The Mauritius Legislature has modernised the legal framework that governs the non-banking financial services sector on the island by introducing three new pieces of legislation, and repealing five pieces of legislation that had become outdated.
The new legislation comprises The Financial Services Act 2007 of Mauritius (the "FSA"), the Securities (Amendment) Act 2007 (the "Securities (Amendment) Act") amending the Securities Act 2005 (the "Securities Act") and the Insurance Amendment Act 2007 amending the Insurance Act 2005 (the "Insurance Act"). All came into force on 28 September 2007. The FSA, Securities Act and the Insurance Act are hereinafter referred to as the "Acts".
The Financial Services Development Act 2001 (the "FSDA"), the Financial Services Development (Amendment) Act 2005, the Insurance Act 1987, the Stock Exchange Act 1988 and the Unit Trust Act 1989 have been repealed.
The FSA confirms the role of the Financial Services Commission (the "FSC") as an independent regulator in the field of non-banking financial institutions and finance service providers. The FSC is the integrated regulator for the industry and its remit encompasses those of the former regulatory bodies for securities (Stock Exchange Commission), insurance (Insurance Division of the Ministry of Economic Development, Financial Services and Corporate Affairs) and global business (Mauritius Offshore Business Activities Authority). The FSC licenses, regulates and supervises non-bank financial institutions in Mauritius, which includes institutions involved in insurance & pensions, capital market operations, leasing & credit finance as well as global business activities such as global funds (collective investments schemes).
The FSA introduces a new conceptual approach to international business, or global business as it is more commonly referred to. This approach provides two distinct legal, regulatory and fiscal regimes for Mauritian companies -- one for those conducting business in Mauritius and another for those conducting business outside Mauritius.
The FSA consolidates all the amendments made to the FSDA, streamlines and consolidates the entire licensing framework both for domestic and global business, and updates the conceptual approach to global business in the light of recommendations made by the IMF/World Bank Financial Sector Assessment Programme.
Under the FSA, in order to qualify for a Global Business Licence ("GBL"), a company must conduct business outside Mauritius, the test being whether the ultimate purpose of the company is to invest or to provide a service outside Mauritius. However, that test is not intended to be narrow and the impetus is to look for even more substance than was required under the FSDA.
Further, the list of activities that potentially qualify for a Category 1 Global Business Licence ("GBL1") will not be set out exhaustively as under the FSDA. Companies applying for a GBL1 will have the freedom to choose their type of business provided these are neither illegal nor are contrary to public interest. Section 71 of the FSA now makes it mandatory for all GBL1 companies to be administered by a management company in Mauritius. Insofar as an application for a GBL is concerned, the FSA has retained the language of the FSDA by stating that the application must be made in accordance with FSC Rules.
Nevertheless, the FSA requires that an application be accompanied by a business plan or feasibility study setting out the proposed business activity of the applicant, and contains particulars of promoters, beneficial owners, controllers and proposed directors in the form that may be prescribed by the FSC Rules. The FSC is expected to issue 'Practice Notes' regularly to inform investors and service providers of the requirements for GBL companies and to address difficulties that arise in the context of implementing the provisions of the FSA.
The FSC has also indicated that under its proposed Rules, partnerships governed by laws other than Mauritian law may apply, in specified circumstances, for a GBL1 license.
The Securities (Amendment) Act
The Securities (Amendment) Act is intended to improve on the framework established by the Securities Act by making minor amendments to the legislation.
Parliament had three main objectives: broadening the scope of the Securities Act; streamlining the whole licensing framework for non-bank financial institutions and service providers; and ensuring consistency of the Securities Act with the rules and regulations that complement it.
The definition of 'securities' has been broadened to accommodate a wider range of 'financial instruments' that may be traded on an exchange. These may now comprise treasury bills, options, futures and derivatives, including derivatives where the underlying assets are commodities. Also, the term 'depository' has been removed from the phrase 'depository, clearing and settlement' system because under the broader scope given to 'securities' not all securities will have to be deposited whilst they are being processed for clearing and settlement purposes.
The FSC is given the sole responsibility for entertaining applications for licences under the Securities Act.
Finally, the Securities Act has shortened the delay from five to three years during which existing Collective Investment Schemes must be in conformity with the requirements of the Securities Act.
The Insurance Act is designed to modernise the regulation of insurance business in Mauritius in order to move toward full compliance with the Core Principles of the International Association of Insurance Supervisors (IAIS).
The legislation provides for the application of IAIS standards and principles and focuses on specific regulatory issues relating to capital adequacy requirements, solvency, corporate governance and the protection of policyholders. Insurers will no longer be required to seek FSC approval to open a branch in Mauritius or elsewhere or to set up a subsidiary overseas; only a prior notification to the FSC is required. Also, a foreign insurer will no longer be required to furnish the FSC with all documents it lodges with the regulator in its home jurisdiction.
It is anticipated that the legislative changes outlined above will provide efficient and simplified processes and procedures, remove hurdles to investment, facilitate delivery of services, and deliver international standards in every activity in order for Mauritius to be globally competitive.
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