been provided to were progressed domestically.  the Chief Minister s Department with the development and enactment of other

In the funds industry, work continued on  legislation, in particular the Proceeds

the Funds regime review during the year,  of Crime and Terrorism (Tipping Off

with significant progress and detailed  Exceptions) (Jersey) Regulations 2014 and discussions with industry regarding  Proceeds of Crime (Financial Intelligence) streamlining and simplification.  (Jersey) Regulations 2015. The former set The Commission finalised its work  out circumstances when it will be possible on Managed Accounts introducing  to pass on information about a suspicion of an exemption, by way of an Order, from  money laundering or financing of terrorism Investment Business for those conducting  to another person without committing an activity in this space. This resulted in  offence, and the latter provide Jersey s simplifying their regulatory treatment,  financial intelligence unit (housed in the

in one place in Jersey, under the Fund  Joint Financial Crimes Unit of the States Services Business regime. Progress was  of Jersey Police) with additional powers to also maintained on AIFMD implementation  collect intelligence from the financial sector. working closely with industry and European

regulators on the framework and supervisory At the request of Jersey s Financial Crime approach. The Bank Licensing Policy was  Strategy Group, a report assessing money amended to permit the possibility of smaller, laundering and financing of terrorism risks non-systemic banks to operate in the Island. associated with the use of virtual currencies

has been prepared. The report also suggests a number of options for regulating virtual

In advance of MONEYVAL s fourth round  currencies in Jersey. The report and options assessment of Jersey s compliance with  are currently under consideration.

the FATF Recommendations, a number of

changes were made to Jersey s AML/CFT  The Commission also coordinated, and framework: contributed to, publication in January of a

pan-agency report on money laundering

 An amendment was made to the  typologies and trends in Jersey.

Money Laundering (Jersey) Order 2008

(the Money Laundering Order), which  In line with the increasing use of technology came into force in October 2014.  to counter money laundering and the financing

of terrorism, the Commission has also

 The Handbook for the Prevention and  recently published a statement on the use

Detection of Money Laundering and  of tablet and smart phone applications to the Financing of Terrorism for Financial  carry out customer identification measures. Services Business Regulated under the

Regulatory Laws (AML/CFT Handbook)  Finally, the enabling law to permit the use was substantially re-written and  by the Commission of civil penalties was re-published in January 2015. This followed approved by the States in 2014 and

an extensive period of public consultation subordinate legislation issued under

starting in July 2014.  the law is subject to consultation in 2015.

Acting with

intelligence and

agility in a rapidly changing

 financial world

S  upervision: inremain confidential, evolvement. Whilst the individual cases xaminations have Banking waThisgoanserdvaEernance oe focused on corporatrrxveeaminations for the ralidatssuulltteodedfginf Jerserourofeuwp pereinry incorporatithcepiaigthivest otionere goisskanthatrf the yvadernance ted banktehdcorporatefipear nodsiints,igvsee.  identified issues with the following: Risk rating customers

 Information security

has improved considerably in recent years

contribution of Jersey based independent

non-executive directors, which have now been   Credit risk in the home jurisdiction  appointed at all Jersey incorporated banks.

 Monitoring pooled customers

Although the possibility of a bank collapse  has subsided since the peak of the global    Payment controls

Examinations and findings financial crisis, risk management issues  

continue with a handful of individual banks    Assessment of risk relative to particular

that warrant the JFSC s attention and  high risk jurisdictions

  The Banking division fulfilled a full programme of supervisory

engagement during 2014. Our examination efforts focused on an AML/ sanctions thematic programme in the first half of the year, culminating in  Prudential matters

a detailed summary report published for industry guidance. Overall, banks

were found to be well advanced in implementing their AML/CFT and financial Jersey incorporated banks remained  seen, helped also by overhead reductions. sanctions systems and controls which were considered to now be of a  generally well capitalised, despite the  It seems that further material improvements

good standard.  challenges of the financial crisis and the  are at least partly dependent on interest

more efficient management of capital by  rate increases commencing.

parent groups. Reorganisations required

Assessments included a practical screening exercise whereby banks  as a result of the UK s and other home  Banks have steadily developed deposit

were asked to pass a list of names provided by the JFSC through their  jurisdictions plans to ring-fence large  behavioural data and their analysis of this screening filters, and present the results for analysis. This exercise  retail banks will lead to risk profiles changing since prudential liquidity requirements were proved valuable in benchmarking the banks screening arrangements  risks, which might lead to capital increases  intrcontinuing applications toduced in 2008. This forms the basis oo the Commission f

in respect of credit, operational and market

and in two cases led directly to the identification of serious, and previously being required in individual cases.  for banks to go beyond standard permitted undetected, flaws in their screening filters. Key/common findings were:  liquidity mismatches.

Bank profitability improved as levels of new

credit provisions continued to reduce and

 Automated re-screening of customers an increased element of recoveries was

 Senior management understanding of screening arrangements

Other developments

We continued to organise and  Bank registration fees were increased by 30% chair the Contingency Planning Group,  (per bank) to address a shortfall arising from: established to review and enhance

Jersey s preparedness for a bank failure

 The consolidation of banking operations and consequent surrender of licences

(consisting of representatives from the

 Staff procedures for discounting potential target matches

JFSC, Viscount s Department, Chief Minister s Office and the Deposit Compensation

  and compliance monitoring   An ongoing absence of new applicants

System Board). Work has revolved around   ensuring each stakeholder has adequate

 The increased cost of matching

contingency plans in place and running

continually evolving international standards

bank failure scenarios to test these.

Jersey currently lacks an adequate bank

There is a continuing trend for banks to consolidate and to close operations within branches and local subsidiaries. Over the last ten years, two thirds of subsidiaries have exited and total licence numbers have fallen by a third. This trend has obvious potential consequences for licence fee levels.

resolution regime, something which

the JFSC will continue to work with

Government on addressing.

06.2

I nvestment Business

Examinations and findings

  An extensive programme of on-site Investment Business examinations was performed, which focused heavily on the suitability of investments.

Performing 17 Investment Business  the suitability of investments will remain a key examinations identified that the majority  area of focus for the Investment Business

of firms have taken, or are taking, steps to  team in different areas. For example, they enhance procedures relating to customer  will continue to engage with industry and suitability. Findings included weaknesses  monitor developments relating to sales of

in relation to product due diligence, product Interest Rate Hedging Products.

approval processes, maintaining and

recording up-to-date knowledge of clients  A number of other matters arose in 2014 circumstances and client risk tolerance/ that warranted the Commission s attention. capacity for loss and concentration risk.    These included: fraud, information security,

suspicious activity reporting, corporate Suitability of investments was also the  governance inadequacies and financial focus of off-site supervision. This resulted resource deficiencies.

in a single figure number of investment

businesses becoming subject to increased  Other off-site supervisory activities will Supervision and Enforcement action.  continue into 2015, including; outreach to

assist industry in ensuring compliance with It is evident that our supervisory measures  revised regulatory requirements resulting are having their desired effect, and that  from changes to the Codes of Practice business conduct has improved in recent  in July 2014, and efforts to ensure that years. However the JFSC continues to identify regulated activities conducted in Jersey

and pursue cases of historic misselling of  on a cross-border basis are compliant non-retail investment funds. Accordingly,  with the Island s regulatory regime.

Other developments

Regulatory changes arising from the  by commission based remuneration

JFSC s Review of Financial Advice (RFA)  arrangements. The Investment Business project came into effect on 1 January 2014.  team has reviewed compliance with RFA RFA aims to raise professional standards  through supervisory activities in 2014, with and competence and reduce possible  only isolated instances of non-compliance conflicts of interest that can be caused  being identified.

Funds

Examinations and findings

  In total, 36 on-site examinations were carried out by the Funds Supervision team in 2014, providing visibility of the Commission in the market place and an opportunity to review industry s systems

and processes and to ensure compliance with the regulatory laws and codes of practice.

The main theme of the 2014 visit programme was a review of licence holders risk management systems and controls in relation to money laundering and the financing of terrorism. The key findings were:

 Improvements were noted in the recording of issues discussed  at Board level;

 While some Business Risk Assessments evidenced deficiencies,

  in others a broader spectrum of risks were being recorded, which

  in turn directly influenced activities undertaken as part of compliance  monitoring programmes;

 Weaknesses were identified relating to the independence of the Money  Laundering Reporting Officer, and the effectiveness of compliance

  monitoring regarding identification and verification of clients.

Funds by asset class NAV £ millions as at 31/12/14

Equity  47,173 Venture capital/private equity  44,774

Real property  31,438

Hedge and alternatives  66,281

Other (balance) 39,214

Total   = 228,880

47,173  44,774  31,438

228,880

66,281  39,214 Other developments

Remediation plans were agreed with each entity visited and the division is  The Funds Division introduced a  During 2014 a number of compliance

programme of outreach meetings with  officers were asked for feedback on the pleased to report a continued high level of co-operation from the entities  key stakeholders and held a number of  design and development of a new Funds

visited during the year.  AIFMD consultations, seminars and  annual compliance return. The quality of

training programmes during the year.  the feedback was very high and the new

The attendance at these seminars was  compliance return will be launched in 2015.

very high and to supplement this face-to- The introduction of an annual compliance

face contact, improvements and updates  return will now put the Funds sector on

were made to the guidance notes and  the same footing as the other finance

codes of practice on the Commission s  industry sectors.

website. Frequently asked questions on

specific AIFMD topics were also published.

T  rust Company  Business

Examinations and findings  2004   05   06 specific themes which rPanridThe TnciniptelegCB Division focused most attsr,itpyaortficJeurlsaerlyyiinn eprcteorm esentmmseorfc ed the highest risk tpiarol atention and rencdtifinngaanncdiaelesourmnhaato the JFSC ntecce this yrisn,gatnhdecear on r s Guiding oeupnutteartiinogn 09   10   11  

07   08

financial crime both in Jersey and elsewhere.

Aw erthe conducorough ont -ed during the ysite examinatioear. The visit prn programme mogramme highlighteant 42 on-site exaed the minations 12   13 2014 following issues that existed in some firms:

Weaknesses in SAR reporting procedures

Overall, by year end 2014, the TCB

 Some poor conflict of interest management  supervision team has conducted

  over 500 on-site examinations over

  the preceding 10 years.

In addition to this work, the team continues its outreach programme of

training and seminars to regulators and industry representative bodies   on the somewhat specialist activity of Trust company regulation that few

supervisors undertake worldwide (in 2014, including working with the  Other developments

Maltese and Liechtenstein regulators). In July 2014, the Island s government  Tax Schemes , the Commission will in future,

published a statement regarding abusive  as part of its normal programme of on-site

tax schemes which introduced a requirement examinations, test the compliance of service

on service providers to document where any providers with the above requirement.

new business involves schemes registered

under Disclosure of Tax Avoidance Scheme  The TCB division also provided resources obligations ( DOTAS ) in the UK. to a Group of International Finance Centre

Supervisors (GIFCS) working party, which

The Commission responded to this statement resulted in the publication in October 2014

by advising regulated entities that, in addition of a revised Standard on the Regulation of

to existing requirements set out in a Guidance Trust and Corporate Service Providers.

letter dated March 2013 entitled Aggressive

Insurance

Examinations and findings

  The Insurance team carried out a combination of general supervision assessments and Payment Protection Insurance (PPI) examinations. The examinations followed desk-based surveys of the industry in relation to suitability of investments and PPI misselling complaints.

Whilst the PPI review is to be completed in    Inadequacies in the maintenance 2015, the JFSC is pleased to note that local  of AML business risk assessments firms appear to be handling PPI fairly with

many taking into account the UK requirements   Over-reliance for critical customer under group-wide procedures.  information on obliged persons such

as introducers and intermediaries

The remaining supervision examinations   identified the following findings:    Inadequacy of source of

wealth documentation

 Sub-standard risk-based

compliance monitoring

The ongoing trend for consolidation across the Jersey insurance sector continued during 2014. The JFSC dealt with several insurance companies undertaking transfer schemes plus merger and acquisition activity, as non-resident firms continued to seek structural efficiencies in preparation

for Solvency II.

Other developments

The Insurance team concluded a self- number of amendments to insurance assessment of compliance with revised  regulatory requirements to address core principles issued by the International  gaps identified which will be subject Association of Insurance Supervisors (IAIS).  to consultation with industry.

There may consequentially be a small

AML Unit

Examinations and findings

  The AML Unit completed 48 on-site examinations in 2014, visiting a broad and diverse range of non-traditional financial services businesses (collectively known as DNFBPs or designated non-financial business and professions) for which it is responsible, including money service businesses, accountancy practices, law firms, estate agents, and other financial services, such as lenders.

The AML Unit has made a shift to a genuinely Other developments

risk-based approach to supervision, with the

emphasis moving from breadth of coverage  During 2014, the AML/CFT risk model for and outreach to advise firms of broad  DNFBPs, including money service businesses requirements, to more in-depth examinations,  was enhanced and approximately 250

testing AML/CFT systems and controls to  businesses were re-assessed. Outputs from ensure they are not only adequate, but are  the model now form the basis for the 2015 operating effectively. This more in-depth  examination programme. It has been approach has resulted in the JFSC identifying synthesised with emerging money laundering businesses requiring heightened supervision and terrorist financing trends and typologies due to inadequate risk management, though to ensure a truly risk-based approach

no evidence was found of actual money  to supervision.

laundering or other criminal activity.

Key findings included: In respect of such emerging risks, the

AML Unit has worked closely with the

 Poor business risk assessments

Commission s Financial Crime Policy team

 Inadequate consideration of  on new products such as virtual currency the money laundering, terrorist  and pre-paid cards. In 2014, the team

financing vulnerabilities and threats  conducted a series of themed examinations relative to the individual business of money service businesses in order to understand Jersey s exposure to money

 Poor client risk assessment processes  laundering and terrorist financing risk

and inadequate consideration of  through the use of pre-paid cards. cumulative money laundering risk factors,  As a result, related guidance is now

with a systemic defensive culture of  available in Part 4 of the AML Handbook.

 we know our clients

The AML Unit undertook a survey of

 Inadequate Suspicious Activity Reporting

Non-Profit Organisations (NPOs) to gain (SAR) processes. There is a systemically

an increased understanding of the sector s low volume of internal and external

activities, fund raising and disbursements. suspicious activity reporting amongst

The information gathered in the survey DNFBPs which is not necessarily being

now forms part of a more in-depth considered as a red flag , but may

analysis currently underway.

indicate deficiencies in areas such

as staff training

p.47 Divisional Reports / Enforcement p.48 Annual Report 2014

06.3

Enforcement

  The goal of the Enforcement division is to be firm but fair, and to engage in constructive dialogue with those that we regulate, resorting to the use of statutory enforcement sanctions where necessary.

The Enforcement Division dealt with a total of 93 new cases during 2014.

Enforcement Process

Where formal sanctions are imposed, the JFSC s decision making process is followed with the preliminary review by two directors to assess the case and determine if it is suitable for settlement discussions.

01  02  03  04  05

Disclosure  Review  Consideration  Board of  Appeal to and Verification  Committee -  of the case by  Commissioners  the Royal of the file to  sense check  the Board of  receive oral  Court if the subject. and review of  Commissioners. and or written  subject

the evidence and submissions  contests recommended  from the  decision. action. subject and

make final

determination.

Public Statements and Sanctions

Public statements continue to be  During the year, Enforcement entered into an important and effective regulatory  settlement agreements with five individuals/ sanction, but also act as an alert to the  businesses subject to enforcement action public and a point of reference for the  culminating in the issue of directions and regulated community to learn from the  public statements. Settlement agreements mistakes of others, or to alert them to  allow the JFSC to increase the volume of the fact that directions have been issued  cases it investigates and reduces the costs against a specific individual who may pose  associated with contested enforcement

a risk to the finance industry. In 2014 the  action. The use of settlement agreements Commission issued 13 such public statements.  was incorporated into the JFSC s decision

making process, which was updated in 2011, Twelve individuals were considered to pose a and is subject to a further review in 2015, risk to the industry and issued with directions to incorporate changes needed for the preventing or restricting them from obtaining introduction of Civil Penalties in Q3 2015. employment with a registered person, without

first obtaining the specific consent of the JFSC.

One such consent was granted in 2014.

Fraud Prevention

Members of the public, many of  In late 2014, Enforcement joined forces with them retired both in Jersey and overseas,  the States of Jersey Police, Trading Standards, continue to search for better returns  Digital Jersey and the Honorary Police to on their savings, and have on occasions  form the Fraud Prevention Forum, with the been tempted to invest money through  aim of delivering initiatives in Q2 2015 to unsolicited telephone calls or emails and  protect members of the public from

sadly, fall victim to fraud and scams.  falling victim to such scams.

Investigation Findings  Intelligence

Poor standards of corporate governance exercised at the board level continued to be the root cause of several of the most significant enforcement cases in 2014, and resulted in the closure of two regulated service providers, together with the issue of directions to the former directors preventing or restricting their future employment by any regulated entity.

Wherever appropriate, Enforcement will  The JFSC s capability to collate and attempt to steer or force a regulated  develop intelligence has been essential in business towards a course of remediation.  ensuring that Enforcement focus resources The overwhelming majority of Enforcement  in the correct manner adopting an intelligence cases fit into this category resulting in

significant improvements in adherence

to the regulatory standards.

led approach to regulation. In 2014, the JFSC received 12 substantive contacts from whistleblowers, often providing very precise and key intelligence.

Registry Registry Activities in 2014

S//ys/t/e/m/ s/ // / / P/ ro/ c/ e/ s/ s/ e/ s/ /// R/ e  g  i  st Sry P Brinc Piple Ps / /  D a /s /h /b /o /a /rd /  /// / In /d /u /s /t /ry /  /// / S /L/A International // Vision // Our People // Customer // SIR // Tell Us Once // EBR

  The JFSC operates Jersey s Companies Registry, which registers  Automation and e-commerce projects continue to be developed Jersey companies, partnerships, foundations and business names.

The Registry aims to maintain a service that is able to supply its users  In December 2014, we implemented a series  The online search facility, monitoring and with a customer-centric approach enabling users to have access to  of dashboard systems which provide real-time filing systems were all enhanced in 2014, to

improve the quality of service users receive accurate and reliable information. The Security Interests Register (SIR) manaapplications submittgement information red by custegaromers. ding the  and to ensure access to high quality public

and the registration of trademarks are also operated by the Registry. This has been an invaluable tool to manage  data is maintained.

and deploy resources to meet the customer

The Registry: needs based on live activity levels.

 Monitors and vets adherence to the Sound Business Practice Policy (SBPP)

Applications in 2014

 Undertakes the first line (second line for regulated business) of

  anti-money laundering and countering the financing of terrorism,  To evidence our commitment to a customer- standing for companies, partnerships,   defence checks for Jersey locally resident users   centric apprmillion documents froach, we conom imavertge files ted over 2.45 o  foundations and business names. At present, the Registry holds 312,251

searchable pdfs, to allow easy access.  entries on its register (this includes live A system has also been built to provide  and dissolved legal entities).

 Beneficiary Customer / Industry immediate online certificates of good

 Outcomes

Increased CustExcellentomer Simplificationof Doing  PrReducedocessing ImprDataoved   312,251 43,890 Transparency

PrPocedurolicies,es, Service Business Times Integrity Number of entries on the Register Online submissions

AML/CFT Checks

 Programme of Work Throughout 2014 the Registry processed approximately 200,000 applications,

2,771 of these were company incorporations.

Sound Business Practice Policy Automated Processes 2014 2015

Registry Dashboard and Registry Processing Statement SLA Monitoring and Enhanced Forms

Registry Principles Intelligence

The Registry has introduced a set of  applicant, in line with Financial Action Task initiatives to sustain high customer service  Force (FATF) Recommendations. The SBPP levels, while fulfilling the role of AML/CFT  outlines the risk-based approach applied by gatekeeper within the JFSC. In November  the JFSC, acting through the Registry, when 2014, it published the SBPP with the objective processing applications, that include activities of ensuring that on incorporation, the  or functions that are deemed to pose higher Registry is made fully aware of the nature  reputational risks to Jersey.

of the business to be conducted by an

06.4

Registry business model Registry at a glance in 2014  

In order to maintain its international reputation for quality service, the Registry has continued to develop better services

for its users by driving a reduced paper agenda and delivering efficiencies where possible. We have acted on user feedback to make it as easy as possible for customers to do business with us, having already identified the need to update our IT platform to ensure that any new systems remove the burden

of redundant administrative requirements and take into account any legislative drivers thereby adhering to developing international standards and expectations.

The focus for 2015 is to engage with stakeholders, in particular with other local registries and States of Jersey agencies to combine efforts for the benefit of the Island. Particular focus is on implementation of the Jersey Aircraft Register. Registry is also keen to proceed with applying for a jurisdiction four digit local operating unit number from the Global Legal Entity Identifier (GLEI), Regulatory Oversight Committee and begin research on the feasibility of running a Jersey register to issue GLEIs.

Registry is also working hand in hand with  

shop for residents wishing to set up a   33,048 the States of Jersey on the Tell us Once  

project an initiative to provide a one stop  

business in Jersey.  Active companies on the Register

Particular focus in 2014 has been on   2014

of ultimate beneficial ownership of   55,000+

the Registry s operation of the register

companies and other Jersey legal entities  Searches received by the Registry

on incorporation or inception. This is

supported by the Commission s licensing

and supervision of TCBs to maintain up

to date beneficial ownership of all such  65% / Paper 35% / Electronic structures on an ongoing basis is an

important component of Jersey s leading

98.7% position in the international debate on

capture of beneficial ownership information.

Companies incorporated within 2 days

100% Requests for documents delivered within 2 days

2,771 Number of total incorporations / registrations

International Development of the Registry

We are an active member of the  Registry also continues to work with the  European Business Register (EBR),  group set up to consider the requirements  

a network of National Business Registers  of the Directive on the Interconnectivity of  and information providers from currently 27  European Union and non European Union  European countries. The EBR provides easy  (third countries) business registries.

access to European company information  

online allowing access to each member  As part of its strategy to maintain key  country s official register.  internation involvement, Registry continues  

to provide input to a number of international  The Director of Registry is a board member  surveys which in turn help to promote Jersey of EBR and was elected to the European  and ensure that it maintains visibility with  Comerce Registers Forum Working Group. global counterparts.  

International Achievements  

During 2014, we were awarded the International Association of Commercial Administrators Merit Award for the establishment of the Security Interests Register (SIR) in 2013.

p.53 Divisional Reports / Finance and Resources p.54 Annual Report 2014

06.5

Finance and

Resources

Strategic Report

  The Commission achieved a net surplus for the 2014 year compared  Operating costs

to a budgeted net deficit. Lower than expected fee income was mitigated

by containing operating costs where possible.   Operating expenditure amounted to  Investigation and litigation costs incurred

£14.65 million compared to a budget of  during the year increased to £0.85 million

£14.38 million. The variance is primarily due  due to two significant ongoing enforcement to increases in staff costs, investigation and cases. However, a notable amount of

litigation costs, unexpected one-off costs  investigation and litigation costs were Bearing down on costs  and the impact of completed capital projects exceptionally recovered from regulated

which resulted in increased depreciation  entities subject to enforcement action

The Finance department commenced  will form key focus areas for the team.  charges. Increases in expenditure were  resulting in an overall net surplus of

an ongoing review of costs during 2014 which A review of significant contracts will be  mitigated by lower costs associated with  recoveries over expenditure during

has continued into 2015. Cost control will be  carried out within the scope of this review.  recruitment, computer systems and  the year.

a core objective for our Finance team during  Several savings have been identified and  public relations.

2015. Improvements in reporting, departmental realised since commencing this review. The Commission s reserves remain in line budget monitoring and procurement control  Staff costs remain the Commission s  with the current reserves policy. The 2015 are central to this objective. As such, these  most significant item of expenditure.  Budget assumes that fees for certain

The average number of staff employed  regulated activities will be increased increased marginally from 124 FTEs in 2013  marginally in order to limit future decreases

to 125 FTEs. Staff costs have increased  in the reserves. However, the Commission

despite the limited overall increase in staff  will be undertaking a strategic review of its Regulatory fees  numbers due to the appointment of several  current funding arrangements and reserves

vacant senior positions, costs associated  levels during 2015 to ensure that appropriate Total fee income increased to £13.76 million year owing to several factors including bank with these senior appointments and specific reserves levels are maintained.

in 2014 from £13.62 million in 2013. This rise  licence consolidation, overseas bank branch one-off payments which were incurred

was due to an increase in fee income from closures and a decrease in one category of  during 2014.

company incorporations, the Security Interests licensed funds due to the closure of funds

Register and company searches. Regulatory at one provider.

fee income decreased 2.6% from the previous

• Corporate Governance

Corporate  Fit and proper requirements

Governance  wheemploTther individuals arheyed in the financial services industry Board makes the fit and pre final decoper tision ao be bout oTwith their legal advisers, tfhientBeorvairedwaslswoitmhetht eeaincdhivino hear their idduivaildsuinalq, tuoegsettiohne.r What did the  wsignificance that it cannoapprheropriate a seely at an Ettlement isxecutivcont be dealt with tese leted vel. or of such  ereprxplanations and listesentations.  en to their

Board do? The Boarporeceivtential confliced ded considertailed rts oeports about the faced carf interest and threfully any ee ts  The Boarca lack oitheir emplonacsoems pthef intatd concluded in some oet na egrityycners.eintdhia, and in ovtidnueaclehs as dthers a leit dat ee md f the or net s vr ta el orain ti en f dg

Commissioners excused themselves from

participating in certain cases. The Board  and subsequent close supervision by

and circumstances, together with transcripts

  The Board met monthly during 2014 and held an away day to think about strategic issues outside of its usual environment. In addition the Board found it necessary to meet on four additional days to consider a number of fit and proper cases. As a consequence Commissioners typically spent significantly more time on Commission business when compared to 2013.

Risk appetite and policy development

The Board spent more time than in previous  The Board regularly debates risk appetite years on strategic risk assessment and policy and strategy and how this impacts on policy. development, responding to the many new  During the year, the Board continued to regulatory requirements promulgated at  discuss its approach to Bank Licensing global, regional and national level, which  recognising that continued industry

have a profound effect on Island business.  consolidation has reduced the choice Topics covered a wide range of matters  available to both domestic and international from UK bank regulation to anti-money  customers. The Board also devoted significant laundering and terrorist financing. time to a number of individual licensing

decisions ranging from a proposal from

an African sovereign wealth fund to whether restrictions should be placed on the existing licence conditions for a bank.

Consultations on legislation, requirements and guidance

The Board approves the content of  During the year the Board devoted significant consultations on regulatory legislation  time to the finalisation of our response to the and requirements, and participates in the  EU s AIFMD to ensure that Jersey based evaluation of consultation responses  alternative investment fund managers are from industry. The Board has delegated  able to take advantage of the new directive. consultations on guidance to the Executive  The Board also spent significant time on the (see also the section on the delegation  development of a civil financial penalties of powers). regime, including detailed consideration

of comment letters and listening to the feedback from industry.

Recruitment of Commissioners and Executive Directors

The Board spent time towards the end of A sub-committee of the Board was formed, 2013 and in the first quarter of 2014 defining  led by the Deputy Chairman, and a member the future role of the Chairman of the JFSC,  of the Jersey Appointments Commission stimulated by the vacancy that arose on  (JAC) was co-opted. Following a competitive the retirement of Clive Jones in the latter  recruitment process, the Board concluded part of 2013. The Board recognised that the  the Lord Eatwell should be offered the

role had taken on more importance given  post. As part of the process, the Board

the speed of change and other challenges  considered Lord Eatwell s other significant being faced by Jersey. commitments and concluded that there

were no conflicts with the Commission or its The Board concluded that the future role  operations. This appointment also complies required a significant increase in the time  with the Codes provision that the Chairman to be spent by the Chairman and required  should not have been the Chief Executive

an individual able to assist the JFSC develop previously. A recommendation was then further its external relationships at UK,  made to the Chief Minister and the

European and Global levels. The Board  appointment was subsequently

also concluded that an appropriate level  made by the States of Jersey.

of financial compensation would need to

be available to ensure that high quality  The Board reviewed its strengths and candidates would apply. weaknesses in the light of the issues that

it expects to address over the next few

years and identified that the balance of the Board skills and knowledge would best be enhanced by the addition of a lawyer with experience of UK and European financial services policy matters, and a Jersey

based financial services practitioner with experience of the private wealth industry. Appointments in these two fields have

been made.

Governance  Composition of the Board

and Statutory  Chairman, Deputy Chairman and eight other Commissioners. With the eThe Board currently consists oxcepf the tion    Regular users on their own account or on behalf oof those users, of others, or rf financial services oepresentatives f I nformation oaroA chart of the Dirf the Boare independent non-ef the Boarecd. Six otor General, all Commissioners f the Commissioners livd of Commissioners is xecutive members e    anIndividuals ry kind supervised bepresenting the y the JFSC

in Jersey, and four in the United Kingdom.  public interest

included in appendix 11.01. The Commission  The Board reviews its composition as and Law requires the Commissioners to include:  when vacancies arise to ensure that there

is a proper balance between the interests  Persons with experience of the type  of persons carrying on the business of

of financial services supervised by  financial services, the users of such the JFSC services and the interests of the public

at large.

Constitution of the JFSC

  The JFSC is a statutory body corporate established under Article 2  Separation of roles of Chairman and Chief Executive of the Financial Services Commission (Jersey) Law 1998 (the Commission  The roles of the Chairman and Chief  The Deputy Chairman of the Board is

Law). The governing body comprises the Board of Commissioners, which  Executive (Director General) are distinct.  considered by the Board to be its de facto is responsible, in particular, for agreeing the strategy of the JFSC and  The Chairman is responsible for the running  Senior Independent Director as described ensuring that the necessary financial and human resources are in  of the Board s business and the Director- in the Code.

place for the JFSC to meet its objectives. General has erunning of the JFSC xecutivs dae responsibility for the y-to-day business.

Compliance with FRC Corporate Governance Code Appointment and reappointment of Commissioners

The Board believes that high quality governance is essential for well-run organisations. There are no specific codes or standards for the governance of regulatory bodies. The Commission believes that the UK Corporate Governance Code (the Code) issued by the Financial Reporting Council is an appropriate benchmark for the Commission. The Code requires boards to comply with its principles or explain how those principles are met in practice.

The Board has complied in full with the Code  The appointment of Commissioners is issued in September 2012. Although the  a matter reserved for decision by the States Commission does not have shareholders,  of Jersey. Where a vacancy exists the Board instead it has a wide range of stakeholders  follows the procedures recommended by and seeks to have effective dialogue with  the Jersey Appointments Commission (JAC) them by way of the annual Business Plan  and a member of the JAC participates in the and Budget, the Annual Report and the wide  process. The Board identifies the skills and range of consultation documents about  experience that would be of most benefit to major legislative and policy proposals that  the future function of the JFSC, advertises

it publishes. and uses search consultants and then

evaluates the candidates. The Board

The last update to the Code was issued in  recommends appointments to the Chief September 2014 and will first apply to the  Minister who takes a proposition for any Commission in 2015. The Board is committed  appointment to the States for debate

to complying with the amendments contained and vote.

within the updated Code.

On appointment, Commissioners receive an induction to the work of the Board and each Division of the JFSC. This includes an opportunity to meet senior staff in each Division at the earliest stage.

Commissioners receive a standing invitation to attend in-house seminars, as well as receiving lunchtime presentations at strategic level from local and overseas speakers of recognised stature. This is in addition

to ad hoc continuous development

training events.

Under the provisions of the Commission Law, Commissioners are appointed for terms not exceeding five years and, upon expiry of their first term of office, are eligible for reappointment. The Chairman takes soundings, near the end of their first term, to determine whether the individual wishes to be appointed for a further term and obtains feedback on their performance before making a recommendation to the Board, which is then conveyed to the

Chief Minister.

Delegation of powers Audit Committee

The Board is empowered to delegate any  The Board retains those regulatory powers

of its powers to the Chairman, one or more  which relate to:

Commissioners, or an officer of the JFSC.

However, the Board has decided to retain to    The authorisation of new applicants

itself those powers that could have a highly  under the Banking Business (Jersey) significant effect on the achievement of  Law 1991

its key purposes or on the finances or

reputation of the JFSC. The Board s    The refusal of an application or the

approach to delegation is set out in two  revocation of a permit or registration

policy statements which can be viewed on   its website at www.jerseyfsc.org/the_com-   The determination of the amount of mission/about_us/board_of_commission- a civil financial penalty ers/corporate_governance.asp

The Board receives a monthly summary of the use of the high level powers that it has delegated to the Executive and at each meeting probes items that appear unusual or potentially controversial.

Planning, budgets and monitoring progress

The Board maintains a rolling three-year  The Board monitors performance against business plan and an annual budget. In the  the objectives set in the business plan

last quarter of each year, the Executive of  by reviewing regular reports from each the JFSC prepares a draft business plan  Divisional director. These reports are

and budget incorporating, amongst other  considered at the Board s regular meetings things, the strategic issues discussed by  at which the relevant director is present the Board at its annual away day.  and available to the Board to answer questions

and provide any additional information that The JFSC publishes an abridged version  may be required. Performance against

of the detailed internal business plan used  budget is monitored by the presentation by the JFSC s staff for comprehensive  of quarterly management accounts to the planning and monitoring purposes and  Board and financial presentations as and uses this publication to stimulate a  when appropriate.

dialogue with industry.

Internal controls Committees of the Board

The JFSC s financial control processes  The Board has established two Committees; have been in place throughout the year and  an Audit Committee and a Remuneration have been kept under regular review. The  Committee. The Board appoints the Board concluded that the system of financial  members of the Committees. The terms control in relation to key items was  of reference of the two Committees are effective throughout the year. published on the JFSC s website.

The Audit Committee s terms of reference  controls in relation to these key items was include recommending the appointment of effective throughout the year. The Audit the auditor and agreeing their remuneration, Committee reported this to the Board. supervising and assessing the work of  The Audit Committee took a significant internal audit, supervising reviews and  interest in the continued development assessing risk management framework  of the JFSC s key risk register and KPIs and the effectiveness of internal controls. to enable the Board to monitor progress

towards achieving key regulatory outcomes.

The members of the Audit Committee

during 2014 were Commissioners  The Audit Committee also reviewed

Ian Wright (Chairman), Stephan Wilcke  work undertaken by Internal Audit in

and Cyril Whelan. The Committee met twice  respect of certain key non-financial

during the year and its Chairman reported  controls. This included work relating

on the system of governance and control to  to internal whistleblowing arrangements.

the Board of Commissioners. The meeting  Whilst noting that supporting procedures scheduled for December 2014 was postponed needed minor updates, the Committee

until early January 2015. concluded that arrangements were

sufficiently robust to enable Commission

staff, to raise concerns about possible

The audit committee is constituted of

improprieties in matters of financial Commissioners with relevant knowledge,

reporting or other matters in confidence experience and qualifications to carry out

and, furthermore, that arrangements were

an effective audit committee function as

sufficient to ensure that any such matters summarised below:

would be adequately investigated.

Ian Wright: Qualified accountant (ACA),

former Senior Partner of Price waterhouse- Following its review of the annual report Coopers in the Global Corporate Reporting  and accounts and of assurance work

Group. Ian is currently a member of the  undertaken during the year by BDO and Financial Reporting Council s Monitoring  Internal Audit, the Audit Committee was Committee; able to advise the Board of Commissioners

that, in its opinion, the annual report and Stephan Wilcke: Graduate of Oxford

accounts, taken as a whole, were fair University with a Masters in Politics,

balanced and understandable and provided Philosophy and Economics, Chairman of

the information necessary for stakeholders OneSavings Bank PLC and Audit Committee

to assess the Commission s performance, Chairman of Milvik (Bima). Stephan was

business model and strategy.

formerly the Chief Executive Officer of

the Asset Protection Agency. In July the Audit Committee considered a Crown Advocate Cyril Whelan: Senior Crown  proposal from management to obtain better Advocate for the Island of Jersey. Currently  use of resource during a period of significant

a Senior Consultant at Baker & Partners  organisational change. It was agreed the

and former senior legal adviser in the Law  Internal Audit role would be replaced by a Officers Department in Jersey. Risk and Assurance role to help develop the

Commission s risk management framework. During the year the Audit Committee  To safeguard the quality of assurance being reviewed the scope of the external audit  provided to the Audit Committee, it was

and work proposed by the Internal Audit  agreed that the Risk and Assurance role function and concluded that it would be  would have a dual reporting line so that it sufficient to provide the assurance required  could maintain a reporting line into the

over the Commission s financial statements. Chair of the Audit Committee. Furthermore, Internal and external audit reports relating it was agreed that the engagement of third

to the adequacy and effectiveness of key  parties to provide independent assurance financial controls including essential  work would be considered as appropriate to controls covering cash payments,  supplement assurance activities provided contracting and physical security enabled  by management and the new Risk and

the Audit Committee to conclude that  Assurance role.

there were no significant matters to

address and that the system of financial  / Continued

Audit Committee / Continued Nomination Committee

The Audit Committee met with BDO  and omissions and concluded that the plan  The Board has concluded that it is not  Subsequent to the year end, a smaller LLP, the external auditor, during the year.  was appropriate and that the audit should  necessary to have a standing nomination sub-committee was formed to evaluate the The Commission had concluded in 2013  be effective. BDO LLP continued to carry  committee and instead the full Board  candidates identified by this process and that it wished to comply in full with corporate out the audit from a BDO LLP office in the  carries out the functions of a nomination  make a recommendation to the full Board. governance best practice. This allowed  UK, with the work being overseen by a UK  committee as and when the need arises. The sub-committee was joined by a

the auditors to expand their audit report  based partner. The Audit Committee noted  During the year the Board identified that the  representative of the Jersey Appointments to comment on their assessment of materiality in the prior year that the audit partner should balance of the Board s skills and knowledge  Commission to help ensure that JFSC and the areas of corporate governance and  be rotated for the 2014 audit following his  would best be enhanced by the addition of  complied in full with the Procedures for reporting specified for their review by the  seventh year as engagement partner on  a lawyer with experience of UK and European Appointments made by the States of Jersey. Code. The Audit Committee reviewed the  the audit. This rotation was duly actioned  financial services policy matters, and a Jersey

audit plan and considered whether there  by BDO LLP following the conclusion of the  based financial services practitioner with

were any material exposures omitted.  2013 audit. BDO LLP did not provide any  experience of the private wealth industry.

It discussed the work proposed and the  non-audit services to the Commission.

level of materiality for potential errors  The Committee selected Thomas & Dessain

to perform recruitment services for these

potential appointments. There were no other connections between the Commission

and Thomas & Dessain. The roles of

Remuneration Committee Commissioner were then advertised in

Jersey and UK media and on the

Commission s website.

The terms of reference of the Remuneration Committee are set out on our website and include advancing and approving the

JFSC s remuneration strategy ensuring

that performance related compensation arrangements support the strategy, and assisting the Chairman with the annual performance review of the Director General.

The members of the Remuneration Committee during 2014 were, Debbie Prosser (Chairman), John Mills (until retirement), Markus Ruetimann and Lord Eatwell who joined the committee on the retirement

of John Mills. The Committee met eight times during the year. The Remuneration

Committee was particularly active during

2014. The Committee undertook its normal

role of considering the relevant remuneration including bonus levels of the Executive

Directors including the Director General.

Attendance at meetings

During the year the Committee has

taken an active role in assisting with  Board and Committee attendance during 2014 was as follows:

the development of the JFSC s future

competency framework and input   Meeting

into the initial planning for the Change  

Programme regarding performance  Commissioner  Board  Audit   Remuneration and remuneration.  John Averty  12/12

John Harris   11/12

Lord Eatwell  12/12  4/4 John Mills  10/10  4/4 Debbie Prosser  12/12  8/8 Markus Ruetimann  12/12  8/8 Cyril Whelan  10/12  2/2

Stephan Wilcke  9/12  2/2

Ian Wright  12/12  2/2

Simon Morris and Peter Pichler were appointed Commissioners after the year end.

Accountability arrangements Assessing effectiveness

The JFSC is an independent regulatory body, but it is accountable for its overall performance to the States through the Chief Minister.

As part of its accountability arrangements, the JFSC s Business Plan, Budget and Annual Report are presented to, and discussed with, the Chief Minister.

An Annual Report is provided to the

States by 31 July each year. These reports are then published and available to industry and consumers. The JFSC ensures that the annual report provides a fair, balanced and understandable assessment of its position and prospects.

Under Article 12 of the Commission Law The Board conducted an externally

the Chief Minister may, after consulting  facilitated effectiveness review three

the JFSC and where the Chief Minister  years ago and was scheduled to repeat considers that it is necessary in the  the exercise during 2013 which is the time public interest to do so, give to the JFSC  frame contained in the Code. However, given guidance or give in writing general  the recent appointment of the Chairman directions in respect of the policies to  and the other changes being made at JFSC be followed by the JFSC. The JFSC has a  and at Executive Director level the Board duty in carrying out its functions to have  concluded that a period of time should pass regard to any guidance and to act in  before commissioning an external review to accordance with any directions given  maximise its benefit. Accordingly the Board to it by the Chief Minister.  decided to defer an externally facilitated

review until the latter part of 2015.

The Chief Minister and the JFSC have entered into a Memorandum of Understanding to clarify the circumstances and the manner

in which the powers granted under Article 12 of the Law will be exercised. The text of the Memorandum can be obtained from the JFSC s website.

Instead, the Board conducted a self- evaluation of its performance during the last quarter of 2014 which was completed in early 2015. The self-evaluation included a trend analysis which showed that progress was being made across a range of issues when comparing 2014 with prior periods.

Good scores were reported for a number of topics assessed in the effectiveness review, including whether the Board itself has the right balance of skills and experience of JFSC and the extent of delegation and quality of decision making. However, the review identified that the Board s succession planning needed significant work and that progress needed to be made to ensure

that the Board spent more time on strategic issues and less on routine. The Board discussed the conclusions in early 2015 and has scheduled a number of actions

to address the identified weaknesses.

Relations with stakeholders

Whilst the JFSC does not have any  other industry bodies. The Executive shareholders, the Board has taken steps  also meets with Government Ministers to understand the views of the Commission s  and Officers, and representatives of major stakeholders by holding meetings  Jersey Finance Limited and other

with senior Government Ministers, Jersey  industry bodies, on a regular basis. Finance Limited and representatives of

p.67 p.68 Annual Report 2014

 Effective

 understanding to refine our

 approach to

 oversight

Financial Statements  

The Financial Details  

Introduction  

  This financial report and the annual financial statements are made  by the Commissioners of the JFSC under the requirements set out  in Article 21 of the Financial Services Commission (Jersey) Law 1998.

It is made to the Chief Minister of the States of Jersey to be laid before  

the States and covers the period from 1 January 2014 to 31 December 2014.

Pursuant to Article 21(3)(a) The financial statements  

 Shall be audited by auditors who are qualified for appointment as auditors  

of a company by virtue of Article 113 of the Companies (Jersey) Law 1991; and

 Shall be prepared in accordance with generally accepted accounting principles  

and show a true and fair view of the profit or loss of the Commission for the period  and of the Commission s affairs at the end of the period.

The Commissioners have considered in detail the whole of the annual report and financial  statements and concluded that it is, taken as a whole, balanced, fair and understandable  and provides the information necessary for stakeholders to assess our performance as  a regulator, our regulatory model ensuring effective supervision and enforcement, and  our longer term strategy.

Going concern

The Board has reviewed progress against the budget for 2015, the current level of its financial reserves and the potential impact of unexpected events on its financial resources. It has concluded that it is appropriate to prepare the financial statements on a

going concern basis and that there are no significant matters that require disclosure

in the financial statements. The Board has also considered the viability of the JFSC for periods after 12 months from the date of this report and has not identified any matters that might impact its viability

for the foreseeable future.

Auditor

The auditors, BDO LLP, who were appointed in accordance with Article 21 of the Financial Services Commission (Jersey) Law 1998, have indicated their willingness to continue

in office.

08

Statement of Commissioners responsibilities

  The Commissioners are responsible for preparing the financial statements in accordance with applicable law and regulations.

The Financial Services Commission (Jersey) Law 1998 requires the Commissioners to prepare financial statements for each financial year. Under that law the Commissioners have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (being United Kingdom accounting standards and other accounting principles generally accepted in the United Kingdom).

The financial statements are required to give a true and fair view of the state of affairs of the Commission and of the surplus or deficit of the Commission for that year. In preparing these financial statements the Commissioners are required to:

 select suitable accounting policies and then apply them consistently;

 make judgements and accounting estimates that are reasonable and prudent; and

 prepare the financial statements on the going concern basis unless it is inappropriate

to presume that the Commission will continue in business.

The Commissioners are responsible for  For and on behalf of the Board keeping adequate accounting records  of Commissioners

that are sufficient to show and explain the

Commission s transactions and disclose  C F Renault

with reasonable accuracy at any time the  Commission Secretary financial position of the Commission.  7 May 2015

They are also responsible for safeguarding

the assets of the Commission and hence for PO Box 267

taking reasonable steps for the prevention  14-18 Castle Street

and detection of fraud and other irregularities. St Helier

Jersey

The Commissioners are responsible for the  Channel Islands

maintenance and integrity of the financial  JE4 8TP

information included on the Commission s

website. Legislation in Jersey governing

the preparation and dissemination of the

financial statements and other information

included in Annual Reports may differ from

such legislation in other jurisdictions.

p.73 p.74 Annual Report 2014

• Independent

 auditor s report to

 the Chief Minister of the States of Jersey

Opinion on financial statements  Our assessment of risks of material misstatement

and our audit approach to these risks

  In our opinion the financial statements:

The following risks had the greatest impact on our audit strategy and scope:

 Give a true and fair view of the state of the Commission s affairs     as at 31 December 2014 and of its surplus for the year then ended; Revenue consists of regulatory and  For regulatory fees we performed

registry fees. Revenue recognition is a  analytical reviews on the various streams, presumed risk under International  developing expectations based on the

 Have been properly prepared in accordance with United Kingdom  Standards on Auditing (UK & Ireland). movement in the number of regulated

  Generally Accepted Accounting Practice; and entities together with any fee changes.

We also tested on a sample basis that fees

 Have been prepared in accordance with the requirements  for regulated entities had been calculated

in accordance with fee notices published

  of the Financial Services Commission (Jersey) Law 1998. by the Commission. We also recalculated

deferred income to ensure it had been

The financial statements comprise the income and expenditure  correctly accounted for in accordance with account, the balance sheet, the cash flow statement and the related  the Commission s accounting policies.

notes. The financial reporting framework that has been applied in their  For registry fees we performed analytical preparation is the Financial Services Commission (Jersey) Law 1998  reviews on the various streams, developing

and United Kingdom Generally Accepted Accounting Practice. expectations based on fee changes and

any other relevant changes, such as

movements in the number of searches

and incorporations. We also tested on a

sample basis that fees had been calculated

in accordance with fee notices published

by the Commission. We recalculated annual return income based on the number of

returns submitted to the registry.

Our application of materiality and an overview of the scope of our audit Matters on which we are required to report by exception

We apply the concept of materiality both

in planning and performing our audit, and in evaluating the effect of misstatements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial

as we also take account of the nature

of identified misstatements, and the particular circumstances of their occurrence, when evaluating their

effect on the financial statements.

We determined planning and final materiality We have nothing to report in respect  In particular, we are required to

for the financial statements as a whole to  of the following: consider whether we have identified

be £200,000. In determining this, we based  any inconsistencies between our

Under the ISAs (UK and Ireland), we are

our assessment on a level of 1.5% of income.  knowledge acquired during the audit

required to report to you if, in our opinion,

and the Commissioners statement that information in the Annual Report is:

We agreed with the Audit Committee that  they consider the Annual Report to be fair, we would report to the Committee all audit  balanced and understandable and whether

 Materially inconsistent with the

differences in excess of £4,000, as well as  the Annual Report appropriately discloses

information in the audited financial

differences below that threshold that,  those matters that we communicated to

statements; or

in our view, warranted reporting on  the audit committee which we consider qualitative grounds. should have been disclosed.

 Apparently materially incorrect based

on, or materially inconsistent with, our

Our audit of the Commission was undertaken

knowledge of the Commission acquired

to the materiality level specified above and

during the course of performing

was all performed at the Commission s

our audit; or

office in Jersey.

 Is otherwise misleading.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.

This includes an assessment of whether the accounting policies are appropriate to the Commission s circumstances

and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Commissioners; and the overall presentation of the financial statements.

In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and

to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Respective responsibilities of Commissioners and auditors BDO LLP

Chartered Accountants

As explained more fully in the statement  This report is made solely to the Chief

of Commissioners responsibilities, the  Minister in accordance with Article 21(3) of Bristol

Commissioners are responsible for the  the Financial Services Commission (Jersey)  United Kingdom

preparation of the financial statements  Law 1998. Our audit work has been  Date: 14 May 2015

and for being satisfied that they give a  undertaken so that we might state to

true and fair view. Our responsibility is  the Chief Minister those matters we are  BDO LLP is a limited liability partnership to audit and express an opinion on the  required to state to the Chief Minister  registered in England and Wales (with financial statements in accordance  in an auditor s report and for no other  registered number OC305127).

with applicable law and International  purpose. To the fullest extent permitted

Standards on Auditing (UK and Ireland).  by law, we do not accept or assume

Those standards require us to comply  responsibility to anyone other than the

with the Financial Reporting Council s  Chief Minister, for our audit work, for this

Ethical Standards for Auditors.  report, or for the opinions we have formed.

 Financial Reports

Income and expenditure account

For the year ended 31 December 2014

2014  2013 Note  £ 000   £ 000

Regulatory income

Regulatory fee income  3   10,717  11,002 Registry fee income  4   3,039   2,616

Total regulatory income  13,756  13,618 Other income  6   1,024  46

Interest income  59  64 Total income   14,839  13,728 Expenses

Staff costs  5   (10,300)  (9,250) Investigation & Litigation  6   (855)  (701) Computer Systems  (832)  (1,026) Depreciation of tangible fixed assets  7   (487)  (405) Operating lease expenditure  (462)  (463) Legal & professional services  (400)  (457) Other premises costs  (336)  (318) Other operating expenses  (330)  (266) Travel costs  (251)  (219) Staff learning and development  (244)  (204) Recruitment costs  (132)  (291) Auditors remuneration  (18)  (16) Public relations costs  (5)  (19)

Total expenses  

(14,652)  (13,635) 187  93

7,340  7,247 7,527  7,340

Accumulated reserve carried forward

All the items dealt with in arriving at the net surplus for the current and preceding year relate to continuing operations.

There are no recognised gains and losses in the current and preceding year other than those included in the net surplus above, therefore no separate statement of total recognised gains and losses has been presented.

Balance sheet as at 31 December 2014

2014  2013 Note   £ 000  £ 000   £ 000  £ 000

Fixed Assets

Tangible fixed assets  7    816  852

Current Assets

Fee income receivable  -  2 Sundry debtors  1,133  60 Prepayments  370  606 Cash and bank balances  8 10,978   11,330

12,481  11,998 Total Assets  13,297  12,850 Creditors - Amounts falling due within one year

4,637   4,381

537  631 139  168 106  122 351  208

5,770  5,510 7,527  7,340

Accumulated reserves  7,527  7,340

The notes on pages 82 to 88 form an integral part of the financial statements.

The financial statements on pages 79 to 81 were approved by the Board of Commissioners on 7 May 2015, and signed on its behalf by:

Lord Eatwell Chairman

J R Harris Director General

Notes to the

Financial Statements

 For the year ended 31 December 2014

Cashflow statement

For the year ended 31 December 2014

2014  2013

Note  £ 000   £ 000 1  Significant accounting policies

Cash flows from operating activities

Basis of preparation

Net income for the year 187  93 Recoveries of enforcement costs are Interest received  (59)  (64) The financial statements have been  accounted for only when they have been Depreciation charges  7   487  405 prepared under the historical cost convention awarded and it has become virtually certain

Deferred rental incentive  (16)  (15) in accordance with generally accepted  that they will be received. Interest received

accounting practice in the United Kingdom.  on bank deposits is accrued on a time basis (Increase)/Decrease in debtors and prepayments  (835)  (296) The financial statements have been  by reference to the principal outstanding

(Increase)/Decrease in creditors  276  (89) prepared on a going concern basis. and the effective interest rate applicable. Net cash inflow from operating activities  40  34 Sundry income is recognised on receipt

The principal accounting policies applied  as this approximates the timing of the

in preparation of the financial statements  services provided.

Returns on investments and servicing of finance

are set out below. These policies have been

Interest received  59  64 consistently applied to all the years presented,

Net cash flow from returns on investments unless otherwise stated. Expenses

59  64

and servicing of finance The financial statements contain information

about the Commission as an individual entity, All expenses are accounted

Capital expenditure and do not include consolidated financial  for on an accruals basis.

information as the parent of a group.

Payments to acquire tangible fixed assets  (451)  (378) The Commission is exempt from the

Net cash flow from capital expenditure  (451)  (378) requirement to prepare consolidated  Foreign currency

financial statements because the inclusion

of its subsidiary is not material for the  Foreign currency balances are translated Net decrease in cash and bank balances  (352)  (280) purpose of giving a true and fair view. to Sterling at the rate of exchange ruling on

the last business day in the financial period. Foreign currency transactions are translated

Reconciliation of net cash flow to movement in net funds Income into Sterling at the rate of exchange ruling

on the date of the transaction. Profits and (352)  (280) Income is accounted for on an accruals losses on foreign exchange are included

Decrease in cash and bank balances

basis. Regulatory and Registry annual fees  in the income and expenditure account. Cash and bank balances at 1 January  11,330  11,610 received in advance are recognised as income

on a straight-line basis over the relevant

period. Annual registry fees include only

Cash and bank balances at 31 December  10,978  11,330 the share of annual fees attributable to the  Investigation and litigation costs

Commission. All other fees are recognised  Investigation and litigation costs are

on receipt as this approximates the timing  recognised as incurred. No provision is

of the services provided. made for the cost of completing current

work unless a present obligation exists

at the balance sheet date.

Cash and bank balances Leases 2 Taxation

Cash and bank balances comprise  Rentals payable under operating leases The Commission is exempt from the provisions of the Income Tax (Jersey) Law 1961, as amended. cash in hand, deposits and other short- are charged to the income and expenditure

term liquid investments that are readily  account on a straight-line basis over the

convertible to a known amount of cash  term of the lease.

aonf changes in vd are subject alue. to an insignificant risk  Lease incentives received to enter into   3 Regulatory fee income

operating lease agreements are released

to the income and expenditure account  2014  2013 Fixed assets on a straight-line basis over the period £ 000   £ 000

ending on the date of the first lease break.

Banking   1,205  1,277 lessF iaxec dc uasmsuetlast a er de  s dt ea pte red  ca it a h ti is ot no r aic na dl  c ao ns yt  Funds  4,601  4,685

impairment losses. Historical cost includes  Pension costs Insurance companies  728  745 expenditure that is directly attributable  General insurance mediation  101  107

to bringing the asset to the location and  The costs of defined contribution  Investment business  1,141  1,192 condition necessary for it to be capable

of operating in the manner intended  pension schemes aron an accruals basis. e account The costs ed for of annual  Trust companies  2,393   2,446

by management. contributions payable to defined benefit  Designated non-financial businesses

schemes operated by the States of Jersey  and professions  514  518 Repairs and maintenance are charged  are accounted for on an accruals basis  Recognised auditors  22  22

to profit or loss during the period in which  because the Commission is unable  Money services business  12  10 they are incurred. to obtain the information necessary

to apply defined benefit scheme  10,717  11,002 Depreciation of fixed assets is calculated  accounting (see note 10).

so as to write off their cost less estimated

residual value on a straight-line basis over

their expected useful lives. The estimated

useful lives used for this purpose are:

Motor vehicles  3 years

Office furniture, fittings and equipment 3 to 5 years Computer equipment 3 years

Computer software  3 to 5 years

The cost of computer software in respect of major systems is capitalised within fixed assets. All other computer software costs are expensed as incurred. Computer systems under construction are not depreciated. Depreciation is charged when a system has been completed and is ready for use.

Gains and losses on disposals of fixed assets are determined by comparing the proceeds with the carrying amount and are recognised in the income and expenditure account.

4 Registry fee income

Registry fees arise from the operation  Registry fees include annual return fees. of the Companies Registry, the Business  The amount of the annual return fee payable Names Registry, the Registry of Limited  to the Registry include amounts collected Partnerships, the Registry of Limited  on behalf of and remitted to the States Liability Partnerships and the Securities  of Jersey.

Interest Register.

The number of annual returns received during the year was:

2014  2013 Annual returns received  33,043   32,988

2014  2013

£ 000   £ 000

Total annual return fee income  4,956   4,948 Less: collected on behalf of the States of Jersey  3,800   3,794

Retained by the Registry  1,156  1,154 Other Registry income  1,883  1,462

Total Registry income  3,039   2,616

5. Staff costs 7 Tangible fixed assets

2014  2013

£ 000   £ 000

Staff salaries  8,543   7,670 Commissioners fees  269  249 Social security contributions  404  375 Pension contributions  725  645 Permanent health and medical insurance  242  218 Other staff costs 117  93

10,300  9,250

Contributions to staff pension schemes  The average number of staff employed are payable monthly to pension scheme  during the year was 125 (2013: 124). administrators. Contributions amounting

to £100,001 (2013: £90,375) were payable to

the schemes at year end and are included

in sundry creditors.

Office Computer Computer Motor Total furniture, systems systems & vehicles

fittings & under equipment

equipment development

£ 000 £ 000 £ 000 £ 000 £ 000

Cost

At 1 January 2014  668  48  3,221  10  3,947 Additions   79  182  190  -  451 Systems completed during period  -  (211)  211  -  - Disposals  (5)  -  -  -  (5)

At 31 December 2014  742  19  3,622  10  4,393 Accumulated depreciation

At 1 January 2014  (590)  -  (2,504)  (1)  (3,095) Charge for the year  (43)  -  (441)  (3)  (487) Disposals  5  -  -  -  5