The official version of this document can be found via the PDF button.
The below content has been automatically generated from the original PDF and some formatting may have been lost, therefore it should not be relied upon to extract citations or propose amendments.
Jersey Financial
Services Commission
2015
Maintaining
and developing market access for Jersey businesses
in Europe
and the world
Annual Report
2015
p.01 Highlights and Achievements p.02 Annual Report 2015
00
08 13
Highlights and
Achievements for The JFSC granted power to impose financial Appointment of Deputy Director General 2015 p£e4nma,l stiters e no gn t rheegnuinlagte rdegbuulasitnoerys sfreasmoef wupo rtko
04 09 14
The JFSC 2015 Business Plan presentation Conviction secured in landmark case of MONEYVAL report - expected to enhance attended by over 200 members of Industry providing false and misleading information Jersey s reputation & international standing
01
Development of and initial implementation of the Change Programme
02
Appointment of Simon Morris, Peter Pichler
& Michael de la Haye as Commissioners
03
05
The JFSC signs MoU with South Africa 06
Leadership development training for senior managers
07
10 15
Jersey Fraud Prevention Forum lauched, helping to improve investor awareness
11
ESMA recommended granting Jersey funds and managers AIFMD passport,
helping to expand market access
12
New Communications function for the JFSC International Association of Commerical The JFSC inaugural Careers Fair
Adminstrators Merit Award for Jersey Registry 150 attendees / 60 CVs
The Jersey
Financial Services Commission
Our Role
What we do In summary, the JFSC carries out these functions by:
The Jersey Financial Services Commission (JFSC) has statutory Ensuring that all authorised financial services businesses and responsibilities (or functions) set out in the Financial Services individuals meet the appropriate criteria and that the JFSC Commission (Jersey) Law 1998. In fulfilling these functions, the matches international standards of banking, securities, JFSC is required to have regard to certain guiding principles : trust company business, and insurance regulation
Combatting the financing of terrorism and financial crime as part of the wider international effort in this regard
Functions a
Supervision and development of financial services
Enforcement
b c d Working closely with fellow regulators and law-makers to ensure Reports, advice, Policy Operation of access to efficient and effective markets for financial services
assistance and development the Companies
information to Registry Developing policy in reaction to changes in markets and Industry Government and
public bodies and, where appropriate, in anticipation of such changes
Being an agile, thoughtful, proportionate and listening regulator Have regard to that pays due regard to both the costs and benefits of regulation.
Guiding a principles Reducing risk
to the public
of financial loss due to mismanagement
b c d
Protecting and Fostering the Countering enhancing best economic financial crime the reputation interests of in Jersey
of Jersey in Jersey and elsewhere commercial and
financial matters
Priorities for 2015
We made strong progress against our strategic priority areas in 2015. One of the highest priorities for the JFSC is to ensure that Jersey maintains and develops access to international financial markets. This is achieved through the maintenance of the highest standards of regulation. Like all international finance centres, market access is a fundamental feature of Jersey s success, and improvements in market access will be in the best economic interests of Jersey.
We continued to strengthen Jersey s ability to access international financial markets:
European Securities and Markets Authority (ESMA) recommended that Jersey should
be amongst the first non-EU Member States granted an Alternative Investment Fund Managers Directive (AIFMD) passport
We ensured that we met legal and other obligations
We launched a consultation on the JFSC s funding arrangements, which sought to establish
a fair and simple funding model that will provide sufficient resources to enable the JFSC to carry out its functions in a secure and stable environment.
These key priorities will continue to be progressed during 2016. The Financial Services Industry that we regulate in Jersey
A combination of factors, including effective and proportionate regulation, a modern and effective legal system, stability, independence and tax neutrality, continue to make Jersey an attractive international finance centre. Key sectors of Jersey s Financial Industry include:
The MONEYVAL assessment is expected to be positive and demonstrate that Jersey
is a transparent jurisdiction, with robust measures in place to protect against money Banking laundering and terrorist financing
Working with Government and Industry, the JFSC considered the potential benefits and
drawbacks of achieving equivalence with the revised EU financial instrument regulatory pack age (MiFID II and MiFIR)
By establishing Memoranda of Understanding with other jurisdictions; and Insurance Trust Business With ongoing work to evolve the Jersey Funds Regime.
Where appropriate, we undertook work to match international standards:
Working together with other Crown Dependencies, we consulted on the local adoption
of a Basel III compliant framework
Broadening the range of potential enforcement actions by the introduction of a civil
penalty Funds Regime.
Capital Markets Funds
We enhanced the delivery of the JFSC s guiding principles:
A wide-ranging review of our supervisory functions was completed and the implementation Banking
of a revised approach began
Jersey s 32 banks attract clients from more than 200 countries and a sizeable share of
The revised supervisory approach, which incorporates a shift to entity-based supervision Jersey s total deposits are held in foreign currencies; a reflection of the international appeal
and a more sophisticated assessment of risk, will make our supervisory activities more of Jersey as a banking centre.
effective and deliver some efficiencies for Industry
Jersey s banking sector holds an average Tier 1 Capital ratio that is 50% higher We continued to develop and implement improvements to our operational systems, which than Basel III requirements;
will provide internal efficiency and make interaction with the JFSC easier and faster
Jersey s banking model is stable and diversified; and
We reviewed and improved our Human Resource management, with a focus on being
an employer of choice and valuing both individual performance and team contribution In September 2014, Jersey introduced a revised Licencing Policy to reflect new realities in an environment that provides flexible working practices and opportunities for and provide a workable and flexible framework for a wide variety of banks to operate development and growth. within a strong regulatory framework.
Trust Business
Jersey is arguably the number one jurisdiction globally for trusts, with a pedigree in the field of administering trusts since the 1960s. The Island has a broad range of trust and company service providers from large banks and independently owned companies to smaller niche providers.
Jersey first introduced its own Trust Law in 1984 and leads the field in the continuing
development of the principles of trusts and standards globally; and
Jersey has 187 regulated trust and company service providers holding 855 trust
company business licences.
Funds
Jersey has been a prominent player in delivering fund services since the 1960s, with the emphasis today on institutional, specialist and expert investors. Funds in Jersey may be established as companies, limited partnerships or unit trusts, and be open or closed-ended, providing significant flexibility for investor needs.
The total net asset value of funds under administration in Jersey stands at £225.7 billion; Jersey has 1,320 regulated funds;
The unregulated Funds Regime in Jersey was introduced in early 2008. By December 2015,
there were 126 such funds which were active; and
The net asset value of funds under administration in Jersey is up 25% since 2009.
Capital Markets
Jersey has developed specialist expertise in supporting cross-border capital markets transactions structured by the world s leading investment banks and professional services firms.
Jersey listed companies on global exchanges held a total combined market
capitalisation of £145 billion;
Jersey has 111 companies listed on global stock exchanges from the LSE to the NASDAQ; and Jersey has the greatest number of FTSE 100 companies registered outside the UK.
Insurance
A variety of structured insurance products, particularly insurance transformers and vehicles for securitisation of insurance risk, are evolving within Jersey s positive legislative and regulatory environment, as a result of the convergence of capital markets and insurance/ reinsurance markets and Jersey s expert knowledge for securitisation using SPVs and other financial structures.
View from the top Chairman s
Statement
Our Business Plan for 2015 envisaged significant effort maintaining and developing market access for Jersey businesses in Europe and the world, restructuring our operations and improving our efficiency by using e-enabled documents and data rather than pieces of paper.
I am pleased to report strong progress in all of these areas, although there is much still to do.
International developments were dominated by AIFMD, MONEYVAL and the approaching MiFID II (something of a moving target). Each of these is important in establishing Jersey as a supportive jurisdiction committed
to play its part responsibly in the flow of international capital by working collectively with EU and other major economies.
Jersey was among the very first jurisdictions Industry will always know their potential
to be recommended for an AIFMD European and how they can create jobs and growth fund management passport supporting the better than we do. But we can only listen bilateral market access arrangements already if they speak.
in place with a number of EU countries. I am
delighted to observe that the Island is now Many financial service providers found experiencing significant growth in funds the time to join us for our Business Plan and fund management businesses. presentation and supported new initiatives
to help Industry, Government, Jersey Finance The MONEYVAL assessment also took up and the JFSC better understand common significant amounts of our time. The final needs and issues. A number of members report is expected to be positive and we look of the trust company business sector were forward to receiving it. The Island pulled also particularly helpful in improving our strongly together to achieve this outcome understanding of their business models,
and I would particularly like to thank Industry, opportunities and challenges. I would like Jersey Finance, Government and our Senior to thank them for the time they set aside Executive team for all their hard work and to meet with us.
long hours that it involved.
The JFSC is in the middle of its planned I am also very pleased to report a major step Change Programme. The Executive has forward in our dialogue with Industry. It is vital created new roles and responsibilities that we learn of the potential opportunities whilst redefining others, installed a new and the concerns of Jersey businesses. accounting system and is part way through
installing new Human Resources, Our Business Plan for 2016, published in Relationship Management and Registry January, sets out how we are responding Systems that are changing how we manage to many of these challenges.
and exchange information with Industry.
The Executive is substantially on track due This year has also seen significant changes in no small part to the significant commitment in the membership of the Board.
and effort from all of the team, and it has
been a pleasure to observe the very positive John Averty retired in January 2016 after team spirit that has developed. 10 years as a Commissioner, of which five
were as Deputy Chairman. He was a wise The Board has kept its focus during the year and valued member of the Board. We all on progress with each of these challenges, appreciated his contribution, particularly whilst being alert to market developments. during the nine months he chaired the
Last year might have seemed relatively Board and the appointments process for benign but the first quarter of 2016 has a new Chairman, which he undertook with brought into focus a plethora of issues commensurate skill and good humour. ranging from stressed commodity, US debt
and equity markets, to Brexit and other EU I am delighted that Debbie Prosser, structural uncertainties, to cyber-attacks a Jersey resident Commissioner with
and data breaches. significant experience of local legal and
trust company services, accepted the
Like many others, we will have to await the Board s invitation to take on the role of result of the UK referendum and the start Deputy Chairman and Senior Independent of any negotiations before we can begin to Director in John s place. The Board also assess the impact, if any, of a UK withdrawal welcomed Simon Morris and Peter Pichler from the EU. Jersey currently is not a member as new Commissioners at the start of 2015 of the EU but has a special status negotiated and Michael de la Haye OBE in early 2016. as part of the UK s treaty of accession, so I would like to thank all of them and the we will not be high on any list of pressing other Commissioners for their hard
issues post the vote. What is clear is that work and dedication to the JFSC over markets are already unsettled and likely the period.
to be increasingly so.
Market events are not alone in making
an impact on our future prospects.
The Board, Executive and team at the JFSC
are monitoring economic and regulatory
developments from the UK budget, OECD John Eatwell action on taxation (BEPS), Fintech, Regtech, Chairman virtual currencies and the prospects for
utilising the block chain to make financial
services systems more robust and reliable.
It is vital we
learn of potential opportunities and concerns of Jersey businesses.
We can only listen if they speak.
Delivering against our objectives Director General s Statement
2015 has been a turning point for the JFSC. The comprehensive internal Change Programme initiated in 2014 has occupied a significant amount of the JFSC s focus and resources during 2015, and the resulting improvements for internal and external stakeholders are beginning to be realised. The Change Programme has purposely sought to challenge existing ideas and practices that constrain the JFSC s performance. The resulting changes can be unsettling, but I have been heartened by the way that the Board and staff at all levels of the JFSC have risen to the challenges and continued to maintain a focus on changing the JFSC for the better - making it more efficient and effective, and better able to manage the evolving regulatory and business environment.
The Change Programme results from a analyse and manage risk, and initiating a number of factors, including changes in the wholesale restructuring of the Supervision international environment and expectations divisions within the JFSC. Over the course of on regulators. The changes also seek to 2016, these changes will streamline Industry address issues common to all organisations; interaction with the JFSC, improve the ensuring that we have skilled and experienced allocation of our supervisory resources
staff, that our stakeholders can interact and enhance our supervisory effectiveness. with us efficiently, and that our back
office systems enable staff to work In addition to the Change Programme, effectively and minimise time spent the JFSC has maintained an appropriate level on administrative tasks. of supervisory oversight. Our supervisory
interactions during 2015 have continued to Some of the more fundamental changes evolve, with an increasing focus on areas
we progressed in 2015 are those designed of perceived risk, more use of thematic
to further improve the JFSC s supervisory visits and the continued use of alternative activities. In particular, we agreed to supervisory mechanisms such as mystery embrace an increasingly risk-based shopping of Investment Businesses. methodology for planning supervisory The key supervisory themes for 2015
activity and a switch to an entity-based included corporate governance, AML/CFT supervisory model. During 2015, we and suitability of investment products.
began the transition to this new approach:
establishing a Supervisory Risk Unit,
responsible for improving the way we
The JFSC also continued to take The JFSC launched the first comprehensive proportionate enforcement action in review of its funding arrangements appropriate circumstances, for example since it was established in 1998.
where breaches were particularly serious The review reflects the need to ensure
or where other remediation efforts had that the JFSC is adequately funded and the been exhausted. Many of the cases were need to ensure that the fee regime is fair, challenging and involved lengthy investigations. simple and proportionate for Industry.
15 public statements were issued covering The consultation paper recognises that
a range of matters requiring a regulatory the JFSC has held down fee increases sanction, often involving the restriction of since the onset of the financial crisis. future employment of individuals within This has resulted in the JFSC becoming the Jersey financial sector. underfunded in the face of the range of
challenges that all regulators face and are As noted in the Chairman s Statement, expected to shoulder in the post-financial
the AIFMD passport recommendation crisis environment. Such underfunding and the MONEYVAL report were significant is not sustainable in the long term and achievements during 2015. I would also like therefore we expect that fee increases,
to point to a number of other achievements exceeding the general level of inflation, in this period: will be necessary in future years.
During 2015, the JFSC was provided with the
power to impose financial penalties of up to £4 million on Registered Persons for significant and material breaches.
The powers will be exercised in a reasonable and proportionate manner
with the aim of protecting consumers, Our staff are an Industry, and deterring and
the reputation of Jersey s Finance essential element
preventing financial crime.
in the development
and delivery
of these
improvements.
The Registry was awarded the Merit
Award by the International Association of Commercial Administrators (IACA) for introducing the Sound Business Practice Policy as well as a Registry dashboard system that helps to balance the Registry regulatory burden with the ease of doing business.
As in previous years, I should like to thank the Chairman and Commissioners for their wise and insightful support across the full range of our activities. I would also like to pay tribute to the hard work, professionalism and dedication of our Directors and all our staff who support me in my role so well.
During 2015, the JFSC also made a
substantial additional investment in its communications capability with the setting up of a dedicated function in this area. This has already yielded good results in terms of both stakeholder engagement and greater understanding of the
JFSC s work and challenges
amongst numerous audiences.
Worthy of specific mention also has
been the JFSC s contribution to the Jersey Fraud Prevention Forum, a multi-agency drive to raise awareness of fraud and scams targeting Island residents.
This has taken the form of an extensive information campaign and will continue into 2016. The JFSC is pleased to be able to make such a contribution in an area of
of growing exposure, where tips and guidance on the dos and don ts
can make a significant difference
to outcomes for many.
We enter 2016 in good heart for the continuing regulatory and organisational challenges that lie ahead, and we look forward to seeing the improvements arising from all of our hard work in 2015: more effective and efficient Supervision and Registry activities, and easier interaction for our stakeholders. Our staff are an essential element in
the development and delivery of these improvements. Throughout the course of 2015, we have invested time and resource in bolstering our people development activities to see our staff equipped as well as possible for the changing demands of Supervision in today s world, inclusive of enhanced managerial and leadership capabilities.
Turning to 2016, we look forward to continuing to serve Jersey in the demanding environment that financial services regulation and supervision
has become.
John Harris
Director General
p.17 p.18 Annual Report 2015
04
Summary o f Activities
Policy
The JFSC s Policy function has a number of responsibilities; monitoring and reacting to international regulatory developments, ensuring that the regulatory framework is updated, if appropriate, to changing risks or developments, acting as a knowledge resource for staff involved in Supervision and Authorisation, and leading other one-off significant pieces of work such as evaluations by external standard setters. The policy work is split between two teams with the Financial Crime Policy team, focussing specifically on AML/CFT matters, and the Policy team covering other areas. Both teams work closely with the JFSC s Supervision teams.
Key achievements during 2015
The Policy teams play an important role in We worked with Government to consult maintaining a regulatory environment that on and agree the appropriate framework enables the Financial Services Industry to to regulate virtual currencies, the outcome grow and develop in a way that protects of which was a decision by Government the public and the Island s reputation. to regulate, for AML/CFT purposes, Key achievements in 2015 were: the conversion of fiat currencies
(e.g. sterling and euros) into virtual
The JFSC played a significant role in currencies, and vice versa;
co-ordinating and contributing to
the MONEYVAL assessment of Jersey. 2015 saw the introduction of the civil
It is anticipated that the final report will penalties regime, which enables the reflect positively on Jersey as a whole Commission to impose financial penalties and the JFSC s activities; of up to £4 million on Registered Persons
for significant and material breaches.
We developed and implemented a This will bring the JFSC in line with
regulatory framework for alternative similar powers available to counterpart investment managers (the AIFMD regulators around the world. framework) that enabled the European
Securities and Markets Authority
(ESMA) to recommend that Jersey
should be amongst the non-EU Member
States granted an AIFMD passport;
Other key areas of work
A number of other key policy areas were The JFSC launched the first review of its also progressed during 2015: funding arrangements. The comprehensive
review aims to establish a fee regime
In Banking, we continue to work with our that is fair, simple and proportionate
counterparts in other Crown Dependencies for Industry.
on the local adoption of Basel III standards.
During 2015, we consulted on capital Updated AML/CFT Handbooks and an adequacy and leverage proposals. updated money laundering typologies
and trends report were published.
For the Investment Industry, the JFSC
has been monitoring carefully the The JFSC engaged with Government development of the MiFID II regime and Industry on the development of within the European Union and engaging Fintech in Jersey. We consulted on
with Industry to identify whether there changes to the AML/CFT Handbooks
are potential opportunities for Industry to recognise the development of
in developing an equivalent regime. electronic customer identification tools, This work will inform the JFSC s future provided guidance to a number of Fintech consultation in this area. businesses, participated in Jersey s first
Fintech conference and provided input
The JFSC has worked closely with to a number of other projects, including
Government and Industry on the the Jersey Innovation Review. The JFSC review of the Funds Regime in Jersey. also developed the initial stages of a Rather than framing an entirely new cyber-security strategy for Industry.
Funds Regime, it was determined that
the optimal strategy is an evolutionary, Work on introducing financial education step-by-step approach to development into Jersey schools continued. It is
of the regime. pleasing to note that financial education
was incorporated into the Jersey curriculum during 2015.
Working with other stakeholders
The JFSC maintains a strong working The JFSC has a responsibility to co-operate relationship with Government and Industry. with overseas regulators. We have signed
It also works closely with other important Memoranda of Understanding (MoUs) overseas stakeholders and standard with regulators in over 90 jurisdictions. setters, such as HM Treasury, the UK Each MoU provides a formal framework Financial Conduct Authority, the UK for the exchange of regulatory information Prudential Regulation Authority, and the provision of mutual assistance for the Group of International Finance Centre the purpose of ensuring compliance by Supervisors, the European Securities and financial service businesses with regulatory Markets Authority, the European Commission, requirements in Jersey and the overseas MONEYVAL, and IOSCO. These relationships jurisdiction. During 2015, we signed new or help to enhance the reputation of Jersey, enhanced MoUs with the Channel Islands give us a strong voice in policy development, Securities Exchange Authority Ltd and
and enable us to identify potential issues or regulators in Denmark, South Africa, opportunities for Industry. Switzerland and the UK.
Supervision
One of our key functions as a regulator is to supervise Industry to determine how well firms comply with their relevant legal and regulatory obligations. The Supervision teams do this through desk-based and on-site assessments. The JFSC s supervisory activities are increasingly risk-based, allocating resources to firms, products or services that present a greater risk to our aims and objectives. Authorisation of Registered Persons is an intrinsic function of our Supervision activity and ensures that firms meet certain minimum standards before they are permitted to carry on regulated activities.
Key achievements during 2015
During 2015, the Supervision teams The Supervision teams continue to
allocated significant levels of resource interact closely with individual firms to a review of the JFSC s supervisory that are facing challenging issues or approach, the Change Programme are working to resolve issues identified and the MONEYVAL assessment, either internally or through the
whilst maintaining core Commission s monitoring activity. business-as-usual activities.
A report on a mystery shopping exercise,
covering 14 Investment Business firms, was issued in 2015. The report identified examples of best practice and areas for improvement. Where appropriate, the findings of the exercise were followed up with the relevant firms.
Key visit findings
The Supervision teams undertook In Investment Business, there were still 112 supervisory visits in 2015. The visits instances where there was insufficient covered the whole range of Industry, evidence to confirm the suitability of including banks, funds services business, advice provided. There were also some insurance companies, investment business, corporate governance failings and
trust company business (TCB), and designated inadequacies in knowledge of non-financial business and professions suspicious activity reporting
(DNFBP). While many visits concluded requirements
without identifying any concerns, some
key issues were identified during the In TCB, there were some instances 2015 visit programme including: where enhanced customer due diligence
had not been applied in higher-risk
In Banking, there was not always cases, weaknesses in business risk
evidence of sufficient periodic review assessments and SAR processes.
of the effectiveness of boards of In some cases, firms failed to obtain directors, and there was some evidence sufficient information, such as current/ of AML/CFT weaknesses (particularly in updated tax advice, necessary for ongoing situations where institutions are using monitoring of the business relationship
reliance on obliged persons to for AML/CFT purposes
meet certain customer identification
requirements, and the application of In the DNFBP and money service simplified due diligence) business sectors, some weaknesses
exist in business risk assessment and
In the Funds area, some corporate SAR processes, and there are cases of
governance failings were identified, inappropriate reliance placed on obliged there was some evidence of inadequate persons and inadequate risk profiling compliance monitoring and resources, of clients
and weaknesses in business risk
assessments and suspicious In the insurance sector, some
activity report (SAR) processes weaknesses were identified in
corporate governance and
compliance monitoring.
The Supervision teams worked
with a number of firms to ensure that identified breaches or weaknesses were adequately remediated.
Other supervisory activities
During 2015, the JFSC continued to These take the form of written guidance provide guidance to Industry and other and reports, Industry presentations and stakeholders to help them understand discussions with Registered Persons the regulatory framework and the JFSC s and Industry bodies.
supervisory approach, expectations and
visit findings.
04.3
Supervisory Review
The JFSC completed a comprehensive review of its supervisory functions during 2015. The review identified a number of ways to enhance the efficiency and effectiveness of its Supervision teams. Following extensive internal consultation and discussion, the JFSC agreed on a number of actions to implement the recommendations made by the review. Some of these actions will have a significant impact on the JFSC s supervisory functions.
The key actions agreed as a result of the review are:
We are re-organising ourselves around A dedicated Supervision Examination supervision of the whole firm rather Unit is being developed to help deliver than individual licences held by firms our examination programme. This new
so there will be a single consolidated approach will improve consistency and supervisory view per firm, rather than effectiveness across the supervisory per licence function, benefitting both the JFSC and the firms being examined
This model of working will improve
our overall understanding of a firm s Administrative activities are being business and its risk culture. It will centralised within a single team within enable us to better assess and target Supervision, so that we can further our resources more effectively, by improve consistency and become concentrating our activities on the leaner and more efficient
risks and issues in Industry that could
cause the greatest harm to Jersey During 2015, the new teams required to and its reputation carry forward these recommendations
were formed and the JFSC began to
A new Supervisory Risk Unit has been engage with Industry on the changes
created to improve the way we analyse and what it will mean for businesses. and manage risk. The team will have a Further communications, meetings, pan-Industry view, providing information presentations and consultation, where and insight to inform strategy, whilst necessary, will be held as the JFSC helping supervisors to manage their continues to implement the changes portfolio of entities with agreed risk during 2016.
tolerance levels through an improved
risk model
Enforcement
The Enforcement team investigates cases of actual or potential legal Other key activities
or regulatory breaches committed by Registered Persons or individuals
associated with them. The Enforcement team aims to engage in constructive During 2015, 76 new enforcement The JFSC issued 15 Public Statements dialogue with the regulated community, but does resort to the use of cases wthe number oere opened. Although fef cases opened in 2014, the wer than during 2015, identifying rbreaches by firms or individuals. Six oegulatory or legal f
statutory Enforcement Sanctions where breaches are particularly complexity of cases has generally increased. these specifically prevented or restricted serious or where other efforts to resolve issues have been exhausted. As at the end of 2015, the JFSC was working individuals from obtaining employment in
on 53 live cases. The JFSC issued 95 the Jersey Financial Services Industry. formal notices requiring information
and/or documents to be provided, and a The JFSC Investigation and Enforcement Key achievements during 2015 further 21 notices compelling individuals activity relies on information received from
to attend the JFSC for formal interview. a range of sources. The Whistleblowing Line The team continued to apply a robust but Robust background checks, diligent continues to be a good source of information,
proportionate approach to enforcement investigation and sound record keeping with 21 such calls being received during 2015. matters; achieving successful remediation practices helped to secure a successful 10 of these calls led to an active investigation.
outcomes in the vast majority of cases, criminal prosecution of an individual for
but taking robust enforcement action knowingly providing false and misleading
where necessary information to the JFSC
A significant contribution was made to
the launch and activities of the Jersey Fraud Prevention Forum; a multi-agency body that helps to protect the most Outreach and international co-operation
vulnerable in our society from falling
victim to financial crime. The Forum
Overseas regulators continue to to the UK Serious Fraud Office and National has embarked on an extensive
reach out to the JFSC to assist in their formal Crime Agency. In November, the team held information campaign, providing
regulatory investigations. During 2015, the its bi-annual Enforcement Conference useful tips and guidance that will
JFSC received and actioned 13 requests for providing feedback on trends and
make a significant difference to
such assistance. developments to approximately 330
those at most risk
attendees. Feedback on the event was
The Enforcement team has provided training positive and attendees commented
to other small island jurisdictions in 2015 favourably on the audience participation
on its use of enforcement powers and approach to the seminar. Any surplus from investigative techniques. In addition, the the nominal charge levied for attendance team has provided input, drawn from its will be applied to help fund Jersey experience dealing with trust structures, Fraud Prevention Forum activities.
Operations / Communications
Internal Change communications, boexternallyMore r, during 2015 with a dedicatesources wth intere committernally and ed ted o Ein the incrbvidence oy the JFSC, for eeased communications output f this stratxample: deegy can be seen veloping a Programme timprwit brings, and the ream appointithostvae communications and engaffthroed. Pughoole theart outthf this work weCy plahan y in it.geProgement as tgramo me ridentityintintefreracernational speaking engaeshed and mortion, establishing social media , improving media re contemporary brand elations and gements,
and beyond, so employees understand the platforms (Twitter, LinkedIn, Facebook), purpose, the challenges and the opportunities increasing the number of local and
stakeholder newsletters, Industry-wide
Externally, a strategic approach has events, and sector and community
been developed to deliver a much more outreach programmes, plus managing proactive, coordinated and comprehensive the communications for the Jersey
communications strategy to enable the Fraud Prevention Forum.
JFSC s operations, priorities, objectives,
Overview values, ambitions and challenges to be
better understood by all of our stakeholders.
The overarching objective of the internal Change Programme
is to advance the efficiency and effectiveness of the JFSC s activities. The Operations team plays a significant role in developing and delivering the changes necessary to achieve this. More generally, the Operations team also manages the systems and support necessary for the Commission to carry out its functions effectively.
Human Resources
The JFSC has increased its investment in its Human Resources and made a number of changes to become an employer of choice that combines a flexible, family-friendly workplace with a performance - focussed culture. These changes included the introduction of a comprehensive competency framework, a performance management framework that
more clearly links remuneration
to performance, and leadership development initiatives.
In October 2015, the JFSC held its
inaugural Careers Fair which was a
significant success. Approximately
150 people attended the event and
a number of appointments were
made directly as a result. 150 Careers Fair attendees
60 CVs received since Careers Fair One new Careers Microsite
520+ clicks on Careers Fair Facebook advert
63% of attendees heard about Careers Fair on Facebook
Systems
During 2015, the JFSC agreed the The portal will gradually be rolled out to requirements for the initial release of different sectors of Industry, a process
the Customer Relationship Management which began in early 2016. This work will (CRM) tool and external portal for Industry. enhance the JFSC s capacity to gather, The portal will enable on-line fee calculation store, analyse and re-use information and and collection, and provide Industry with a is designed to improve the way we operate secure portal for providing information to and interact with our stakeholders.
the JFSC.
Finance
The Finance team completed a new cheque receipts, centralisation of
finance system implementation during 2015. fee collection, centralisation of financial The core objectives of the system included control functions and related efficiencies. integration with CRM, the portal and the The underlying system capabilities will Registry systems. The implemented be developed throughout 2016 in line system provides an increased capability with the Change Programme to deliver and facilitates several organisational further future benefits.
objectives such as the reduction of
Information Technology
The Information Technology team New mobile and remote access solutions has continued to drive and support the were put in place supporting availability JFSC s line of business systems and anywhere for a more mobile Commission support requirements while providing workforce.
the infrastructure and development
resource to support the JFSC s The JFSC approved a revised internal Change Programme. cyber-security strategy in response to
changing risks and extended its external The JFSC s public facing infrastructure security engagement activity in line with was replaced in line with existing plans. the increasing global cyber threats.
Registry
The JFSC operates Jersey s Companies Registry, which registers Jersey companies, partnerships, foundations and business names. The Registry aims to maintain a service that is able to supply its users with a customer-centric approach enabling users to have access to accurate and reliable information. In addition, the Registry operates the Register of Beneficial Ownership, Security Interests Register (SIR) and the Trademarks Register.
The Registry activities include:
Jersey s second line of defence on Assessing applications from Jersey
AML/CFT compliance where an overseas companies that wish to circulate person incorporates a company through a prospectus
a TCB (the first line of defence being
the TCB) The Registry continued to focus on automation and e-enablement throughout
Monitoring and vetting adherence to 2015, whilst also embedding significant
the Sound Business Practice Policy (SBPP) changes to Registry practices arising from the introduction of the SBPP and the SIR.
Assessing and recording details
of beneficial ownership
Key Achievements for 2015
2014 2015
200,000 240,000 Applications processed (approx.)
2,771 2,939
Of these, number of 1,386 fast-tracked, 1,385 1,558 fast-tracked, 1,381 company incorporations standar d 2-day incorporations standard 2-day incorporations
2,430 2,640 Dissolutions
7,926 7,992 Name applications
2,818 3,494 Certificate of good standing
The Registry actively contributed to
the MONEYVAL assessment, particularly with regard to the transparency of legal persons and arrangements (Financial Action Task Force Recommendations
33 and 34). Significant changes to Registry policies and processes during 2015 helped to achieve the positive MONEYVAL assessment
Registry operations continued to
perform in accordance with expectations. Business volumes increased slightly
in 2015 and all Registry service targets were met
The Registry Change Programme
remained on target. The process of e-enablement continued with the launch of an on-line incorporation service in November 2015. The specification for
the automated Jersey Aircraft Register (JAR) was agreed with Government in December 2015
The Registry is well respected internationally, winning a Merit Award from the International Association of Commercial Administrators in 2015.
This award relates to the Transparency for Registry project implemented in 2014. The project included the introduction of the SBPP and Registry dashboard system in order to balance the Registry regulatory burden with the ease of doing business.
The Registry is an active participant
in European Business Register network, enhancing Jersey s reputation internationally, and providing a forum in which to learn and contribute to international best practice.
Finance and Bearing down on costs
Resources rcontrFinance tevieThe JFSC has maintained an ongoing w oolling of costs which pream and the JFSC as a whole. verall costs during 2015. Cost oved effective in Imprdepartmental budgeprobjecto be kocurotivvement contreements in re. As such, these will continue y focus areas for the teporting, ol art monite central toring and eam.o this
control remains a core objective for the
A budgeted net deficit of £427k was expected in 2015 due to non-recurring costs associated with the Change Programme.
The actual result for the year was a deficit of £644k. The variance from budget is primarily due to unanticipated staff costs. Total income exceeded budgeted income by £157k. The first-time application of the new accounting framework applicable in the UK (FRS 102) resulted in downward reserves adjustments totalling £622k. These adjustments related to provisions for paid leave entitlements of staff. The combined effect of the net deficit and prior year adjustments is a fall in the JFSC s reserves to £6,261k as at 31 December 2015.
Regulatory fees
Total fee income increased to £14,643k maintained by the Registry and increases from £13,756k in 2014. This rise was due in fees from the Banking and Funds sectors. to increases in income from registers
Operating costs
Operating expenditure (which does not Staff costs remain the JFSC s most significant include investigation and litigation costs) item of expenditure. The average number of for the year was £14,823k against a budget staff employed increased marginally from
of £14,387k. The variance is primarily due to 125 full-time employees (FTEs) in 2014 to unanticipated staff costs. Once the above 127 FTEs by 31 December 2015.
mentioned non-recurring costs are taken
into account, operating expenditure was Learning and development costs increased broadly in line with budget. Lower than during the year in line with the JFSC s people expected costs associated with recruitment, development objectives. The JFSC recognises insurance and travel costs have been offset that staff development is critical to achieving by higher than expected general operating its objectives. 2015 costs included both expenses, learning and development costs, organisational training and support for
and the impact of earlier than expected certain staff studying for relevant
completion of capital projects which resulted professional qualifications.
in increased depreciation charges during
the year. Investigation and litigation costs incurred
during the year decreased to £591k following Costs associated with computer systems the conclusion of two significant enforcement increased to £873k during 2015. Expenditure cases during 2015. These costs are expected on cyber defences increased in line with to remain at this level during 2016.
the increasing trend in the frequency of
cyber-crime and attempts to gain As a direct consequence of the FRS 102 unauthorised access to the JFSC s adjustments and the net deficit, the JFSC s information systems and data. reserves have decreased below the reserve Other computer systems costs have threshold outlined in the current reserves increased due to the effects of the policy. The 2016 Budget assumes that Change Programme as licence, support fees for certain regulated activities will be and maintenance costs are incurred on increased marginally in order to limit future newly implemented systems during the decreases in reserves. However the JFSC run-off period of outgoing systems that will be continuing its strategic review
are still within their licence periods. of current funding arrangements and reserves levels during 2016 to ensure
The significant increase in professional service that appropriate reserves levels can
costs arose from professional services be maintained.
engaged during the requirements gathering
phases and project management of systems
developments related to the Change
Programme. These costs will decrease
progressively as the Change Programme
nears completion.
04.8
Principal Risks and Uncertainties
The Board discusses the risks and uncertainties facing the JFSC. The Board s agenda is influenced by global political, economic, legal and regulatory factors, as well as local considerations such as the risks presented by regulated firms and the operation of the JFSC itself.
Of the risks identified, the JFSC currently considers the following to be its principal risks and has allocated significant resources to managing them:
Market access
This is the risk that the reputation of This in turn helps us influence both Jersey s Jersey s Finance Industry suffers significantly legislative priorities for Industry and the because of unfounded but sustained work of external policy makers in developing criticism of its business or regulations the regulatory framework that we are
from within the global political, fiscal and guided by.
regulatory environments in which we operate.
We consider this risk to be increasing. To assist in this, we have considerably
strengthened our Policy function, worked In mitigation, we work closely with closely with Government to implement international standard setters in the UK, recommendations for agreed reform, and Europe and elsewhere to ensure that we devoted considerable resources to important factor into our risk modelling the latest international and European initiatives such thinking and likely developments. as MONEYVAL and AIFMD.
Information security
The wide use of internet technology reputational and/or financial damage
and mobile/remote working, coupled with should that information be compromised. the increasing frequency and sophistication Accordingly, we make every effort to maintain of cyber-attacks, poses a persistent, strong defences and create a safe, reliable significant risk to data and information. operating environment. In 2015, we continued
to invest in effective technologies, systems We hold extensive confidential information and controls to manage this threat. We also about individuals and businesses in order began to develop information to help regulated to perform our regulatory and Registry firms understand this risk better.
obligations, and would be exposed to
Money laundering and terrorist financing Human Resources
Jersey has a good track record in We seek to mitigate this risk by setting In an increasingly challenging regulatory have the right people in the right roles and preventing and deterring money laundering high regulatory standards, focussing our environment, the JFSC must be able to to reflect the critical importance of suitable and terrorist financing. However, there is a supervisory activities accordingly and attract, develop and retain the right number succession plans. A new competency
risk that Jersey could be linked with money taking a strong stance where firms do not of high calibre staff to achieve our goals. framework and an improved performance laundering or terrorist financing to such an comply with our regulations and the law. The nature of our work means that we management system helped us develop extent that it would damage the Island s We also ensure that there are effective need people with technical expertise and our people further and reward performance reputation and lead to loss of confidence working relationships between the relevant the ability to build strong, collaborative more effectively. We also had success with in doing business in the Island. agencies (The JFSC, States of Jersey Police, relationships with their colleagues and our new recruitment channels such as Facebook,
and prosecuting authorities) so that effective stakeholders. We achieve this by recruiting LinkedIn and our first Careers Fair. We will We consider this risk to be increasing as action is taken when a suspicious transaction the best people we can and investing in continue to monitor this area of risk but were a result of heightened terrorist threats, the is reported. Jersey s membership of MONEYVAL, their ongoing training and development. buoyed by our ability to recruit some excellent increase in cyber-crime and the emergence which entails formal evaluations of the During 2015, increasing Industry demand new staff in a challenging marketplace.
of payment systems that avoid the use of adequacy and effectiveness of Jersey s for good quality risk and compliance staff
bank accounts. There is also potential for legal and regulatory regime, and the led to higher staff attrition, particularly in During the latter part of 2015, the Board threats to emerge from new markets that effectiveness of the JFSC s AML/CFT Supervision, where firms were able considered the structure of the Executive, Jersey firms are developing. supervisory activities, contributes to offer a significant premium over and agreed a restructuring that took effect
to the management of this risk. our benefits packages. in December 2015. Consequent to that decision, John Everett was appointed as
We built greater resilience to this persistent Deputy Director General and Mike Jones threat by reviewing our structure and our was appointed Director of Policy.
Financial resources resource requirements to ensure that we
After a period of forbearance on fee increases and limited internal investment, the JFSC has begun to invest in a three year Change Programme to meet the increasing demands of international regulators, satisfy rising stakeholder expectations and protect itself against cyber-attacks. This has contributed to an income deficit in 2015 and a forecast deficit in 2016 together
with a reduction in our reserves.
It is essential that the JFSC maintains sufficient reserves to enable future investment in its people, infrastructure and systems to engage with Industry in an efficient and cost-effective manner.
Our reserves are also used to meet any
unexpected or exceptional costs that arise from our enforcement activities.
Market developments
During 2015, the JFSC made some immediate
cost savings in a number of areas and In common with all finance centres, the JFSC perceives these risks to be began to re-engineer some of its core Jersey s Financial Services Industry is increasing and therefore monitors market processes to improve efficiency and exposed to risks arising from geopolitical developments to understand how they may cost-effectiveness. It also consulted with and macro-economic developments, as affect Industry so that we can develop the Industry in October on some proposals for well as changes in extra-territorial legislation most appropriate regulatory approach.
the JFSC s funding model. In 2016, we will be and regulation. In the post-crisis environment,
reviewing feedback from our consultation
and this area of risk will continue to be given a high priority.
During 2015, the JFSC continued developing its enterprise risk management approach. A Risk Committee was created to help the Executive and the Board gain a more holistic understanding of the JFSC s key risks and the effectiveness with which they are being managed. Further work to develop and embed a consistent, effective risk management framework across
the JFSC will continue during 2016.
p.37 p.38 Annual Report 2015
05
Governance
Governance
Constitution of the JFSC Delegation of powers
The JFSC is a statutory body established under Article 2 of the Financial Services Commission (Jersey) Law 1998 (Commission Law). The Commission Law provides that the JFSC shall be governed by a Board comprising persons with financial services experience, regular users of such services and persons representing the public interest.
Where a vacancy arises, the Board identifies the skills and experience that will best develop and balance the contribution of the existing
Commissioners and takes soundings of The Board is permitted to delegate any Ministers, Government and Industry. of its powers to one or more Commissioners
or to an officer of the JFSC. However, the Board The Board then seeks and evaluates has decided to retain certain powers which candidates in a manner approved by the could have a highly significant effect on the Jersey Appointments Commission and the JFSC s finances or reputation, including: makes a proposal to the Chief Minister
and, with his support, a recommendation The authorisation of new banks;
is placed before Members of the States
of Jersey. Appointments to the Board are The refusal of an application or the
made following a vote of the Members of revocation of a permit or registration;
the States of Jersey.
The final stage in the decision-making
process involving an enforcement action, where there is no settlement previously agreed by the Executive; and
The determination of the amount
of a civil penalty.
Accountability arrangements Composition of the Board of Commissioners
The JFSC is an independent regulatory body but is accountable to the public of Jersey through their elected representatives, specifically the Chief Minister and the States of Jersey. The relationship with Ministers is set out in a Memorandum
of Understanding so as to ensure the independence of the JFSC, whilst facilitating effective dialogue and working practices.
In addition, under Article 12 of the Law,
the Chief Minister may give the JFSC
general directions, subject to significant
The Board currently consists of safeguards. No such general directions
the Chairman, Deputy Chairman and were given in 2015.
eight other Commissioners. All of the
Commissioners are considered to be The JFSC produces an Annual Report which
independent with the exception of the is presented to the Members of the States.
Director General. A chart of the Board In addition, the JFSC produces an annual
members at the date of this report is Business Plan which is presented to the
set out on page 73, further information Chief Minister, to the financial services, and
is available on the JFSC s website
the wider community in an open meeting.
www.jerseyfsc.org.
The Board is conscious that there is high diversity of skills and experience amongst the existing Board members but would
be keen to improve Board diversity as and when possible.
Commissioners are appointed for one initial term of five years and are eligible for one further term of five years.
Governance arrangements Board meetings and attendance
The Board believes that high quality governance arrangements are essential
for well-run organisations. There are no comprehensive Codes or Standards for
the governance of a financial services regulator, but the JFSC believes that the UK Corporate Governance Code (Code) is a useful benchmark. The Code requires Boards to comply with its high level principles or explain how those high level principles have been met through other arrangements.
The structure and arrangements of the JFSC are consistent with the vast majority of the
principles in the Code. For example, there The Board met 10 times to consider
is a clear division of responsibility between regular business during 2015. All Board the Chairman and Director General, no members attended all 10 meetings with individual has unfettered powers of decision, the exception of Mr Harris , Mrs Prosser and there is a formal, rigorous and transparent and Mr Wilcke who were each unavailable procedure for the appointment of new for one Board meeting.
Commissioners.
The Board also met a number of times Additional explanations are set out on to consider enforcement cases that had the following pages where the Board has been referred to the Board for decision organised itself to meet the underlying in accordance with the decision-making objectives behind a principle in the Code, process. These included applications such as explaining our dialogue with to vary decisions made in historical stakeholders in the absence of shareholders. enforcement cases where the applicant s
circumstances had changed and the Board was asked to consider whether the grounds for the initial decision remained.
In addition to formal Board meetings the Commissioners met for a strategy day and participated in events with fellow regulators, Industry and Ministers.
Board members and the Board consider carefully the potential for conflicts of interest to arise and Board members excuse themselves should any perceived or actual conflict be identified.
Board activities
The Board had a busy year with a focus on continuing to ensure access to markets for Jersey businesses, supporting and monitoring the internal Change Programme and considering the allocation of our scarce resources given intense competing demands on our time.
A number of issues demanded the Board s attention as we progressed from success with the work on AIFMD to the challenge of supporting the Executive as they and other parts of the Island s community responded to the MONEYVAL assessment and subsequent drafts of its report. In recent months consideration has also had to be given to
our research into the appetite of Jersey businesses for us to seek equivalence
in relation to the EU MiFID II proposals.
The Board increased its monitoring of the progress of the Change Programme and supported proposals from the Executive to make significant reallocation of resources so that we can be sure that the Change Programme will keep to its schedule. Progress so far has seen some small
areas of slippage but the amounts
are not significant.
The Board has been particularly keen to understand what difference will be seen
by the regulated community and is strongly supportive of the move to entity supervision and the single web portal so that we can receive substantially all regulated data in an e-enabled form.
Allocating scarce resources to support significant changes in our supervisory approach, as well as our Accounting, Human Resources and Relationship Management Systems, has been particularly difficult. The Board has been very keen to support the development of our talented team and the opportunities afforded to those willing to apply for new roles in our revised risk management and other structures.
The Board has devoted increased time
to our cost base, recognising the pressure from investment in systems and particularly cyber and other information theft defences. The Board has had to make proposals for increases in fees to all Industry sectors to counter running at a deficit as it has done
this year. The Board remains concerned particularly by the level of legal fees it incurs and is seeking ways to manage and mitigate these amounts which are to some degree
out of our control.
The Board monitored the performance against the JFSC s 2014-2016 Business Plan, challenging and supporting throughout the year as necessary. Significant progress was made as explained in this report. There were no items in the Business Plan which were deferred or not progressed.
During the year a sub-group of the Board, comprising three Commissioners together with members of the Executive, reviewed the opportunities and challenges facing the trust company business sector by talking to practitioners both on the Island and in London. The Board considered a report from the sub-group and agreed certain action points relevant to the regulation
of this important sector and these action points are being progressed.
The Board has undertaken an annual internally facilitated board effectiveness review for a number of years but concluded that it would be appropriate on this occasion to obtain some external perspectives. As a result, it appointed the Global Governance Group to carry out the work comparing
us against best practice consistent with
the principles in the Code. The review commenced in early 2016 and interviews and meetings were held with Commissioners, the Executive and externally with stakeholders including Ministers and Industry.
At the time of publication of this Report,
a number of areas for improvement in our efficiency and effectiveness have been identified in the first draft report, including potential changes to Board papers and more regular reporting on business as usual issues.
During the year, the Board considered enforcement cases against three individuals, of which one remains outstanding.
Commissioners remuneration Nomination Committee report
Commissioners are paid a fixed amount During the year the Board considered, in his annually and receive no extra amounts for absence, the performance and remuneration chairing or participating as members of the of the Chairman. Whilst noting that the Remuneration Committee, Audit Committee Chairman had delivered on a substantial
or sitting on sub-groups to hear individual time commitment and led a step change in enforcement cases or attend to other matters. our dialogue with Government and Industry,
the Board concluded that the Chairman s Fees paid to Commissioners had not been remuneration should remain unchanged increased since 1 January 2013. The Board for 2015 and 2016. The apparent increase considered evidence of market rates for compared to 2014 arises from being directors of substantial entities based in appointed as Chairman during that year.
the Island, took soundings of Ministers and
concluded the annual amount should be
increased by £5,000 for both on Island and
off Island Commissioners, but that such
amounts should be fixed until 2018.
Fees paid to Commissioners during the year were as follows:
2015 2014
£ £
John Averty ( Deputy Chairman) 33,350 28,350 Lord Eatwell of Stratton St. Margaret (Chairman) 150,000 96,519 John Harris - - John Mills (Retired 22 October 2014) - 17,500 Peter Pichler (Appointed 21 January 2015) 23,833 - Simon Morris (Appointed 21 January 2015) 33,458 - Deborah Prosser 26,000 21,000 Markus Ruetimann 36,500 31,500 Cyril Whelan 26,000 21,000 Stephan Wilcke 36,500 31,500 Ian Wright 26,000 21,000
391,641 268,369
John Harris is not paid any fees in his capacity as a Commissioner but rather is paid in his capacity as Director General of the JFSC (Refer to Remuneration Committee report on page 45 for further details).
The Board acts as its own Nomination Working in partnership with the Jersey Committee as all but one Commissioner is Appointments Commission and Hassell considered to be independent and generally Blampied Associates, a search process there is insufficient nomination activity to was carried out for the role of Commissioner. justify a separate committee arrangement. Other than the engagement to perform Where the requirement to consider recruitment services, there were no other nominations arises, the Board follows connections between the JFSC and
a fully inclusive approach in identifying Hassell Blampied Associates. The role potential candidates. was advertised in Jersey media and on
the JFSC s website.
During the year, Crown Advocate Whelan
and Mr Ruetimann reached the end of A number of applicants were interviewed by their first term in office. The Chairman took a panel acting as a sub-committee of the soundings of other Commissioners of their Board. Mr de la Haye was recommended performance and contribution and, with the for appointment to the Board and, with the support of all Board members, asked Crown support of the Chief Minister, was duly Advocate Whelan and Mr Ruetimann if they appointed by the Members of the States
would put themselves forward for re-election. with effect from 1 January 2016.
Their appointments for a further term of five
years were subsequently approved by the The Board also considered the impending Members of the States. vacancy for Deputy Chairman of the JFSC
and recommended Commissioner Deborah
Mr Averty retired on 21 January 2016 after Prosser to the Chief Minister for appointment.
10 years service as a Commissioner and The Chief Minister made the ministerial Deputy Chairman. During 2015, the Board decision to appoint Mrs Prosser as Deputy reviewed its strengths and weaknesses Chairman with effect from 21 January 2016. given the loss of Mr Averty and decided to
seek an individual with a strong knowledge
and understanding of social issues in the
Island and detailed knowledge of the
operation and organisation of Government.
Remuneration Committee report
The Remuneration Committee is chaired by Mrs Prosser and the current members
are Mr Ruetimann and Mr de la Haye (appointed to Committee on 26 January 2016) following the retirement of Mr Averty (retired from the Committee on 20 January 2016). There were six meetings during 2015 which were attended by all eligible members. The terms of reference are available on the JFSC s website, several amendments having been made following the Remuneration Committee s annual review of its terms
of reference.
It was an exceptionally active year, principally in support of the strategic decisions being taken as part of the JFSC s Change Programme. Significant time was spent on proposals for linking pay with performance and the development of new Human Resources policies and practices, including a competency framework.
The Committee supported the objectives of the Human Resources team to become an employer of choice and reports on changes to Human Resources policies and proposed new initiatives were received and considered by the Remuneration Committee throughout the year.
The Remuneration Committee assisted
the Executive in determining a Pay for Performance strategy for remuneration, with emphasis on rewarding Executive Directors and employees, both in terms of remuneration and bonus, by reference to the performance of objectives and competencies. Objectives and competencies are monitored throughout the year, culminating in an annual process of assessment of remuneration levels and bonus payments, which were determined within budget. Due to the change in remuneration policy, the payment of the annual bonus for eligible staff was delayed until the first quarter
of 2016.
The Remuneration Committee made recommendations to the Board for the remuneration of the Director General which were considered in conjunction with the Director General s annual performance review. The Committee resolved to increase the remuneration of the Director General for 2015. During the year, he received total remuneration of £325,000 (2014: £314,188).
Audit Committee report Auditors
The Audit Committee is constituted of Commissioners with relevant knowledge, experience and qualifications to carry out an effective Audit Committee function.
The Committee is chaired by Mr Wright and its members during the year included Crown Advocate Whelan, Mr Pichler (appointed during the year) and Mr Wilcke (retired during the year). All eligible members attended all three meetings. The terms
of reference for the Audit Committee
are available on the JFSC s website www.jerseyfsc.org
Details of the Committee Members qualifications and experience are summarised below:
Ian Wright:
Qualified accountant (ACA), former Senior Partner of the Price waterhouse Coopers Global Corporate Reporting Group. Mr Wright is currently a member of the Audit Committee of the States
of Jersey.
Stephan Wilcke:
Graduate of Oxford University with a Masters in Politics, Philosophy and Economics, Chairman of OneSavings Bank PLC and Audit Committee Chairman of Milvik (Bima).
Mr Wilcke was formerly the Chief Executive Officer of the UK Asset Protection Agency.
Crown Advocate Cyril Whelan:
Senior Crown Advocate of the Island of Jersey. Currently a Senior Consultant at Baker & Partners and former senior legal adviser in the Law Officers Department in Jersey.
Peter Pichler:
Qualified accountant (ACA) and member of the Canadian Institute of Chartered Accountants. Mr Pichler has extensive international experience in onshore and offshore financial services. Former Chief Operating Officer and Finance Director of Mourant Ozannes and former CEO of Deutsche Bank Offshore (based in Jersey). Mr Pichler has been a director of a FTSE 350 company and Chairman of its
Audit Committee.
The Committee had an active year with The auditors are BDO LLP and were making the appointment of auditors to the significant time spent on the adoption of appointed for a three year term which ends JFSC. The Comptroller and Auditor General new accounting standards and the new with the audit of these financial statements. has requested that the Board issue a accounting system, the development of The States of Jersey Comptroller and tender for the audit for the December
our response to cyber risks and the further Auditor General is now responsible for 2016 annual accounts.
development of our risk framework.
New accounting standards have been
issued by the UK Financial Reporting Responsibility for Annual Report and accounts
Council (FRC) which became mandatory
for December 2015 accounts and the old This Annual Report and accounts The Board has reviewed the effectiveness standards used by the JFSC were withdrawn. comply with the requirement in Commission of the principal financial controls over its Consideration was given to whether to Law to produce an Annual Report to the Chief financial accounting systems with the
adopt International Financial Reporting Minister and to be presented to the Members internal and external auditors and did
Standards (IFRS) or new Financial Reporting of the States no later than seven months not identify any material deficiencies.
Standard (FRS 102) issued by the FRC after the end of the financial year.
and the latter was chosen as the IFRS The Commissioners have considered
disclosure requirements were perceived The statutory obligations on the the financial position as shown by these
as excessive given the relatively simple Commissioners are not extensive financial statements, the latest management structure of the JFSC. The Audit Committee requiring only that the annual accounts accounts and recent projections of the
carefully monitored the development of the shall be prepared in accordance with JFSC s income and costs for the period
prior year adjustment on transition to the generally accepted accounting principles ended December 2019. As a consequence
new standards and carefully considered and show a true and fair view of the surplus the Board believes it appropriate to prepare
the judgements involved in estimating the or deficit for the period and state of affairs the accounts on a going concern basis and provision for long leave and the fixed asset at the period end. The Commissioners have is satisfied that there are no significant depreciation period. elected to prepare the financial statements threats to the viability of the JFSC within
in accordance with FRS 102, the Financial the period of the projections.
Information security is essential for entities Reporting Standard applicable in the United
with highly confidential data. The Audit Kingdom and the Republic of Ireland. The Commissioners have considered the Committee addressed internal and external financial statements on pages 57 to 70 and
events and developments at every meeting Taking into account general practice, are satisfied that they show a true and fair
and monitored significant enhancements the Commissioners confirm that they view of the deficit for the year and the
to the JFSC s defences. The Audit Committee are responsible for: financial position of the JFSC at
analysed and supported a proposal from 31 December 2015.
Keeping adequate accounting records
the Executive to create an Executive Risk
sufficient to show the financial position
Committee, taking into account how the The Commissioners have considered
within a reasonable period of time;
new committee would fit into the Board the Annual Report and, taken as a whole,
and Executive structures. Safeguarding the assets and for taking confirm that they believe the Annual Report
is fair, balanced and understandable.
reasonable steps for the prevention
The Audit Committee completed other and detection of fraud and other
aspects of more routine work including irregularities;
considering the independence of the external auditors and reviewing plans Preparing the financial statements
and results of internal audit work. in accordance with applicable laws For and on behalf of the Board
and regulations; of Commissioners
Selecting suitable accounting policies
and applying them consistently; C F Renault
Commission Secretary Making judgements and accounting 29 April 2016
estimates that are reasonable and
prudent; and PO Box 267
14-18 Castle Street
Preparing the accounts on a going St Helier
concern basis unless it is inappropriate Jersey
to presume that the JFSC will continue Channel Islands
in business. JE4 8TP
p.49 p.50 Annual Report 2015
Working
closely with
fellow regulators and law-makers
to ensure access
to efficient and effective markets
for financial services
Independent
Auditor s Report to
the Chief Minister of the States of Jersey
Opinion on the financial statements of Jersey Financial Services Our assessment of risks of material misstatement Commission (JFSC) 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 JFSC s affairs as at Revenue consists of regulatory For regulatory fees, we performed
31 December 2015 and of its deficit for the year then ended; and Registry fees. Revenue recognition analytical reviews on the various income
is a presumed risk under International streams, developing expectations based
Standards on Auditing (UK & Ireland). on the movement in the number of regulated Have been properly prepared in accordance with United Kingdom In the case of the JFSC, this risk relates entities together with any fee changes.
Generally Accepted Accounting Practice; and primarily to the completeness We also tested on a sample basis that fees of income and recognition in the for regulated entities had been calculated
Have been prepared in accordance with the requirements of the correct accounting period. in accordance with fee notices published
by the JFSC. We also recalculated deferred Financial Services Commission (Jersey) Law 1998. income to ensure it had been correctly
accounted for in accordance with
The financial statements comprise the income and expenditure the JFSC s accounting policies.
account, the balance sheet, the statement of changes in accumulated For Registry fees, we performed analytical reserves, the statement of cash flows and the related notes. reviews on the various income streams, The financial reporting framework that has been applied in their developing expectations based on fee preparation is the Financial Services Commission (Jersey) Law changes and any other relevant changes,
1998 and United Kingdom Generally Accepted Accounting Practice. such as mosearches and incorporations. Wvements in the number oe also f
tested on a sample basis that fees had
been calculated in accordance with
fee notices published by the JFSC.
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 Statement regarding the Commissioners assessment of principal risks,
going concern and longer term viability of the company
We apply the concept of materiality both We agreed with the Audit Committee that
in planning and performing our audit, and we would report to the Committee all audit We have nothing material to add or to draw over a period of at least 12 months from in evaluating the effect of misstatements. differences in excess of £10,000, as well attention to in relation to: the date of approval of the financial
In order to reduce to an appropriately low as differences below that threshold that, statements; or
level the probability that any misstatements in our view, warranted reporting on The Commissioners confirmation in the
exceed materiality, we use a lower materiality qualitative grounds. Annual Report that they have carried out The Commissioners explanation in
level, performance materiality, to determine a robust assessment of the principal the Annual Report as to how they have the extent of testing needed. Importantly, Our audit of the JFSC was undertaken to risks facing the entity, including those assessed the prospects of the entity, misstatements below these levels will not the materiality level specified above and that would threaten its business model, over what period they have done so, necessarily be evaluated as immaterial was performed at the JFSC s office in Jersey. future performance, solvency or liquidity; why they consider that period to be
as we also take account of the nature of appropriate, and their statement as identified misstatements, and the particular Our audit approach was developed The disclosures in the Annual Report that to whether they have a reasonable circumstances of their occurrence, by obtaining an understanding of describe those risks and explain how expectation that the entity will be able when evaluating their effect on the the JFSC s activities and the overall they are being managed or mitigated; to continue in operation and meet its financial statements. control environment. Based on this liabilities as they fall due over the period
understanding, we assessed those The Commissioners statement in the of their assessment, including any
We determined planning and final materiality aspects of the JFSC s transactions and financial statements about whether they related disclosures drawing attention
for the financial statements as a whole to balances which were most likely to considered it appropriate to adopt the to any necessary qualifications
be £209,000. In determining this, we based give rise to a material misstatement. going concern basis of accounting in or assumptions.
our assessment on a level of 1.5% of average preparing them and their identification
income over a three year period. of any material uncertainties to the
entity s ability to continue to do so
Scope of the audit of the financial statements
Matters on which we are required to report by exception
An audit involves obtaining evidence overall presentation of the financial
about the amounts and disclosures in statements. In addition, we read all the We have nothing to report in respect Is otherwise misleading.
the financial statements sufficient to give financial and non-financial information of the following:
reasonable assurance that the financial in the Annual Report to identify material In particular, we are required to statements are free from material inconsistencies with the audited financial Under the ISAs (UK and Ireland), we are consider whether we have identified any misstatement, whether caused by fraud statements and to identify any information required to report to you if, in our opinion, inconsistencies between our knowledge
or error. This includes an assessment that is apparently materially incorrect information in the Annual Report is: acquired during the audit and the
of whether the accounting policies are based on, or materially inconsistent with, Commissioners statement that they appropriate to the JFSC s circumstances the knowledge acquired by us in the course Materially inconsistent with the information consider the Annual Report to be fair, and have been consistently applied and of performing the audit. If we become aware in the audited financial statements; or balanced and understandable and whether adequately disclosed; the reasonableness of any apparent material misstatements the Annual Report appropriately discloses of significant accounting estimates or inconsistencies, we consider the Apparently materially incorrect based those matters that we communicated to made by the Commissioners; and the implications for our report. on, or materially inconsistent with, our the Audit Committee which we consider
knowledge of the JFSC acquired during should have been disclosed. the course of performing our audit; or
Respective responsibilities of Commissioners and auditors
As explained more fully in the statement of Commissioners responsibilities, the Commissioners are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council s Ethical Standards for Auditors.
This report is made solely to the Chief
Minister in accordance with Article 21(3) of
the Financial Services Commission (Jersey) BDO LLP
Law 1998. Our audit work has been undertaken Chartered Accountants
so that we might state to the Chief Minister
those matters we are required to state to Bristol
the Chief Minister in an auditor s report and United Kingdom
for no other purpose. To the fullest extent Date: 3 June 2016
permitted by law, we do not accept or
assume responsibility to anyone other than BDO LLP is a limited liability partnership the Chief Minister for our audit work, for this registered in England and Wales (with report, or for the opinions we have formed. registered number OC305127).
p.55 p.56 Annual Report 2015
07
Financial Statements
Financial Statements
Income and expenditure account
For the year ended 31 December 2015
Restated* 2015 2014
Note £ 000 £ 000
Regulatory income
Regulatory fee income 4 11,281 10,717 Registry fee income 5 3,362 3,039
Total regulatory income 14,643 13,756 Other income 6 69 1,036
Interest income 58 59 Total income 14,770 14,851 Expenses
Staff costs 7 (11,007) (10,454) Computer Systems (873) (832) Premises costs (741) (811) Professional services (739) (400) Investigation & Litigation (591) (855) Other operating costs (494) (485) Depreciation of tangible fixed assets (437) (487) Staff learning and development (313) (244) Travel costs (219) (251)
Total expenses (15,414) (14,819) (Deficit)/surplus for the year 8 (644) 33
Balance sheet as at 31 December 2015
Restated* 2015 2014
Note £ 000 £ 000 £ 000 £ 000 Fixed Assets
Tangible fixed assets 9 2,019 816
Current Assets
Sundry debtors 251 1,133 Prepayments 627 370 Cash and bank balances 10 9,958 10,978
10,836 12,481 Total Assets 12,855 13,297
Creditors - Amounts falling due within one year
Fee income received in advance 4,624 4,636 Creditors 11 1,515 1,268 Provisions 12 197 97
6,336 6,001 Total Assets less Current Liabilities 6,519 7,296
Creditors - Amounts falling due after one year
Provisions 12 258 391 Total Assets less Total Liabilities 6,261 6,905 Represented by
Accumulated reserves 6,261 6,905
All the items dealt with in arriving at the net (deficit)/surplus relate to continuing operations. The notes on pages 60 to 70 form an integral part of the financial statements.
There are no recognised gains and losses in the current and preceding year other than those included in the net The financial statements on pages 57 to 70 were approved by the Board
(deficit)/surplus above, therefore no separate statement of other comprehensive income and expenditure has of Commissioners on 29 April 2016, and signed on its behalf by:
been presented.
Lord Eatwell Chairman
The notes on pages 60 to 70 form an integral part of the financial statements. John Harris Director General
*Prior year restatement arises from the first time adoption of FRS 102. Further details are disclosed in note 17. *Prior year restatement arises from the first time adoption of FRS 102. Further details are disclosed in note 17.
StatFor the yement oear ended 31 December 2014f changes in accumulated r eserves Notes to the
Accumulated reserv£ 000es Financial Statements Balance at 1 January 2014 6,872
Surplus for the year 33
For the year ended 31 December 2015
Balance at 31 December 2014 6,905
Balance at 1 January 2015 6,905 Deficit for the year (644)
1 Significant accounting policies
Balance at 31 December 2015 6,261
Basis of preparation Income
The notes on pages 60 to 70 form an integral part of the financial statements.
The financial statements have been Income is accounted for on an accruals prepared in accordance with FRS 102, the basis. Regulatory and Registry annual fees Financial Reporting Standard applicable received in advance are recognised as
Statement of Cashflows in the United Kingdom and the Republic income on a straight-line basis over the For the year ended 31 December 2015 of Ireland. relevant period. Annual Registry fees include
only the share of annual fees attributable 2015 Restated* 2014 FRS 102 is mandatory for accounting periods to the JFSC.
beginning on or after 1 January 2015.
£ 000 £ 000
Recoveries of enforcement costs are
Cash flows from operating activities The financial statements are prepared on accounted for only when they have been Net (deficit)/surplus for the year (644) 33 a going concern basis, under the historical awarded and it has become virtually certain
cost convention. that they will be received. Interest received Interest receivable (58) (59) on bank deposits is accrued on a time basis
Depreciation charges 437 487 The principal accounting policies applied by reference to the principal outstanding (Decrease)/Increase in provisions (33) 89 in preparation of the financial statements and the effective interest rate applicable. Deferred rental incentive (15) (16) are set out below. These policies have been Sundry income is recognised on receipt
consistently applied to all the years presented, as this approximates the timing of the Decrease/(Increase) in debtors and prepayments 625 (835) unless otherwise stated. Details of the first services provided.
Increase in creditors 146 341 time adoption of FRS 102 are disclosed in
Net cash generated from operating activities 458 40 note 17. Comparative figures have been
restated where applicable to reflect the
Cash flow from investing activities financial position, performance and Expenses
cashflows as would have been reported
Interest received 53 59 under FRS 102. All expenses are accounted for on Purchases of tangible fixed assets (1,531) (451) an accruals basis.
Net cash used in investing activities (1,478) (392) The financial statements contain information
about the JFSC as an individual entity, and
Net decrease in cash and bank balances (1,020) (352) do not include consolidated financial Foreign currency
information as the parent of a group.
Cash and bank balances at 1 January 10,978 11,330 The JFSC is exempt from the requirement Foreign currency balances are translated
to prepare consolidated financial statements
Cash and bank balances at 31 December 9,958 10,978 because the inclusion of its subsidiary tthe last business dao sterling at the rate oy in the financial period. f exchange ruling on
is not material for the purpose of giving
Foreign currency transactions are translated Cash and bank balances consists of: a true and fair view.
into sterling at the rate of exchange ruling Cash at bank and in hand 157 135 on the date of the transaction. Profits and Short term deposits 9,801 10,843 losses on foreign exchange are included in
the income and expenditure account.
Cash and bank balances 9,958 10,978
The notes on pages 60 to 70 form an integral part of the financial statements.
*Prior year restatement arises from the first time adoption of FRS 102. Further details are disclosed in note 17.
Investigation and litigation costs Cash and bank balances Impairment of tangible Pension costs
fixed assets
Investigation and litigation costs are Cash and bank balances comprise The costs of defined contribution recognised as incurred. No provision is cash in hand, deposits and other short- Assets that are subject to depreciation pension schemes are accounted for on
made for the cost of completing current term liquid investments that are readily are assessed at each reporting date to an accruals basis. The costs of annual
work unless a present obligation exists convertible to a known amount of cash determine whether there is any indication contributions payable to defined benefit
at the balance sheet date. and are subject to an insignificant risk that the assets are impaired. Where there schemes, operated by the States of Jersey, of changes in value. is any indication that an asset may be are accounted for on an accruals basis
impaired, the carrying value of the asset because the JFSC is unable to obtain the
is tested for impairment. An impairment information necessary to apply defined loss is recognised for the amount by which benefit scheme accounting (see note 14).
Tangible fixed assets the asset s carrying amount exceeds its
recoverable amount. The recoverable
Fixed assets are stated at historical cost less accumulated depreciation and any amount is the higher of an asset s fair value
impairment losses. Historical cost includes expenditure that is directly attributable to less costs to sell and value in use. For the Annual leave pay accrual
bringing the asset to the location and condition necessary for it to be capable of purposes of assessing impairment, assets
operating in the manner intended by management. are grouped at the lowest levels for which A liability is recognised to the extent of
there are separately identifiable cash any untaken annual leave entitlement which Repairs and maintenance are charged to the income and expenditure account flows. Non-financial assets that have been has accrued at the balance sheet date and during the period in which they are incurred. previously impaired are reviewed at each can be carried forward to future periods.
reporting date to assess whether there is The liability is measured at the undiscounted Depreciation of fixed assets is calculated so as to write off their cost less estimated residual any indication that the impairment losses cost of untaken annual leave that has
value on a straight-line basis over their expected useful lives. The estimated useful lives used recognised in prior periods may no longer accrued up to the balance sheet date.
for this purpose are: exist or may have decreased.
Motor vehicles 3 years Provision for long leave entitlements Office furniture, fittings and equipment 3 to 5 years Government grants
Computer equipment 3 years Grants are accounted under the accrual Provision is made for the accrued
Computer software 3 to 7 years model. Grants relating to expenditure on entitlements tsheet date, evo long leaen when such entitlements ve as at the balance fixed assets are initially recognised as deferred may not yet have vested. The provision is
The cost of computer software in respect of major systems is capitalised within fixed income and are recognised in income and increased each year as additional entitlements assets. All other computer software costs are expensed as incurred. Computer systems expenditure account on a systematic basis are earned. The provision is decreased when under development are not depreciated until the system has been completed and is ready over the expected useful life of the related long leave entitlements are taken and when for use. asset. The deferred income element of such entitlements expire.
Government grants is included in other
Gains and losses on disposals of fixed assets are determined by comparing the proceeds creditors. The provision represents management s with the carrying amount and are recognised in the income and expenditure account. best estimate of the amounts expected to
be paid out, taking into account long leave In the requirements gathering phase of an internal systems development project, it is not Leases entitlements that may be lost when an
possible to demonstrate that the project will generate future economic benefits and hence employee leaves the employment of the
all expenditure incurred is recognised as an expense when incurred. Systems developments Rentals payable under operating leases JFSC. The provision is discounted if the
are recognised as fixed assets from the development phase of a project if, and only if, certain are charged to the income and expenditure effect would be material.
specific criteria are met in order to demonstrate the system will generate probable future account on a straight-line basis over the
economic benefits and that its cost can be reliably measured. If it is not possible to distinguish term of the lease.
between the requirements gathering phase and the development phase, the expenditure is The JFSC has taken advantage of the
treated as if it were all incurred in the requirements gathering phase only. exemption available on transition to FRS
102 which allows lease incentives on leases
entered into before the date of transition to
continue to be released to the income and
expenditure account on a straight-line basis
over the period to the first lease break.
For leases entered into after the date
of adoption of FRS 102, lease incentives received to enter into operating lease agreements are released to the income and expenditure account over the term of the lease.
2 Critical accounting judgements and key sources of estimation uncertainty 5 Registry fee income
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Key accounting estimates and assumptions
Management are required to make estimates and assumptions concerning the future. The resulting accounting estimates may not equal the actual outcomes. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are outlined opposite.
Provision for long leave entitlements Registry fees arise from the operation Registry fees include annual return
of the Companies Registry, the Business fees. The amount of the annual return
The balance of the provision for long leave Names Registry, the Registry of Limited fee payable to the Registry includes
has been determined based on a range of Partnerships, the Registry of Limited amounts collected on behalf of and
estimates regarding the probability that Liability Partnerships and the Security remitted to the States of Jersey.
the related leave entitlement will vest and Interests Register.
be taken. The balance of the provision
represents management s best estimate, The number of annual returns received during the year was: regarding the expected future cash flows
related to long leave entitlements.
2015 2014 Useful lives and residual values Annual returns received 33,533 33,043
Tangible fixed assets are depreciated 2015 2014 over their useful lives taking into account £ 000 £ 000 residual values, where appropriate.
The actual lives and residual values are Total annual return fee income 5,030 4,956 assessed annually and may vary depending Less: collected on behalf of the States of Jersey (3,856) (3,800) on a number of factors. In re-assessing
useful lives and residual values, a wide Retained by the Registry 1,174 1,156 range of factors are taken into account. Other Registry income 2,188 1,883 Changes in these assessments are
accounted for prospectively and therefore Total Registry income 3,362 3,039 only have a financial effect on current and
future periods.
3 Taxation
The JFSC is exempt from the provisions of the Income Tax (Jersey) Law 1961, as amended.
4 Regulatory fee income
2015 2014
£ 000 £ 000
Banking 1,467 1,205 Funds 4,850 4,601 Insurance companies 707 728 General insurance mediation 108 101 Investment business 1,174 1,141 Trust companies 2,399 2,393 Designated non-financial businesses & professions 545 514 Recognised auditors 18 22 Money services business 13 12
11,281 10,717
- Other income
2015 Restated / 2014
£ 000 £ 000
Income from hosted events 16 23 Investigation and litigation recoveries* 40 1,000 Sundry income 13 13
69 1,036
*As part of its regulatory responsibilities, the JFSC carries out investigations and enters into
legal actions from time to time, the costs of which may be significant. In a few cases, some or all of the Commission s costs may be recoverable.
- Staff costs 9 Tangible fixed assets
2015 2014
£ 000 £ 000
Staff salaries 9,109 8,543 Commissioners fees 392 269 Social security contributions 412 404 Pension contributions 743 725 Permanent health and medical insurance 267 242 Other staff costs 132 117 Long leave provision (33) 89 Annual leave pay accrual (15) 65
11,007 10,454
Contributions to staff pension schemes The average number of staff employed are payable monthly to pension scheme during the year was 127 (2014: 125). administrators. Contributions amounting
to £NIL (2014: £100,001) were payable to the
schemes at year end.
- (Deficit) / Surplus for the year
For the year is stated after including the below:
Office Computer Computer Motor Total furniture, systems systems & vehicles
fittings & under equipment
equipment development
£ 000 £ 000 £ 000 £ 000 £ 000
Cost
At 1 January 2015 742 19 3,622 10 4,393 Additions 14 1,479 147 - 1,640 Completed computer systems 10 (385) 375 - -
At 31 December 2015 766 1,113 4,144 10 6,033 Accumulated depreciation
At 1 January 2015 (628) - (2,945) (4) (3,577) Charge for the year (38) - (396) (3) (437)
At 31 December 2015 (666) - (3,341) (7) (4,014) Net book value at 31 December 2015 100 1,113 803 3 2,019 Net book value at 31 December 2014 114 19 677 6 816
The principal expenditure during the year Registry platform, the Relationship related to the Change Programme and Management System and the included systems development of the Finance System.
2015 2014
£ 000 £ 000
Depreciation of tangible fixed assets 437 487 10 Cash and bank balances Foreign exchange differences 4 4
Contributions to employee pension schemes 2015 2014 (refer to note 15) 743 725
£ 000 £ 000
Operating lease expenditure 477 475
Audit fees 31 18 Current accounts 154 133
Deposit accounts 9,801 10,843 Petty cash 3 2
9,958 10,978
The JFSC s accumulated financial reserves, accounts. In order to mitigate the credit less the funds invested in fixed assets and risk, these deposit accounts are maintained working capital, are invested in bank deposit with five different banks.
11 Creditors 14 Financial instruments
The JFSC s financial instruments are analysed as follows:
2015 2014 2015 2014
£ 000 £ 000 £ 000 £ 000
Trade creditors 464 537 Financial assets
Accruals 552 274 Financial assets measured at amortised cost 10,170 12,072 Deferred rental incentive 91 106
Sundry creditors 408 351 Financial liabilities
Financial liabilities measured at amortised cost (638) (739)
1,515 1,268
Financial assets measured at amortised Financial liabilities measured at amortised cost comprise cash at bank and in hand, cost comprise trade creditors and other trade debtors and other debtors. creditors.
12 Provision for long leave
2015 2014
£ 000 £ 000
At 1 January 488 - First time adoption of FRS 102 - 399
Additions to provision during the year - 117 Reversal of provision during the year (18) - Utilised in the year (15) (28) Charged to income statement (33) 89
At 31 December 455 488
Falling due within one year 197 97 Falling due after one year 258 391
455 488
15 Pension costs
The JFSC 2012 Staff Pension Scheme
In 2012, the JFSC closed the Jersey The JFSC 2012 Staff Pension Scheme s Financial Services Commission Staff assets are held separately from those Pension Scheme and replaced it with a new of the JFSC, under the care of an
defined contribution scheme, the JFSC 2012 independent trustee.
Staff Pension Scheme. The new Scheme
is open to staff whose initial employment Salaries and emoluments include pension by the JFSC occurred after 1 January 1999. contributions for staff to the schemes of Members interests in the old scheme were £721,137 (2014: £692,464). Contribution automatically transferred to the JFSC 2012 rates have remained unchanged.
Staff Pension Scheme. All transfers of Aggregate contributions increased due interests were completed in 2013. to changes in membership numbers,
ages and employment grades.
Public Employees Contributory Retirement Scheme
Staff employed by the JFSC before The JFSC is unable to identify its share of
1 January 1999 are members of the Public the underlying assets and liabilities of PECRS Employees Contributory Retirement in accordance with Financial Reporting
13 Commitments under operating leases Scheme (PECRS) which is a final salary Standard 102 (Section 28) and accordingly
The JFSC had minimum lease payments under non-cancellable operating leases scheme. The assets are held separately accounts for contributions to the
as set out below: from those of the States of Jersey. scheme as contributions to a defined
Contribution rates are determined by contribution scheme.
an independent qualified actuary so as
2015 2014 to spread the costs of providing benefits Actuarial valuations are performed on a
£ 000 £ 000 over the members expected service lives. triennial basis, the most recent published valuation being as at 31 December 2013
Not later than one year 490 490
Salaries and emoluments include pension which reported a surplus of £92.7 million. Later than one year but not later than five years 1,960 1,960 contributions for staff to this scheme No account has been taken of the
Later than five years 490 980 amounted to £22,025 (2014: £32,777). JFSC s potential share of this surplus
The decrease is due to staff retirement. because the scheme is accounted for
2,940 3,430 The average contribution rate paid by the as if it is a defined contribution scheme.
JFSC during the year was 13.6% (2014: 13.1%)
Rentals payable under this operating lease are subject to periodic review and are based of salary. The contribution rate is unlikely Copies of the latest Annual Accounts of the on market rates. to be adjusted following the results of the scheme, and of the States of Jersey, may be
31 December 2013 actuarial valuation. obtained from the States Treasury, Cyril Le Marquand House, The Parade, St Helier JE4 8UL.
16 Related party transactions 18 Subsidiary undertakings
The JFSC has been established in Law as an independent financial services regulator and as such the States of Jersey is not a related party.
Key management personnel include the Commissioners, the Director General and Executive Directors who together have authority and responsibility for planning, directing and controlling the activities of the JFSC. Total compensation paid to members of key management personnel during the year was £2.17 million (2014: £1.98 million).
Remuneration of Commissioners and At 31 December 2015, the JFSC had an interest in one wholly owned subsidiary company the Director General are set out on (2014 one wholly owned subsidiary company). Further details are outlined below: pages 43 and 45 of this Annual Report.
There were no other transactions with Name: JFSC Property Holdings No.1 Limited key management personnel other than
reimbursement of expenses incurred Country of incorporation: Jersey
for Commission purposes. % of shares held: 100%
Principal activity: Property lease holding
The JFSC Property Holdings No.1 Limited entered into an agreement on behalf of the JFSC to lease the JFSC s office premises. All expenditure incurred by the Company is borne by the JFSC. The Company has no assets or liabilities and therefore has not been consolidated in the financial statements.
17 First time adoption of Financial Reporting Standard 102
These financial statements represent
the JFSC s first time adoption of FRS 102. The last financial statements prepared in accordance with UK GAAP were the financial statements for the year ended 31 December 2014. The date of transition to FRS 102 was 1 January 2014. Comparatives have been restated where applicable to reflect the financial position, results and changes
in accumulated reserves in accordance
with FRS 102.
The only material change to comparative figures reported in the prior year financial statements are to accrue for accumulated annual leave pay and make provision for accumulated long leave. This has resulted in a prior year adjustment to opening reserves of £467,767 and an additional charge of £153,700 against staff costs in 2014.
Adjustments to prior year comparatives due to the first time adoption of FRS 102 are detailed below:
Accumulated reserves
£ 000
Balance at 1 January 2014 - as previously stated under UK GAAP 7,340 Opening balance adjustments on first time adoption of FRS 102 (468)
Restated balance at 1 January 2014 in accordance with FRS 102 6,872 Surplus for the year - as previously stated under UK GAAP 187 Opening balance adjustments on first time adoption of FRS 102 (154)
Balance at 31 December 2014 in accordance with FRS 102 6,905
p.71 p.72 Annual Report 2015
More efficient, effective and better able to mana ge the evolving regulatory and business environment
Appendices
01
Commissioners 2015 LChairmanord Eatwell
John Averty Deputy Chairman
John Harris Director General
Debbie Prosser
Markus Ruetimann Cyril Whelan Stephan Wilcke
Ian Wright Simon Morris
Peter Pichler Michael de le Haye
02
Executives & John Harris Heads of Unit Director General
2015
John Everett
Deputy Director General
Mark Sumner Mike Jones Barry Faudemer Andrew Le Brun* Mike Jeacock Julian Lamb Director of Supervision Director of Policy Director of Enforcement Director of Financial Chief Operating Officer Director of Registry
and Risk Crime Policy
Darren Boschat Sam Davison Roy Geddes Anita Matthews David Porter Jason Capenter Matt Ebbrell Stuart Keir Sarah Kittleson Wanda Adam Head of Banking Head of Supervision Head of Unit, Supervision Head of Unit, Supervision Head of Unit, Policy Head of Unit, Enforcement Head of Human Resources Head of Finance Head of Programme Head of Unit, Registry
Examination Unit Management Office
Francis Katamba Tony Shiplee Steve Gardener Emma Martin Denis Philippe Mark Syvret Dawn Kennedy
Head of Central Support Head of Unit, Supervision Head of Risk and Assurance *Secondment to MONEYVAL Head of Communications Head of ICT Head of Facilities Head of Unit, Registry
p77
09
Notes
International regulatory bodies of which the JFSC is either a member or associated with:
1 Full member of:
International Organization of Securities Commissions (IOSCO) Group of International Finance Centre Supervisors (GIFCS) International Association of Insurance Supervisors (IAIS)
Group of International Insurance Centre Supervisors (GIICS) International Federation of Independent Audit Regulators (IFIAR)
2 Participate fully in the processes, and subject to the procedures, of:
Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL)
3 Participates in the work of the following through its membership of GIFCS:
Basel Committee on Banking Supervision (BCBS) Financial Action Task Force (FATF)
Protecting consumers, the reputation of Jersey s finance industry, and deterring and preventing
financial crime
Jersey Financial Services Commission
PO Box 267
14-18 Castle Street, St Helier Jersey, JE4 8TP
Channel Islands
Telephone: +44 (0)1534 822000 www.jerseyfsc.org