CONSULTATION PAPER NO.6 2006 AMENDMENTS TO THE BANKING BUSINESS (JERSEY) LAW 1991 A consultation paper on the introduction of amendments to the Banking Business (Jersey) Law 1991. ISSUED AUGUST 2006
CONSULTATION PAPER The Jersey Financial Services Commission (the Commission ) invites comments on this consultation paper. Collation of responses is to be undertaken by Jersey Finance Limited, which chairs the existing industry steering group in this respect. Comments should be provided by 3 November 2006 to: David Wild Technical Director Jersey Finance Limited 27 Hill Street St Helier JERSEY JE2 4UA Tel: +44 (0) 1534 836004 Fax: +44 (0) 1534 836001 E-mail: David.Wild@jerseyfinance.je Alternatively, responses may be sent directly to the Commission, the relevant contact point being: Mark Sumner Director, Banking Jersey Financial Services Commission PO Box 267 Nelson House David Place St Helier JERSEY JE4 8TP Tel: +44 1534 822117 Fax: +44 1534 822002 E-mail: m.sumner@jerseyfsc.org It is the policy of the Commission to make the content of all responses available for public inspection unless specifically requested otherwise. AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 1
CONSULTATION PAPER CONTENTS Page 1 Executive summary 3 2 Consultation 7 3 The Commission 8 4 Proposed amendments to the Law 9 5 Cost benefit analysis 26 6 Summary of questions 27 APPENDICES A List of representative bodies who have been sent this consultation paper 28 AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 2
1 - EXECUTIVE SUMMARY OVERVIEW 1.1 This consultation paper invites comments on proposed amendments to the Banking Business (Jersey) Law 1991 (the Law ). 1.2 The proposed amendments relate to: 1.2.1 the appointment of a manager in prescribed circumstances; 1.2.2 the Commission s power to issue Codes of Practice and measures to address the failure of registered persons to adhere to them; 1.2.3 changes to the right of appeal and procedures under Article 18 of the Law; 1.2.4 improved specificity on the way in which registration conditions may be amended; 1.2.5 the power of the Commission to issue directions; and 1.2.6 provisions to effect the transfer of deposit-taking business from one Jersey deposit-taker to another. 1.3 Although the issues above may be new to those solely engaged in deposittaking business, they will be familiar to those who also carry on financial services business or insurance business, in or from within, the Island. This is because the proposed provisions, wherever possible, mirror equivalent powers already contained in the Financial Services (Jersey) Law 1998 and the Insurance Business (Jersey) Law 1996, in order to harmonise the Island s financial regulatory laws. Appointment of a manager 1.4 The Commission is seeking the power to appoint a manager in prescribed circumstances. This power would be invoked, for example, where it is necessary to collect, protect or preserve the assets or records of deposit takers or the property of their customers; or in situations where the deposit taker has persistently failed to examine the complaints of customers. 1.5 This provision differs to the equivalent measure in the other regulatory laws administered by the Commission in that it gives the Commission the power to AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 3
appoint a manager without reference to the Court. Parties who felt adversely affected by the Commission s actions would, however, have the right to seek a judicial review of the Commission s decision. 1.6 Although the likelihood of a local bank collapsing financially or permitting the control of its business to deteriorate to an unacceptable level is considered remote, the Commission needs the power to act quickly and decisively should such an event occur. 1.7 The most likely scenario would involve the collapse of an international banking group, leading either to a run on its Jersey subsidiary or the dispersal of its available funds elsewhere within the group. As such collapses can typically be delayed until a weekend, local regulators need to be equipped with powers that enable them to act swiftly as any delays incurred, for example in seeking a court order to appoint an external manager, could result in funds being paid away to the detriment of local depositors. The Commission would hope to avoid that potential circumstance through gaining the power itself to take appropriate action (see sections 4.1 and 4.2). Codes of Practice 1.8 The Commission is seeking to clearly establish in Law the power to issue Codes of Practice for the purpose of establishing sound principles for the conduct of deposit-taking (see section 4.3) 1.9 Codes of Practice for deposit-taking business were issued on 27 July 2006. Based on established best practice and international standards, the Codes establish requirements for the conduct and management of deposit-taking business. Jersey banks have been requested to ensure compliance with the Codes within six months from the date of issue. 1.10 It is also proposed that the Law be amended to give the Commission the power to investigate alleged breaches of the Codes, to decline or revoke the registration of a registered person who has failed to follow the Codes and to issue a public statement in that respect (see sections 4.4, 4.5 and 4.6). Registration conditions 1.11 The Commission is proposing to amend Article 11 so as to address the Law s current silence on the Commission s ability to withdraw a registration condition at a time other than upon renewal of the relevant registration (see section 4.7). Appeals procedure 1.12 The Commission is proposing to amend Article 18 of the Law so as to introduce timescales for specific aspects of the appeals procedure. These measures do not diminish in any way a person s right of appeal but are designed to prevent the AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 4
misuse of the appeal process to delay actions by the Commission for an indefinite period of time pending the lodging of an appeal (see section 4.9). Directions 1.13 The Commission is proposing to amend the Law to give it the power to issue directions to registered persons. This power will enhance the Commission s enforcement powers and bring the Law into line with the other regulatory laws administered by the Commission and international standards (see section 4.11). WHO WILL BE AFFECTED BY THESE AMENDMENTS? 1.14 All Jersey registered deposit takers and their subsidiaries will potentially be affected by these amendments. BACKGROUND Jersey s banking industry 1.15 Jersey is a leading international financial centre with well-established banking, fund management, investment, trust and company administration and insurance sectors. 1.16 Bank deposits at 31 March 2006 stood at the equivalent of 188 billion, with 70 per cent of deposits in currencies other than sterling. Of the 45 deposit takers registered in the Island, 17 belong to groups with head offices in the UK and 17 belong to other European groups. The remaining 11 span North America, Africa, the Middle-East and Asia. 1.17 The Law provides for the registration of only one class of deposit taker in the Island. The significant drop in the number of Jersey banks from the peak of 82 in 1977 reflects a continuing worldwide consolidation of banks and the rationalisation of such operations within the Crown Dependencies, although levels of banking business conducted in Jersey have grown considerably in that time. 1.18 The Commission permits only members of the world s top 500 banking groups, as measured by tier 1 capital resources, or financial conglomerates with equivalent own funds, to establish deposit-taking operations in Jersey. AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 5
1.19 Confidence in, and demand for, banking services is created by the quality, reputation and expertise of individual institutions and the overall business and regulatory climate promoted by the Island s authorities. The Commission aims to maintain Jersey amongst the world s better regulated financial centres and is committed to supporting and implementing international regulatory standards established by the Basel Committee. Jersey s Banking legislation 1.20 Jersey s financial sector is governed by four separate regulatory laws. The Law governs deposit-taking business in Jersey, and deposit-taking by Jersey banks worldwide. 1.21 The Banking Business (General Provisions) (Jersey) Order 2002, issued under the Law, introduced certain registration exemptions under the Law and added a number of general conditions and legislative prescription. AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 6
2 - CONSULTATION 2.1 The Commission has issued this consultation paper in accordance with Article 8(2) of the Financial Services Commission (Jersey) Law 1998, as amended, under which the Commission may, in connection with the carrying out of its functions.consult and seek the advice of such persons or bodies whether inside or outside the Island as it considers appropriate. 2.2 The Commission invites comments in writing from interested parties on the proposals included in this consultation paper. These are particularly sought in respect of the specific questions posed (which are summarised in section 6). 2.3 Where comments are made by an industry body or association, that body or association should also provide a summary of the type of individuals and/or institutions that it represents. 2.4 To assist in analysing responses to the consultation paper, respondents are asked: to prioritise comments and indicate their relative importance; to respond as specifically as possible; and where comments refer to costs, to quantify those costs. 2.5 This paper will be submitted to Jersey Finance Limited, which has agreed to distribute it to all relevant industry bodies and interested parties, to continue to provide a discussion forum for such stakeholders and to respond to the Commission on these proposals. Unless respondents request otherwise, all responses received by the Commission will be copied to Jersey Finance Limited. 2.6 This paper will also be published on the Commission s web-site at www.jerseyfsc.org for public access and will be brought to the attention of the public through appropriate media announcement. 2.7 Following this period of consultation, the Commission will review responses received and consider any consequent amendments that may be appropriate. AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 7
3 - THE COMMISSION 3.1 The Commission is a statutory body corporate established under the Financial Services Commission (Jersey) Law 1998, as amended. It is responsible for the supervision of financial services provided in or from within Jersey. 3.2 The Commission s guiding principles require it to have regard to: 3.2.1 the reduction of risk to the public of financial loss due to dishonesty, incompetence or malpractice by, or the financial unsoundness of, persons carrying on the business of financial services in or from within the Island; 3.2.2 the protection and enhancement of the reputation and integrity of Jersey in commercial and financial matters; 3.2.3 the best economic interests of the Island; and, in pursuit of the above, 3.2.4 contributing to the fight against financial crime. AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 8
4 PROPOSED AMENDMENTS TO THE LAW 4.1 Power to appoint a manager in prescribed circumstances 4.1.1 The Commission is proposing the addition of a new Article 37A to the Law. This Article will give the Minister for Economic Development the power to prescribe by Order the circumstances in which the Commission may apply to the Court for the appointment of a manager. The wording of the draft Article mirrors similar existing provisions in the Financial Services (Jersey) Law 1998 and states: 37A Commission may appoint a manager in prescribed circumstances (1) The Minister may, by Order, prescribe circumstances in which the Commission may appoint a person to manage the affairs of persons in so far as those affairs relate to the carrying on of deposit-taking business. (2) An Order made under paragraph (1) may contain such incidental or supplementary provisions as the Minister thinks necessary or expedient, and may contain different provisions for different classes of deposit-taking business. (3) The Commission may in the circumstances prescribed in an Order made under paragraph (1), appoint, on such terms as it considers appropriate, a person to manage the affairs of a person in so far as those affairs relate to the carrying on of deposit-taking business. 4.2 Draft Order 4.2.1 Once the amendment to the primary Law comes into force the Commission will seek completion of the Order detailed below. The Order sets out the circumstances in which the Commission may appoint a manager. The relevant extracts are: AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 9
Banking Business (Appointment of Manager) Order 200- (1) Interpretation In this Order Commission means the Jersey Financial Services Commission; Customer in respect of a person carrying on deposit-taking business means (c) a person who has money deposited with the person carrying on the business; a person who has borrowed money from the person carrying on the business that has not been repaid; and a person who owes to the person carrying on the business interest or any other obligation on money borrowed from the person carrying on the business; Law means the Banking Business (Jersey) Law 1991. (2) In this Order a note contained in a paragraph of the Schedule to this Order forms part of that paragraph. 2. Circumstances in which Commission may appoint a manager Where the Commission is satisfied that there is sufficient evidence to show the existence of any of the cases set out in the Schedule in respect of a deposittaking business carried on by a person the Commission may appoint a person to manage the affairs of the person carrying on the deposit-taking business in so far as those affairs relate to that business. SCHEDULE PRESCRIBED CIRCUMSTANCES Case 1 There has been inadequate management of the affairs of the deposit-taking business. AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 10
Note Inadequate management of the affairs of a person s deposit-taking business may be evidenced, in particular, by (c) (d) (e) (f) the dishonesty of a controller of the person; the person committing a serious breach of a fiduciary duty in respect of the person s deposit-taking business; the person having insufficient resources to continue to carry on an effective deposit-taking business; a serious failure by the person to maintain proper records; the existence of a conflict of interests that may prevent the interests of the person s business or the interests of a customer of the person being properly protected; the person committing serious and persistent breaches of the Law or any of the Codes of Practice or Orders issued or made under the Law; (g) the death or incapacity or prolonged absence of a controller of the person to the detriment of the deposit-taking business of the person. Case 2 The person carrying on the deposit-taking business appears to have ceased to do so but has failed to wind-up, liquidate, close or transfer the business in an orderly manner or at all. Case 3 The person carrying on the deposit-taking business has persistently failed to examine claims or complaints of customers. Case 4 The person carrying on the deposit-taking business is not registered under the Law to carry on deposit-taking business of that type. Case 5 There is a need to appoint a manager to collect, protect or preserve the assets or records of the deposit-taking business or the property of the customers of AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 11
the business, or both. Case 6 There is a need to appoint a manager to avoid circumstances arising that could provide grounds for a forced closure of the deposit-taking business. Case 7 There is a need to appoint a manager of the deposit-taking business to promote or implement a compensation scheme established specifically for customers of the business. Case 8 The person carrying on the deposit-taking business has failed to comply with a notice of objection under Article 14 or Article 15 of the Law so there is a need to appoint a manager of the business to ensure its independent management. 4.2.2 Do you agree with the Commission s proposal to amend the Law to give it the power to appoint a manager and the prescribed circumstances in which it can do so? 4.3 Power to issue Codes of Practice. 4.3.1 The Commission is proposing the addition of a new Article 19A to the Law. This Article will give the Commission the power to prepare and issue Codes of Practice for the purpose of establishing sound principles for the conduct of deposit-taking business and to revise any such Codes of Practice by revoking, varying, amending or adding to its provisions. It will also enable the Commission to indicate in any such Codes of Practice if and to what extent it is or is not to apply to any class of deposit taking business or particular deposit taking business. The Article states: 19A Codes of Practice (1) The Commission may, after consultation with such persons or bodies as appear to be representative of the interests concerned prepare and issue Codes of Practice for the purpose of establishing sound principles for the conduct of deposittaking business; AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 12
(c) revise any such Code of Practice by revoking, varying, amending or adding to its provisions; and indicate in any such Code of Practice if and to what extent it is or is not to apply to any class of deposit-taking business or particular deposit-taking business. (2) The Commission shall cause any Code of Practice issued under this Article to be printed and distributed, and may make such arrangements as it thinks fit for such distribution, including causing copies of the Code of Practice to be put on sale to the public at such price as the Commission consider to be reasonable. (3) Failure to follow a Code of Practice issued under this Article shall not of itself render any person liable in proceedings of any kind, or invalidate any transaction. (4) Subject to Article 11(5), in any proceedings under this Law or otherwise, any Code of Practice issued under this Article shall be admissible in evidence if it appears to the court conducting the proceedings to be relevant to any question arising in the proceedings, and shall be taken into account in determining any such question. (5) A copy, certified in writing on behalf of the Commission to be an accurate copy of a Code; or of any part of such a Code, 4.4 Public Statements shall be admissible in evidence in all legal proceedings as of equal validity with the original and as evidence of any fact stated in it of which direct oral evidence would be admissible. (6) Where a document purports on its face to be a copy of a Code or part of a Code, certified in accordance with paragraph (5), it shall be unnecessary for the purposes of paragraph (5) to prove the official position or handwriting of the person signing on behalf of the Commission. 4.4.1 The Commission is proposing to amend Article 48 of the Law to give it the power to issue a public statement concerning a person if that person appears to the Commission to have failed to comply with a AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 13
Code of Practice issued under Article 19A. The amended Article reads as follows (amendments highlighted in bold): Public statements (1) The Commission may issue a public statement concerning a person if that person appears to the Commission to have committed a contravention of the type referred to in Article 8(1); Article 11; (c) Article 20; (d) Article 21; (e) Article 22; (f) Article 23; (g) any Order made under this Law; or (h) any Code of Practice issued under Article 19A. (2) The Commission may issue a public statement concerning a person who it believes to be carrying on deposit-taking business, whether in Jersey or elsewhere, if it appears to the Commission to be desirable to do so in the interests of depositors or potential depositors. (3) Where a public statement, issued under this Article, concerns a registered person the Commission shall, at least 7 days prior to the publication of the statement, give written notice to the person concerned of the proposed statement and of the reasons for which it intends to act. 4.5 Investigations on behalf of the Commission 4.5.1 The Commission is proposing to amend Article 28 (1) of the Law to give it the power to appoint one or more competent persons to investigate and report to the Commission on the compliance by a registered person or formerly registered person with the Law and any Regulation, Order or Code of Practice made, or a condition of any AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 14
grant of registration, or a direction given under this Law. The Article now reads (amendments highlighted in bold): 28 Investigations on behalf of the Commission (1) If it appears to the Commission desirable to do so in the interests of the depositors or potential depositors of a registered person, the Commission may appoint one or more competent persons to investigate and report to the Commission the nature, conduct or state of the registered person s business or any particular aspect of it; the ownership or control of the registered person; (c) the compliance of the registered person with this Law or with any Regulations, Order or Code of Practice made or issued under this Law; or (d) the compliance by the registered person with a condition of the person s grant of registration under this Law; or (e) the compliance by the registered person with a direction given to the person under this Law, and the Commission shall give written notice of any such appointment to the registered person concerned. 4.6 Power to decline registration or renewal of registration of a person to carry on deposit-taking business if the person has failed to comply with a Code of Practice 4.6.1 The Commission is proposing to amend Article 10 of the Law to give it the power to decline registration or renewal of registration of a person to carry on deposit-taking business if the person has failed to comply with a Code of Practice. The new Article reads as follows (amendments highlighted in bold): AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 15
10 Refusal and revocation of registration (1) The Commission may refuse to grant an application for registration or, where registration has been granted may revoke the registration, if the applicant or the registered person has not provided information required under Article 9 or (as the case may be) has not provided to the Commission at any other time such information as the Commission may reasonably require; it appears to the Commission that any circumstances exist which either are likely to lead to the improper conduct of business by, or reflect discredit on, the method of conducting business of the applicant or the registered person (as the case may be) or any person employed by or associated with the applicant or that registered person for the purposes of his or her business; (c) without prejudice to the generality of sub-paragraph, it appears to the Commission that by reason of the applicant or registered person (as the case may be), or any person employed by or associated with, the applicant or that registered person for the purposes of his or her business (i) (ii) having been convicted of an offence involving dishonesty in any part of the British Islands or in any other place in relation to which there is, or was at the time of the conviction, an arrangement with Jersey for the extradition of offenders, or having been convicted of an offence against this Law or any Order made under it, the applicant or registered person is not, or as the case may be, is no longer a fit and proper person to be registered; (d) it appears to the Commission, as a result of information provided in pursuance of the requirements of Article 9 or sub-paragraph or information otherwise obtained, that it is not in the best interests of persons who have deposited, or who might deposit, money with the applicant or the registered person (as the case may be) or in order to protect the integrity of Jersey in financial or commercial matters or that it is not in the best economic interests of Jersey that the applicant or registered person should be registered or should continue to be registered; AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 16
(e) without prejudice to sub-paragraph (c) (ii), if in connection with any application for the grant of registration under this Law, the applicant or registered person has provided to the Commission information which is untrue or misleading in any material particular; or (f) the Commission has reason to believe that at any time there has been a failure on the part of the applicant or registered person to follow a Code of Practice issued under Article 37A. (2) Where the Commission refuses an application for registration or revokes a registration it shall give written notice accordingly to the applicant or registered person, as the case may be. 4.6.2 Do you agree with the Commission s proposals relating to Codes of Practice? 4.7 Conditions on grant of registration 4.7.1 The Commission is proposing to amend Article 11 of the Law in order to clarify the way in which conditions are imposed on the registration of a person and how they may be subsequently amended. The proposed amendment reads as follows: Article 11 (1) The Minister may, on the recommendation of the Commission, prescribe conditions that that are applicable to the registration of all persons under Article 9 or to the registration of any class of persons. (1A) The Commission may attach additional conditions to the registration of a person under Article 9; and amend conditions applying to the registration of a person whether by virtue of paragraph (1) or by virtue of subparagraph 4.8 Powers to facilitate the transfer of deposit taking business AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 17
4.8.1 The Commission is proposing the addition to the Law of a new Article 48A and Schedule which shall regulate the transfer of a deposit-taking business from one registered person to another. 48A Transfer of deposit-taking business (1) The Schedule shall have effect to regulate any transfer of deposit-taking business from one registered person to another. (2) The Schedule set out in the Schedule to this Law shall be added at the end of the principal Law. Schedule Transfer of Deposit-Taking Business 1. Where it is proposed to carry out a scheme under which the whole or part of the deposit-taking business carried on in or from within Jersey by a registered person (the transferor company ) is to be transferred to another body whether incorporated or not (the transferee company ) the transferor company or transferee company may make a Representation to the Court for an order sanctioning the scheme. 2. If any such scheme involves a compromise or arrangement the provisions of Articles 125 to 127 of the Companies (Jersey) Law 1991 shall have effect in the case of a company to which that Law applies as regards that compromise or arrangement, but without prejudice to the operation of the provisions of this Schedule in relation to the scheme. 3. The Court shall not determine an application under this Schedule unless the Representation to the Court is accompanied by a report on the terms of the scheme by an independent auditor and the Court is satisfied that the requirements of paragraph 4 have been complied with. 4. Those requirements are that notice has been published in the Jersey Gazette stating that the application has been made and giving the address of the offices at which, and the period for which, copies of the documents mentioned in sub-paragraph (d) will be available as required by that sub-paragraph; AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 18
except where the Court has otherwise directed, that a statement (i) setting out the terms of the scheme, and (ii) containing a summary of the report mentioned in paragraph 3 sufficient to indicate the opinion of the auditor on the likely effects of the scheme on the customers of the companies concerned, has been sent to each of those customers and to every member of those companies; (c) that a copy of the Representation to the Court, of the report mentioned in paragraph 3 and of any statement sent out under sub-paragraph has been served on the Commission and that a period of not less than 21 days has elapsed since the date of service. (d) that copies of the Representation to the Court and of the report mentioned in paragraph 3 have been open to inspection at offices in Jersey of the companies concerned for a period of not less than 21 days beginning with the date of the first publication of a notice in accordance with sub-paragraph. 5. Each of the companies concerned shall, on payment of such fee as may be prescribed by the rules of court, furnish a copy of the Representation to the Court and of the report mentioned in paragraph 3 to any person who asks for one at any time before an order sanctioning the scheme is made on the Representation to the Court. 6. On any Representation to the Court under this Schedule the Commission; and any person (including any employee of the transferor company or the transferee company) who alleges that the person would be adversely affected by the carrying out of the scheme, should be entitled to be heard. 7. The Court shall not make an order sanctioning the scheme unless it is satisfied that the transferee company is, or immediately after the making of the order will be, authorised to carry on the deposit-taking business to be transferred under the scheme. AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 19
8. No transfer described in paragraph 1 shall be carried out unless the scheme relating to the transfer has been sanctioned by the Court in accordance with this Schedule. 9. Where the Court makes an order under this Schedule sanctioning a scheme, the Court may, either by that order or by any subsequent order, make provision for all or any of the following matters the transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of the transferor company; the allotting or appropriation by the transferee company of any shares, debentures, policies, deposits or other like interests in that company which under the scheme are to be allotted or appropriated by that company to or for any person; (c) the continuation by or against the transferee company of any legal proceedings pending by or against the transferor company; (d) (e) the dissolution, without winding up, of the transferor company; such incidental, consequential and supplementary matters as are necessary to secure that the scheme shall be fully and effectively carried out. 10. Where any such order provides for the transfer of property or liabilities, that property shall, by virtue of the order, be transferred to and vest in, and those liabilities shall, by virtue of the order, be transferred to and become the liabilities of, the transferee company, and in the case of any property, if the order so directs, freed from any other hypothec, security interest or other charge which is by virtue of the scheme to cease to have effect, except that any property so transferred vests in the transferee company subject to any obligations and liabilities however arising that bound the transferor company in relation to that property on the date of the order. 11. Where a scheme is sanctioned by an order of the Court under this Schedule the transferee company shall, within 10 days from the date on which the order is made or such longer period as the Commission may allow, deposit two office copies of the order with the Commission. AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 20
12. Any person who fails to comply with paragraph 5 or 11 shall be guilty of an offence. 13. A person guilty of an offence under paragraph 5 is liable to a fine not exceeding level 4 on the standard scale and a person guilty of an offence under paragraph 11 is liable to a fine not exceeding level 3 on the standard scale. 14. In this Schedule - arrangement includes a reorganisation of the company s share capital by the consolidation of shares of different classes or by the division of shares into shares of different classes, or by both of those methods. customer, in respect of a transferor or transferee company, means a person who has money deposited with the company, a person who has money borrowed from the company, and (c) a person who owes to the company interest or any other obligation on money borrowed from the company. liabilities includes duties obligations includes any requirement or restriction imposed by any enactment affecting the development, use or disposition of property or any transaction in relation to property. property includes property, rights and powers of every description. 4.8.2 Do you agree with the Commission s proposals for the transfer of deposit-taking institutions? AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 21
4.9 Procedures and rights of Appeal 4.9.1 The Commission is proposing the replacement of the existing Article 18 of the Law with a new Article. Article 18 relates to rights of appeal, and procedures to be adopted, where the Commission refuses an application for registration or revokes the registration of a person under Article 10, or decides to attach a condition to the registration of a person or to amend any such condition under Article 11. The amended Article introduces timescales for specific aspects of the appeals procedure and brings it into line with that contained in the Financial Services (Jersey) Law 1998. The substituted Article 18 reads as follows: Article 18 Procedure and rights of appeal registration. (1) This Article applies where the Commission acting in accordance with Article 10, decides to refuse an application for registration or to revoke the registration of a person; or acting in accordance with Article 11, decides to attach a condition to the registration of a person or to amend any such condition. (2) The applicant or the registered person may, within 21 days of being informed of the Commission s decision, require the Commission to furnish him or her with a statement in writing of its reasons for the decision. (3) A person aggrieved by the Commission s decision may, within 28 days of being informed of the decision, appeal to the Court on the ground that the decision was unreasonable having regard to all the circumstances of the case. (4) A decision to which this Article applies, other than a decision to refuse an application for registration, shall not have effect until 28 days after the registered person has been informed of the decision; but if the registered person appeals in accordance with paragraph (3), until the appeal has been determined or withdrawn. 4.10 Procedure and rights of appeal 4.10.1 The Commission is proposing to introduce a new Article 18A which shall outline the rights of appeal and procedure to be adopted where the Commission, acting in accordance with Article 14 objects to a person becoming the controller of a registered person, or under Article AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 22
15 objects to an existing controller of a registered person. Article 18A reads as follows: Article 18A Procedure and rights of appeal objections (1) This Article applies where the Commission acting in accordance with Article 14, decides to object to a person becoming the controller of a registered person; or acting in accordance with Article 15, decides to object to a person as the controller of a registered person, but does not apply where a person has failed to give a notice or become or continued to be a controller in circumstances in which the person s doing so constitutes an offence under Article 16. (2) A person aggrieved by the Commission s decision may, within 28 days of being informed of the decision, appeal to the Court on the ground that the decision was unreasonable having regard to all the circumstances of the case. (3) A decision to which this Article applies shall not have effect until 28 days after the registered person has been informed of the decision; but if the registered person appeals in accordance with paragraph (2), until after the appeal has been determined or withdrawn. 4.10.2 Do you agree with the Commission s proposals to change the rights of Appeal in Article 18 and to introduce a new Article 18A? 4.11 Directions 4.11.1 The Commission is proposing to amend the Law by the insert of a new Article 31A to give it the power to issue directions to registered persons. This power will enhance the Commission s enforcement powers and bring the Banking Business (Jersey) Law 1991 into line with the other regulatory laws administered by the Commission and international standards. Article 31A reads as follows: Article 31A Power to issue directions (1) If it appears to the Commission in relation to a deposit-taking business - AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 23
(c) (d) that a requirement in relation to the registration of the registered person is no longer satisfied; that it is in the best interests of persons with whom the registered person may transact deposit-taking business or of creditors of the registered person; that it is desirable in order to protect the reputation and integrity of Jersey in financial and commercial matters; or that it is in the best economic interests of Jersey, the Commission may, by notice in writing, give the registered person such direction as it considers appropriate in the circumstances. (2) Such a direction may, in particular (c) require anything to be done or be omitted to be done, or impose a prohibition, restriction or limitation, or any other requirement, and confer powers, with respect to any transaction or other act, or to any assets, or to any other thing whatsoever; require that a director, controller or manager of the registered person or a person having functions in relation to the registered person be removed or removed and replaced by another person acceptable to the Commission; require a registered person or formerly registered person to cease operations and to wind up its affairs, in accordance with procedures and directions specified in the direction; (3) A direction mentioned in paragraph (2)(c) may provide for the appointment of a person to take possession and control of all documents, records, assets and property belonging to or in the possession or control of the registered person or formerly registered person. (4) The power under paragraph (1) to give a direction includes the power to vary or withdraw a direction; or to issue further directions. (5) The Commission may publish a direction given under paragraph (1). AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 24
(6) A person to whom a direction has been given may apply to the Commission to have it withdrawn or varied. (7) The Commission must withdraw or vary the direction in whole or in part if it is satisfied that there are no longer grounds under paragraph (1) that justify the direction or part of the direction concerned. (8) A person aggrieved by a decision by the Commission to give a direction under paragraph (1); or to refuse to withdraw or vary a direction on an application made under paragraph (5), may appeal to the Court within one month from the date on which the direction was given or the refusal was made on the ground that the decision of the Commission was unreasonable having regard to all the circumstances of the case. (9) An appeal under paragraph (8) does not suspend the operation of the direction in connection with which the appeal is made except to the extent that it requires the winding up a person s affairs. (10) The Court may, on appeal under paragraph (8), make such order as it thinks fit with respect to the whole or any part of the direction concerned. (11) A person, to whom notice of a direction had been given in accordance with paragraph (1), who fails to obey, comply with or otherwise give effect to the direction within the time and in the manner stated in it, shall be guilty of an offence and liable to a fine and imprisonment for 2 years. (12) The record of the conviction of a person for an offence under paragraph (11) is admissible in civil proceedings as evidence of the facts constituting the offence. 4.11.2 Do you agree with the Commission s proposals with regard to the issue of directions to registered persons? AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 25
5 COST BENEFIT ANALYSIS 5.1 The benefits achievable from these amendments to the Law are: 5.1.1 The introduction of powers to enable the Commission to take certain actions and establish requirements designed to better enable it to pursue its guiding principles, including the reduction of risk to the public; 5.1.2 The satisfaction of a number of recommendations made by the International Monetary Fund in respect to Jersey s regulatory regime; 5.1.3 The harmonisation of similar provisions in the Island s regulatory laws; and 5.1.4 The maintenance of confidence in the Island of depositors, other regulatory bodies and the wider international community. 5.2 The cost to industry of the introduction of these amendments is unlikely to be significant. The proposals simplifying the transfer of deposit-taking businesses are likely to substantially reduce the costs of such transfers to the persons concerned in the future. AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 26
6 - SUMMARY OF QUESTIONS Reference (paras) Question 4.2.2 Do you agree with the Commission s proposal to amend the Law to give it the power to appoint a manager and the prescribed circumstances in which it can do so? 4.6.2 Do you agree with the Commission s proposals relating to Codes of Practice? 4.8.2 Do you agree with the Commission s proposals for the transfer of deposit-taking institutions? 4.10.2 Do you agree with the Commission s proposals to change the rights of appeal contained in Article 18 and to introduce a new Article 18A? 4.11.2 Do you agree with the Commission s proposals with regard to the issue of directions to registered persons? AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 27
APPENDIX A LIST OF REPRESENTATIVE BODIES PROVIDED WITH THIS CONSULTATION PAPER: Jersey Finance Limited Jersey Bankers Association AMENDMENTS TO BANKING BUSINESS (JERSEY) LAW 1991 28