The Financial Services Commission (FSC) is a self-financing regulatory body established in 2001 pursuant to the Financial Services FSC Act, 2001(FSC Act). The FSC is an integrated financial services regulator that operates under the FSC Act, Insurance Act, Pensions Act and Securities Act and their various regulations. It has responsibility to license, regulate, monitor, and supervise the securities, insurance and private pension industries, and to investigate and sanction the entities under its jurisdiction. The FSC is governed by a Board of Commissioners established by law and consists of a Chairman, and up to nine other Commissioners including the Executive Director who is appointed by the other Commissioners. The other Commissioners are appointed by the Minister of Finance and Planning. The Executive Director has responsibility for the executive and administrative functions of the FSC.
To accomplish its mission, the FSC is mandated by Section 6 of the FSC Act, to perform the following duties:
- Supervise and regulate prescribed financial institutions;
- Promote the adoption of procedures designed to control and manage risk, for use by the management, boards of directors and trustees of such financial institutions;
- Promote stability and public confidence in the operations of financial institutions;
- Promote public understanding of the operations of prescribed financial institutions;
- Promote the modernization of financial services with a view to the adoption and maintenance of international standards of competence, efficiency and competitiveness.
Under the Insurance Act 2001 and Insurance Regulations 2001, the Financial Services Commission is responsible for the supervision of life, and general insurance companies and intermediaries. Protection of the interests of policyholders is the primary consideration for the Financial Services Commission (FSC) in its role as supervisor and regulator for the insurance industry. This supervision is directed from the Insurance Division of the Commission. The Division monitors the insurance industry to ensure that:
- Solvency standards for all entities ensure policyholder protection
- The relationships between insurers and their holding, subsidiary and /or associated companies are in accordance with the legislation
- Regulators have access to information
- Industry players pratice good corporate governance as they owe a duty of care to their clients.
The Division monitors both local and branches of foreign companies offering life and general insurance products, and the activities of:
- Sales Representatives, and
- Insurance Consultants and Loss Adjusters
Regulation and supervision of the private pensions industry began in the third quarter of 2006/07 with the licensing of administrators and investment managers; and the registration of trustees, superannuation funds, retirement schemes, and responsible officers. In keeping with its mandate to protect the members and beneficiaries of superannuation funds and retirement schemes the FSC seeks to develop and maintain a comprehensive and robust system of assessment of registrants and licensees to determine whether they are being managed in a safe and sound manner.
A risk-based framework is employed in keeping abreast of risk associated with regulated entities and focusing the FSC’s supervisory efforts and resources. The framework entails a number of regulatory and supervisory activities involving:
- Off-site analysis of data gathered through routine annual and ad hoc statutory filings
- Meetings with trustees, their agents and other key stakeholders
- Conducting on-site examinations and making recommendations
- Interpreting the legislation and issuing of bulletins, guidelines and discussion papers
- Approving specified requests from regulated entities
- Assessing compliance with statutory and regulatory requirements
- Using our powers, where necessary, to obtain information and to protect pension plan members and their beneficiaries.
Securities regulation focuses on monitoring the solvency and market conduct of licensed entities through a programme of routine and special examinations and stock market surveillance. Findings from these examinations sometimes identify areas of potential risk exposure and when these deficiencies are identified the licensee is required to put in place effective corrective measures. Whilst it would not be possible to display here a wide range of indicators, the growth in the capital base of securities dealers is indicative of the improving financial health of this sector.
Amongst the FSC’s priorities has been a recently completed project to review and strengthen the framework for issuer registration and prospectus disclosure. Draft regulatory provisions have been prepared and circulated for industry comment. One feature of the new prospectus regulation is the proposal to establish a category of “accredited investor” covering sophisticated or wealthy investors to whom investment products can be sold which do not meet the more stringent issuer registration requirements.
Under the accredited investor concept, investment products can be more flexibly tailored to meet the needs of a more select clientele with the capacity to obtain their own highly skilled professional advice and with sufficient surplus wealth to be able to sustain the loss of their investment. This concept was initially introduced to the local market by the FSC in November 2004 in a consultation paper entitled The Concept of “Qualified Investor” and its Importance to Jamaica’s Capital Markets which also can be found on the FSC’s website.
Another activity of interest in the area of securities regulation has been the FSC’s programme of investigation and enforcement. It is well known that the FSC has been seeking to enforce the requirements of the Securities Act in relation to entities that are perceived to be conducting securities business without a license or issuing unregistered securities to the public. The FSC maintains a vigorous interest in detecting and investigating these operations as they arise.
In accordance with the Securities Act, entities that conduct or that propose to conduct securities business or offer investment advice to the public are required to be licensed and issuers of securities are obliged to apply to have their securities registered by the FSC before they are issued. The licensing and registration process gives the FSC the authority to monitor promoters of investment schemes to see that they meet their statutory obligation to make full disclosures to investors so that they can make informed decisions before investing. There are fundamental principles of fairness and equity that are at stake here.