Following changes to the Jersey Financial Services Commission's (JFSC) supervisory approach in recent years, the JFSC has recently published its Supervision Examination Guide (the "Guide") clarifying its expectations regarding onsite examinations. It sets out how a firm is notified of an examination, the stages of the examination and how outputs are communicated.
While firms who have been subject to onsite examinations will be familiar with the process, there are changes to the timeframes once the process is completed and to the way in which the outcomes are reported. The dual stages of raising issues both during the onsite review and as a formal debrief meeting should address the concern that the "soft close" meetings, which took place at the end of the onsite, did not raise matters subsequently included as findings in reports. Furthermore, the onus is now firmly placed on the firm to devise an action plan to address any findings. Below we have summarized the key contents of the Guide:
Notification: The firm's Supervision Manager will inform the entity of the proposed examination dates which, once confirmed, will be notified formally to the firm along with the duration and scope of the visit. The notification will further request a preliminary meeting and include an Information Request ("IR"). The IR will be provided six to eight weeks ahead of the visit and firms should ensure it is responded to two weeks prior to the JFSC visit.
Preliminary meeting: This meeting will be held face-to-face ahead of the onsite examination to clarify and explain any matters ahead of the examination. These should reduce the need for an extensive kick-off meeting during the examination.
Desk based review: The JFSC examination team will review the IR submissions ahead of the onsite examination. An examination plan will be finalized during this time which will be used as a guide during the onsite inspection.
Onsite review: During this phase, the examination team will conduct their visit according to the examination plan and the team will discuss matters relevant to the scope of the visit with key members of staff. Depending on the scope, certain documents will be reviewed on site. The JFSC has stated it will be working on a "no surprises" basis; all potential concerns will be raised with the firm during the onsite examination. The JFSC also states in the Guide that it may alter the scope of the visit should issues be identified during this phase to warrant such a change.
Debrief meeting: After the onsite examination, the examination team will review findings off-site and will complete a draft examination report. Prior to it being issued, the examination team will schedule a debrief meeting with the firm within 27 working days of the onsite to discuss the findings in the draft report. The JFSC has highlighted that, as well as potential breaches to regulatory requirements, matters of industry practice and observations may also be noted in the draft report.
Reporting: Within ten working days of the debrief meeting, the draft examination report will be issued to the firm, after which it has 20 working days to address any factual inaccuracies in writing. Once the factual accuracy is agreed, the examination team will issue the final report to the firm.
Remediation: The firm will have 20 working days from the date of the receipt of the final report to respond to the Supervision Manager setting out an action plan regarding how, and when, the findings will be addressed. The Guide states that the JFSC will consider the action plan and confirm its appropriateness within ten working days. The JFSC has also clarified it will not issue recommendations in its reports, nor will it propose timescales for completion. The onus will therefore be on the firm to determine appropriate actions to address findings and to develop appropriate plans regarding remediation.
How Duff & Phelps Can Help
We recommend thorough preparation for an onsite examination, ensuring policies, procedures and documents relevant to an IR are in good order and that staff are informed of the timing and scope of the visit. A pre-examination review to highlight any areas of potential concern may be advisable.
- Support with on-site regulator visits, examinations and enforcement investigations
- Policies and procedures development
- Review of governance arrangements and senior management arrangements
- Annual and ongoing reviews of compliance arrangements, systems and controls (including red-flag reports)
- Regulatory remediation project management and technical guidance
- Compliance and regulatory secondments to assist with temporary resource gaps
- Compliance monitoring
- Compliance infrastructure advice
- Staff training on regulatory matters
- Advice on preparing for regulatory changes
- Regulatory update notifications
For full details of the Guide, please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.