FSC delays zero tolerance policy
The Financial Services Commission (FSC) has delayed its new zero-tolerance policy to breaches of insurance, pension and securities law, which was originally meant to take effect on August 1, to the relief of its licensees.
In a letter dated July 23, the FSC said it would communicate a new effective date for the policy later.
"We welcome the delay," Rezworth Burchenson, managing director of pension fund company Prime Asset Management Limited, told the Financial Gleaner.
"It allows the FSC to engage with all stakeholders, including administrators and trustees, actuaries and attorneys, to ensure they understand and appreciate the deliverables and that they are appropriately resourced to ensure that, going forward, all stakeholders can be compliant," he said.
President of the Jamaica Securities Dealers Association, Julian Mair, expressed similar sentiments, reiterating what he said in May when the FSC announced it would start punishing all breaches of the law.
Noting that the FSC said it was cognisant of the constraints faced by the securities industry, Mair said: "This comes back to a statement I gave before ... that the zero tolerance we believe to be inappropriate at this point in time when we have an industry with so much changes with regard to regulation and legislation related to it, and we still have not had the benefit of complete discussions in relation to each of those items."
He added that "it would be inappropriate to make the industry subject to a zero-tolerance approach until those items are ironed out and finalised in a manner that is satisfactory to all. So, we welcome this adjustment in timeline."
Mair said that since the FSC's announcement in May, his association has shared its "concerns and feelings" in talks with the regulator, and sees the delay in implementation of the policy as a sign that those concerns have been heeded.
In the notice to licencees and registrants over the signature of FSC Executive Director Janice Holness, the regulator said that "while we hold steadfast to the belief that some sectors received adequate notice to streamline their processes as it relates to their compliance regime to meet the August 1, 2015 deadline, we are equally cognisant of the severe constraints our securities industry face at this time as they partner with us on the extensive retail repo reform project, which is of national significance."
Holness added that to avoid imposing what could be viewed as a "split interest" for the dealers, that is, to meet two competing sets of compliance initiatives, prudence dictated that consideration is given to a new implementation date.
The FSC said it intends for the implementation to be uniformed and consistent across all regulated sectors as that approach made for a more structured and efficient application of the zero-tolerance policy, and, as such, the delay would apply to all three sectors regulated by the agency.
"It is a fact that many companies recognise and embrace their responsibility and obligation in this regard and therefore expend a great deal of resources, financially and otherwise, to ensure they are compliant," said Holness.
"As a result, a system that allows some to continuously flout the law without consequences ultimately makes it more costly for those who comply. It also exposes the industry, the regulator and the country to great risk to our credibility and reputation to operate and compete globally. The responsibility to safeguard against this falls to the regulator and we intend to fulfil this obligation," said the FSC executive director.
Burchenson himself alluded to the issue of cost as a possible constraint , while noting that the delay offers an opportunity to further open up that conversation.
"Those conversations may highlight some resource challenges which, through discussions, solutions can be arrived at," said the pension expert, who suggested that such talks precede discussions on a new implementation date for zero tolerance or whatever approach to breaches the FSC decides to take going forward.