Financial Services (General
Insurance Mediation Business (Accounts, Audits, Reports and Solvency)) (Jersey)
Order 2005
THE ECONOMIC
DEVELOPMENT COMMITTEE, in pursuance of Articles 10, 12, 17, 18 and 42 of the Financial Services (Jersey) Law 1998, on the recommendation of the Jersey
Financial Services Commission and after having, as required by Article 18(1)
of the Law, consulted the bodies that appear to the Commission to represent the
interests of persons described in paragraphs (1)(a) and (b) of that
Article, and registered persons, orders as follows –
Commencement [see endnotes]
PART 1
PRELIMINARY PROVISION
1 Interpretation
In this Order, unless the context otherwise requires –
“accounting period”, in respect of a registered person,
means the accounting period for that person that is approved in accordance with
Article 2;
“auditor”, in respect of a registered person, means the
auditor approved by the Commission in respect of that person in accordance with
Article 4;
“auditor’s report” means a report prepared in
accordance with Articles 5 and 7;
“client”, in respect of a registered person, means
–
(a) a
person who has entered into an agreement for services to be provided by the
registered person when carrying on general insurance mediation business; or
(b) a
person who has received or may receive the benefit of services to be provided
or arranged by the registered person when carrying on general insurance
mediation business;
“Commission” means the Jersey Financial Services
Commission;
“declaration” means a declaration that complies with
Article 6;
“financial statements”, in respect of a registered
person, means financial statements prepared in respect of that person that
comply with the requirements of Article 8 or 9;
“Law” means the Financial Services (Jersey) Law 1998;
“registered person” means a person registered under the
Law to carry on general insurance mediation business.
PART 2
ACCOUNTS, AUDITS AND REPORTS
2 Accounting
period
(1) A person applying under
the Law for registration in respect of general insurance mediation business
shall, at the same time, apply to the Commission for approval of –
(a) a
period, of not more than 18 months, that is proposed by the registered person
to be the first accounting period for the person; and
(b) the
period that is proposed by the registered person to be the accounting period
for the person after the end of the first accounting period.
(2) A registered person
shall not change an accounting period without the Commission’s approval.
(3) A registered person may
apply to the Commission for approval of a proposed accounting period for the
person in place of an accounting period that is, under paragraph (4),
approved in respect of the person by the Commission.
(4) The Commission shall
approve or refuse to approve an accounting period proposed in an application
under paragraph (1) or (3).
(5) The Commission shall
only approve, as the accounting period for a registered person after the end of
the first accounting period, a period of 12 months, unless it is satisfied that
there are reasonable grounds for approving another period.
(6) A registered person who
fails to comply with paragraph (1) or (2) shall be guilty of an offence
and shall be liable to a fine.
3 Accounting
records
(1) A registered person
shall keep accounting records that –
(a) show
and explain each of the registered person’s transactions in respect of
the general insurance mediation business carried on by the registered person;
(b) enable
financial statements to be prepared in respect of the person; and
(c) are
capable of disclosing at any time with reasonable accuracy the person’s
–
(i) financial
position, and
(ii) degree
of compliance with any financial resources requirements of the Commission that
relate to the person.
(2) A registered person
shall ensure that accounting records kept in compliance with paragraph (1),
whether in electronic form or any other form –
(a) are stored
in a way that minimizes any risk of their loss due to theft, fire, flood,
corruption or unauthorized erasure;
(b) are
stored in a way that prevents unauthorized access to the records; and
(c) are
backed up or otherwise duplicated so that copies shall be available if the
originals are lost, destroyed, corrupted or erased.
(3) A registered person
shall ensure that accounting records kept in compliance with paragraph (1)
and the backup copy or duplicate made in compliance with paragraph (2)(c)
are kept by the person for at least 10 years from the date the records were
made.
(4) A registered person
shall not be taken to have complied with paragraph (1) or (2) by keeping
in an electronic form any accounting records, or by keeping in an electronic
form any backup copies or duplicates of the records, unless he or she ensures
that an electronic device capable of reading the records is provided to a
person acting on behalf of the Commission, as soon as reasonably practicable
after the person requests the device to be provided.
(5) A registered person who
fails to comply with paragraph (1), (2) or (3) shall be guilty of an
offence and shall be liable to a fine.
4 Appointment
of auditor
(1) A registered person
shall not employ or engage a person to be an auditor in respect of the
person’s general insurance mediation business unless the auditor is
approved under paragraph (3) to be the auditor in respect of the
person’s general insurance mediation business.
(2) A registered person who
fails to comply with paragraph (1) shall be guilty of an offence and shall
be liable to a fine.
(3) A person may apply to
the Commission for approval of a person nominated in the application to be the
auditor in respect of the person’s general insurance mediation business.
(4) The Commission may
approve, or refuse to approve, a person nominated in an application under
paragraph (3) to be the auditor in respect of a person’s general
insurance mediation business.
(5) The Commission shall
approve under this Article an auditor in respect of a registered person only if
it is satisfied that, having regard to the type of general insurance mediation
business carried on by the registered person, the person is suitable to be an
auditor in respect of the registered person.
(6) If the appointment of
an auditor is terminated for any reason, the auditor shall, within 7 days of
the termination, provide to the Commission a statement as to whether there are
circumstances relating to the termination that should be brought to the
Commission’s attention and, if there are, what those circumstances are.
(7) An auditor who fails to
comply with paragraph (6) shall be guilty of an offence and shall be
liable to a fine.
5 Auditor
to prepare reports
(1) A registered person
shall, as soon as practicable after the end of an accounting period, provide to
the person’s auditor financial statements and a declaration in respect of
that period.
(2) The auditor shall
prepare reports in respect of both the financial statements and the declaration
and provide them to the registered person.
(3) A registered person
who, on being requested to do so by the auditor for the purposes of this Order,
fails to give the auditor –
(a) access
at all reasonable times to the person’s records and documents relating to
the person’s business; or
(b) other
information, or an explanation, that the auditor considers necessary for the
performance of the auditor’s duties under this Order,
shall be guilty of an offence and shall be liable to a fine.
(4) A registered person, or
a person acting or purporting to be acting on behalf of a registered person,
who knowingly or recklessly makes a statement to the registered person’s
auditor –
(a) that
conveys or purports to convey information or an explanation that the auditor
requires or is entitled to require in the course of the auditor’s duties
under this Order; and
(b) that
is misleading, false or deceptive in a material particular,
shall be guilty of an offence and shall be liable to a fine.
6 Declaration
(1) A declaration shall
state whether, during the relevant accounting period, the registered person
–
(a) has
complied with the requirements of the Law;
(b) has
complied with the requirements of any Order, or of any Code of Practice made
under Article 19 of the Law, that apply to the registered person;
(c) has
maintained proper accounting records and adequate systems to enable the
registered person to maintain proper accounting records; and
(d) has
complied with the requirements, of all laws relating to money laundering, with
which the registered person is required to comply.
(2) If a registered person
has failed to comply with a requirement referred to in paragraph (1)
(including paragraph (1)(c)) the declaration must contain details of all
material failures and specify any measures taken, or to be taken, by the
registered person to ensure that the failures are not repeated.
(3) A registered person who
knowingly or recklessly includes in a declaration a statement that is
misleading, false or deceptive in a material particular shall be guilty of an
offence and shall be liable to a fine.
7 Auditors’
reports
(1) An auditor’s
report shall be prepared, and the audit leading to that report shall be
conducted, in accordance with the Auditing Standards issued by the Auditing
Practices Board.
(2) An auditor’s
report that relates to financial statements shall specify whether the
statements have been prepared in accordance with this Order.
(3) An auditor’s
report that relates to a declaration shall –
(a) if,
while conducting the audit for the purpose of preparing the report, the auditor
became aware of no matter that could be taken as indicating that a statement in
the declaration was incorrect, state that this is the case; or
(b) if
the auditor cannot confirm that while conducting the audit for the purpose of
preparing the report he or she became aware of no matter that could be taken as
indicating that a statement in the declaration was incorrect, specify the
matter that could be taken as indicating that a statement in the declaration
was incorrect.
8 Financial
statements to be provided
(1) A registered person
shall provide to the Commission financial statements in respect of each
accounting period.
(2) The statements shall be
provided –
(a) within
4 months after the end of the accounting period; or
(b) if
the Commission thinks there are special circumstances in relation to the
registered person, within the period (being not more than 8 months after the
end of the accounting period) that the Commission permits.
(3) The financial
statements shall be accompanied by –
(a) a declaration;
(b) an
auditor’s report in respect of the financial statements and the
declaration;
(c) any
report prepared by an internal or external auditor that is available to the
registered person and addresses a material relevant matter; and
(d) brief
details of any report prepared by an accountant or consultant that is available
to the registered person and addresses a material relevant matter.
(4) In paragraph (3)(c)
and (d) “relevant matter”, in respect of a registered person, means
–
(a) a
breakdown or material weakness in the person’s internal controls or
procedures; and
(b) any
subsequent recommendations of the auditor, accountant or consultant as to how
to improve those procedures.
(5) The financial
statements shall be prepared in accordance with –
(a) International
Accounting Standards; or
(b) the
Generally Accepted Accounting Practice (GAAP) of –
(i) the United
Kingdom,
(ii) the
United States of America, or
(iii) if
the registered person is a body corporate and has the prior approval of the
Commission, the country or territory in which the beneficial owner of the body
corporate is situated.
(6) The financial
statements shall show a true and fair view of –
(a) the
state of affairs of the registered person at the end of the relevant accounting
period; and
(b) the
registered person’s profit or loss for that period.
(7) A registered person who
fails to comply with a requirement of this Article shall be guilty of an
offence and shall be liable to a fine.
9 Consolidated
financial statements
(1) This Article applies if
–
(a) a
registered person is a member of a group of companies or partnerships; and
(b) the
accounting standards in accordance with which, under Article 8(5), a
registered person shall prepare financial statements, allow consolidated
financial statements to be prepared in respect of the members of the group.
(2) If this Article
applies, the consolidated financial statements of the group of which the
registered person is a member may be provided by the person under Articles 5(1)
and 8(1) instead of the financial statements otherwise required to be provided
under those Articles.
(3) The consolidated
financial statements shall show a true and fair view of –
(a) the
state of affairs of the group as at the end of the relevant accounting period;
and
(b) the
profit or loss of the members of the group for that period.
(4) If members of a group
acting in accordance with this Article have provided their auditor with
consolidated financial statements for the purpose of Article 5(1), the
auditor shall for the purpose of Article 7(3) issue a single
auditor’s report in respect of all the separate declarations made by the
members of the group in compliance with Article 6(1).
10 Circumstances
to be communicated to the Commission by auditors, accountants and others
(1) The circumstances in
which matters to which Article 18 of the Law applies shall be communicated
to the Commission are those circumstances that give a registered person’s
auditor (whether appointed by virtue of this Order or otherwise), or any reporting
person in respect of the registered person, reasonable cause to believe that
–
(a) a
ground for revoking a registration specified in Article 9(4) of the Law
has occurred or may occur in respect of the registered person; or
(b) as a
result of a breach of –
(i) a requirement, of
a Code of Practice issued under Article 19 of the Law, that applies to the
registered person,
(ii) a
requirement, of a law, that applies to the registered person, or
(iii) internal
controls or procedures,
a client of the registered person has incurred, or is at significant
risk of incurring, a material loss.
(2) In this Article
“reporting person”, in respect of a registered person, means an
auditor, accountant, or another person nominated or approved by the Commission
in respect of the person in accordance with Article 8(5), or Article 32(4),
of the Law.
11 Exemption
from Articles in this Part
(1) A registered person may
apply to the Commission for an exemption from the requirements of all or any of
Articles 2 to 9.
(2) The Commission may,
after receiving from a registered person an application under paragraph (1),
by notice in writing to the person, exempt or refuse to exempt the person from
the application of all or any of Articles 2 to 9.
(3) The Commission may only
grant an exemption under paragraph (2) in relation to a person if the
Commission is satisfied that, because of the general insurance mediation
business that the person carries on or intends to carry on, no client of the
person is likely to be prejudiced by the grant of the exemption.
(4) An exemption may be
granted under paragraph (2) subject to the registered person complying
with any conditions specified in the notice of exemption.
(5) The Commission may
revoke an exemption granted under paragraph (2) if it satisfied that
–
(a) the
registered person to whom the exemption was granted has contravened or failed
to comply with a condition of the exemption; or
(b) a
client of the person is likely to be prejudiced by the fact that the exemption
has been granted.
(6) The Commission may only
amend a condition of an exemption granted under paragraph (2), or revoke
an exemption granted under paragraph (2), if it has, at least 14 days
before, issued a notice to the person to whom the exemption was granted asking
the person to show cause, within 14 days after the notice is issued, why the
condition should not be amended or the exemption revoked as specified in the
notice.
PART 3
SOLVENCY
12 Interpretation
In this Part, unless the context otherwise requires –
“approved assets”, in relation to a registered person,
means –
(a) cash
held by the registered person, or cash held in the name of the registered
person in an account at an approved bank;
(b) bank
certificates of deposit;
(c) Eurobonds
approved by the Commission;
(d) government
securities quoted on a recognized stock exchange;
(e) net
investment income receivable in relation to assets specified in any of
paragraphs (a) to (d) of this definition;
(f) brokerage
income receivable;
(g) accounts
receivable, net of provisions for bad debts;
(h) tangible
fixed assets at written down value; and
(i) irrevocable
letters of credit provided by an approved bank;
“approved bank”, in relation to a insurance broking
account, means –
(a) if
the account is opened at a branch in Jersey – a person registered under
the Banking Business (Jersey) Law
1991
; and
(b) if
the account is opened at a branch outside Jersey –
(i) an institution
authorized under the Banking Act 1987 of the United Kingdom, as in force from
time to time,
(ii) a
credit institution (as defined in Directive No. 77/780/EEC, the First Banking
Directive on the co-ordination of laws, regulations and administrative
provisions relating to the taking up and pursuit of the business of credit
institutions) established in any other Member State of the European Community
and duly authorized by the relevant supervisory authority in that Member State,
(iii) an
institution authorized under the Banking Act 1975 of the Isle of Man, as in
force from time to time,
(iv) an
institution authorized under the Banking Supervision (Bailiwick of Guernsey)
Law 1994 as in force from time to time,
(v) a building society
registered and incorporated under the Building Societies Act 1986 of the United
Kingdom, as in force from time to time, which operates a deposit-taking
business (within the meaning of the Banking Act 1987 of the United Kingdom as
in force from time to time) without restriction,
(vi) a
bank which is a company in the same group as an institution described in
paragraph (a) or (b)(i) to (iv) of this definition; and
(vii) any
deposit-taking business within the meaning of the Banking Business (Jersey) Law 1991 that is approved by the
Commission;
“bank” means any institution which lawfully carries on
deposit-taking business in the country in which it was established;
“brokerage income”, in relation to a registered person,
means the net retained brokerage and other income arising from general
insurance mediation business activities by the registered person in each
accounting period;
“insurance broking account”, in relation to a registered
person, means –
(a) an
account at an approved bank; or
(b) if
the Commission has, under an Order made under Article 20 of the Law,
issued a waiver in relation to client money received by the registered person
– the account containing the client money at the bank specified in the
waiver,
which account –
(i) holds
the money of one or more clients;
(ii) is in
the name of the registered person;
(iii) includes
either words in its title indicating that it is an insurance broking account or
other information which sufficiently distinguishes it as an account containing
client money; and
(iv) is a
current or deposit account (or, if the bank is an approved bank that is a
building society within paragraph (b)(v) of the definition of
“approved bank”, is a deposit (and not a share) account);
“recognized stock exchange” means any market for the
buying and selling of securities, which market is situated in, and recognized
as a stock exchange of –
(a) any
member state of the European Union;
(b) Australia,
Singapore, South Africa, Sweden, Switzerland or the United States of America;
or
(c) any
other country or territory, if the stock exchange is approved by the
Commission.
13 Margins
of solvency
(1) For the purposes of
this Part, a registered person has the required margin of solvency in relation
to the person’s insurance broking accounts on a particular day if the
total of –
(a) the
amount of money in the person’s insurance broking accounts on that day;
and
(b) the
total on that day of those debts, related to general insurance mediation
business, that are due to the registered person from clients and insurance
companies,
is greater than the registered person’s liabilities, in
respect of general insurance mediation business, that are due to clients and
insurance companies.
(2) For the purposes of
this Part, a registered person has the required margin of solvency in relation
to the person’s general insurance mediation business on a particular day
if the approved assets on that day of the registered person in relation to that
business exceed the amount on that day of the registered person’s
liabilities in relation to that business by at least £10,000, or 5% of
the person’s net brokerage income on that day, whichever is greater.
(3) For the purposes of
paragraph (2), a person’s net brokerage income on a particular day
is the net brokerage income calculated in respect of the 12 month period
immediately before the day.
(4) If, in addition to
carrying on general insurance mediation business, a registered person carries
on other business that is authorized under a relevant law, the required margin
of solvency for the purposes of paragraph (2) shall be an amount that does
not include any amounts which the provisions of that law specify to be required
to establish the solvency of that other business or to ensure the other
business has sufficient capital.
(5) In this Article,
“relevant law” means any of the following laws –
(a) the Banking Business (Jersey) Law 1991;
(b) the Collective Investment Funds (Jersey) Law 1988;
(c) the Financial Services (Jersey) Law 1998;
(d) the Insurance Business (Jersey) Law 1996.
14 Calculation
to be made of margin of solvency
(1) It is a condition of
the registration of a registered person that the person shall, at least once
each month, calculate whether the person has, on the particular day in that
month to which the calculation relates, the required margin of solvency in
relation to the person’s insurance broking accounts.
(2) It is a condition of
the registration of a registered person that the person shall, in accordance
with this Article, calculate whether the person has, on the last day of –
(a) each
accounting period;
(b) each
quarter of the accounting period; and
(c) each
other period, if any, in relation to which the Commission, by a direction
issued to the registered person under Article 23 of the Law, requires the
person to perform a calculation of the margin of solvency in respect of a
period specified in the direction,
the required margin of solvency in relation to the person’s
general insurance mediation business.
(3) The calculation for the
purposes of paragraph (2) shall be made –
(a) for
each accounting period – within 30 days after the last day of the
accounting period;
(b) for
each quarter of the accounting period – within 30 days after the last day
of the quarter; and
(c) for
each period specified in a direction referred to in paragraph (2)(c)
– within 14 days after the last day of the period specified in the
direction.
15 Commission
to be notified if failure to have margin of solvency
It is a condition of the registration of a registered person that
the person shall notify the Commission immediately the person becomes aware
that, in accordance with calculations made for the purposes of Article 14(1)
or (2) in relation to a particular day, the person does not have the required
margin of solvency.
16 Commission
may require preparation of financial scheme for purpose of returning margin of
solvency
(1) It is a condition of
the registration of a registered person that if the person does not have the
required margin of solvency in relation to –
(a) the
person’s insurance broking accounts; or
(b) the
person’s general insurance mediation business,
the Commission may, by notice in writing to the person, require the
person to submit a proposed financial scheme to the Commission within the
period specified in the notice.
(2) A registered person may
submit to the Commission a proposed financial scheme.
(3) For the purposes of
Article 12 of the Law, if a registered person fails to submit to the
Commission a financial scheme in accordance with a notice to the person under
paragraph (1), the Commission may, in addition to any other action that it
may take, apply to the Royal Court under that Article for the appointment by
the Court of a special manager in relation to the registered person.
17 Contents
of financial scheme
(1) A financial scheme
shall be a scheme for ensuring that, by the end of a period specified in the
scheme, the registered person shall have the required margin of solvency in
relation to –
(a) the
person’s insurance broking accounts; or
(b) the
person’s general insurance mediation business.
(2) Without limiting the
generality of paragraph (1), a financial scheme may include proposals for
–
(a) the
appointment by the registered person of a special manager, who is acceptable to
the Commission, in relation to the registered person; and
(b) the
discontinuance, in whole or in part, of all or part of the person’s
general insurance mediation business.
18 Approval
of financial schemes by Commission
(1) The Commission shall, where
a scheme has been submitted to it under Article 16(2) by a registered
person –
(a) approve
the scheme;
(b) modify
the proposed scheme (including by modifying the period specified in the scheme)
and, if the registered person who submitted the scheme approves the
modifications, approve the scheme as modified; or
(c) refuse
to approve the scheme.
(2) If the Commission
refuses to approve a scheme submitted to it under Article 16(2) by a
registered person, the Commission may apply to the Royal Court under Article 12
of the Law for the appointment by the Court of a special manager in relation to
the registered person.
(3) The Commission may, on
the application of a registered person, amend a scheme that it has approved
under paragraph (1) in relation to the person.
19 Registered
person shall comply with requirements of scheme
(1) It is a condition of
the registration of a registered person that he or she shall implement, and
comply with any requirement of, a financial scheme that is approved in relation
to the person under Article 18 and that is in force.
(2) For the purposes of
Article 12 of the Law, if a registered person fails to implement, or to
comply with a requirement of, a scheme that is approved in relation to the
person under Article 18 and that is in force, the Commission may, in
addition to any other action that it may take, apply to the Royal Court under
Article 12 of the Law for the appointment by the Court of a special
manager in relation to the registered person.
20 Subordinated
loan agreements
It is a condition of registration of a registered person that the
person shall not enter into a subordinated loan agreement except with the prior
approval of the Commission.
PART 4
CONCLUDING PROVISIONS
21 Exemptions[1]
(1) This Order does not
apply in relation to a person if the person is exempted by the Commission under
this Article from the application of this Order.
(2) A person may apply to
the Commission for exemption from the application of this Order.
(3) The Commission may,
after receiving from a person an application under paragraph (2), exempt
the person from the application of this Order if the Commission is satisfied
that the person is an appropriately regulated person within the meaning of
paragraph (4), (5), (6) or (7).
(4) A person is an appropriately
regulated person if the person is –
(a) authorized
to carry on general insurance mediation business under the Financial Services
and Markets Act 2000 of the United Kingdom, as in force from time to time;
(b) an
appointed representative of an insurance company, or of an insurance
intermediary, that is authorized under the Financial Services and Markets Act
2000 of the United Kingdom as in force from time to time;
(c) an
appointed representative of an insurance company that is authorized under the Insurance Business (Jersey) Law 1996; or
(d) an
appointed representative of an insurance intermediary that is authorized under
the Financial Services (Jersey)
Law 1998.
(5) A person is an
appropriately regulated person if the person is –
(a) registered
or otherwise authorized to carry on general insurance mediation business under
an enactment, as in force from time to time, of a country or territory other
than the United Kingdom or Jersey;
(b) regulated,
in respect of his or her carrying on general insurance mediation business, by a
regulatory body of that country or territory; and
(c) in
respect of his or her carrying on general insurance mediation business, subject
to a regulatory regime that is sufficient to ensure that no person is liable to
be placed at undue financial risk by virtue of the person being exempted from
the application of this Order.
(6) A person is an
appropriately regulated person if the person is –
(a) the
agent of a principal;
(b) registered
or otherwise authorized to carry on general insurance mediation business under
an enactment, as in force from time to time, of a country or territory other
than the United Kingdom or Jersey; and
(c) in
respect of his or her carrying on general insurance mediation business, subject
to a regulatory regime that is sufficient to ensure that no person is
liable to be placed at undue financial risk by virtue of the person being
exempted from the application of this Order.
(7) A person is an appropriately regulated person
if –
(a) the
person is the agent of a principal;
(b) the
principal is registered or otherwise authorized to carry on general insurance
mediation business under an enactment, as in force from time to time, of a
country or territory other than the United Kingdom or Jersey; and
(c) the
principal is, in respect of his or her carrying on general insurance mediation
business, subject to a regulatory regime that is –
(i) imposed and
supervised by a regulatory body of the country or territory in which the
principal is registered or authorized, and
(ii) sufficient
to ensure that no person is liable to be placed at undue financial risk by
virtue of the person being exempted from the application of this Order.
(8) The Commission may
revoke an exemption in relation to a person if the Commission is no longer
satisfied that the person is an appropriately regulated person within the
meaning of paragraph (4), (5), (6) or (7).
22 Transitional
provision – financial statements not previously audited
(1) This Article applies to
a registered person who, before the 17th February 2005, had not obtained
audited financial statements in respect of the registered person.
(2) Article 5 and
sub-paragraphs (b) and (c) of Article 8(3) do not apply to a
registered person to whom this Article applies.
(3) The Commission may, on
the application of a person to whom this Article applies, extend the period of
4 months referred to in Article 8(2) to a period of not more than 8 months
from the end of the accounting period in respect of the person.
(4) This Article only
applies in relation to the first occasion on which the registered person is
required to submit financial statements in accordance with this Order.
23 Citation
This Order may be cited as the Financial Services (General Insurance
Mediation Business (Accounts, Audits, Reports and Solvency)) (Jersey) Order
2005.