Jersey Financial Services Commission Issue – An Examination Guide

There are three broad categories of examination:

Entity Risk – conducted in response to a known or perceived risk within a particular entity.
Thematic – conducted in response to a perceived current or emerging regulatory risk.
Event Driven – driven by external events which occur outside of a known or perceived risk within a regulated entity.

The Guide introduces new terminology: The Commission will now be issuing an Information Request (“IR”) at the same time formal notice of the examination is provided. The IR specifies the information and documents the Commission requires the entity to provide in advance of the examination. The examination process is now as follows:

Preliminary meeting: This will take place separately to the On-site fieldwork and, going forward, there will be no opening meeting as in previous years.
Desk based review: The Commission will consider the information and documentation submitted in the IR.
On-site – fieldwork: (The visit to the regulated entity.) Key persons and representatives of the management team may anticipate discussion with Commission staff. Importantly, the Commission has said that is operates a “no surprises” policy in respect of examination findings: All potential concerns with be discussed. [Our emphasis].
Debrief meeting: Before finalising its draft report, the Commission will seek to hold a meeting with the regulated entity within 27 days of concluding the on-site fieldwork.
Reporting: The draft report will be issued within ten working days of the debrief meeting. The entity has 20 working days to comment upon the draft report’s factual accuracy. Any comments will be considered and the final report will then be issued.
Remediation Process: Post receipt of the final report containing any findings, the entity has 20 days in which to furnish the Commission with an “action plan” detailing its remediation plan. The Commission will then have ten days to consider whether it deems the action plan to be adequate.

Of particular note is that the Commission will no longer be issuing “recommendations” and providing “Timescales for Completion.”

Preparation is paramount

Preparing for, managing and responding to an examination is key. Getting this right, particularly responding appropriately to “all potential concerns” is likely to determine whether matters escalate, which may ultimately lead to regulatory sanction. Now that the Commission is no longer issuing recommendations, it is incumbent on the regulated entity to understand and anticipate the Commission’s expectations.

What should you be considering?

• Ensure senior management and key persons are available at the time of the examination.
• Ensure structure diagrams and board minutes are up-to-date.
• Respond comprehensively to the IR.
• Identify any weaknesses and, where possible, formulate an action plan in advance of the examination.
• Engage candidly and fully during the examination.
• Ensure any action plan is comprehensive, addresses any root causes and commits you to reasonable and achievable timeframes.

The team at Oben offer a number of services in this area, designed to assist regulated entities. We conduct “mock” regulatory visits as “Health-Checks”; we do make recommendations: we understand the Commission’s expectations and regulatory contribute to and help design actions plans.