Consultation paper on the proceeds of Civil Financial Penalties Issued:16 December 2019 (Proposals = Retention as income)

The JFSC have issued the following Consultation paper that outlines a “proposal for the retention of penalties as income and applied to future fee periods as a reduction to fees that would otherwise be paid by relevant registered persons”

• Consultation paper on the proceeds of Civil Financial Penalties Issued:16 December 2019 (Proposals = Retention as income) - https://www.jerseyfsc.org/industry/consultations/consultation-paper-on-civil-financial-penalties/

1.1 Overview

1.1.1   This consultation paper (CP) seeks feedback on proposals regarding the disbursement of money received by the Jersey Financial Services Commission (JFSC) as proceeds of Civil Financial Penalties (Penalties).

1.1.2   The Commission Law prescribes how the proceeds of Penalties (Proceeds) shall be treated by the JFSC.

1.1.3   This CP invites feedback on how the JFSC proposes to implement the requirements of the Commission Law.

1.1.4   This CP also invites comment on whether alternative mechanisms for the disbursement of money received by the JFSC might be appropriate.

1.2 What is proposed and why?

1.2.1   It is proposed that Proceeds shall be retained by the JFSC and applied to future fee periods as a reduction to the fees that would otherwise be paid by relevant registered persons.

1.2.2   It is proposed that the JFSC will report on the application of Proceeds within its Annual Report.

1.3 Who would be affected?

1.3.1   The proposals in this consultation paper have the potential to affect all registered persons.

2 Consultation

2.1 Basis for consultation

2.1.1   The JFSC has issued this CP in accordance with Article 8(3) of the Commission Law, as amended, under which the JFSC “may, in connection with the carrying out of its functions […] consult and seek the advice of such persons or bodies whether inside or outside Jersey as it considers appropriate”.

2.1.2   The JFSC draws attention to Article 15(3) of the Commission Law which, requires that before the JFSC may introduce and publish any fee it “must first publish a report that must include:

(a)   details of the duty or power for or in respect of which the fee is to be determined;

(b)   details of the proposed fee;

(ba) details of the extent (if any) to which any penalties received have reduced the level of fee that would otherwise have been proposed;

(c) a request for comments on the level of the proposed fee; and

(d)   a date, that is at least 28 days after the publication of the report, before which those comments may be made to the Commission”.

2.1.3   The JFSC considers that this consultation paper constitutes such a report.

2.1.4   While the JFSC is not invoking Article 15(3) in order to introduce a fee, the subject matter within this CP is relevant to future fees consultations.

2.1.5   The JFSC also highlights Article 21G of the Commission Law (Proceeds of penalties) which specifies the manner in which Penalties shall be treated: “

(1)   [The JFSC] may retain any sum of money it receives in respect of a penalty as part of its income.

(2)   The money must be treated as if it were part of the fees due from registered persons of the same class […] as the registered person –

(a)   on whom the penalties were imposed; or

(b)   in the case of a penalty imposed on a principal person, of which the person is a principal person,

so as to reduce the level of fees that would otherwise have been charged to those registered persons.

(3)   However, if the result of the application of paragraph (2) would be to reduce substantially the level of fees that the Commission would otherwise have charged, the Commission may pay the money, or a proportion of it, to the States.”

2.2 Responding to the consultation

2.2.1   The JFSC invites comments in writing from interested parties on the proposals included in this CP. 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.

2.2.2   Comments should be received by the JFSC no later than 10 January 2020.

2.3 Next steps

2.3.1   Following this consultation, the JFSC will publish feedback to this CP in the first quarter of 2020.