1. FSC 20131 Caribbean Group of Securities Regulators 10th Annual Conference and Workshop November 6 -8, 2013

2.  Background  How the FSC conducts examinations  Common Findings  Corrective Measures  Challenges FSC 20132

3. The Financial Services Commission (FSC) was established by the Financial Services Commission Act of 2001 (the Act). For the purpose of performing its functions, the FSC is empowered by section 6(2)(b)of the FSC Act to: “at such times as it may determine but at least once in each year – (ii)examine, in such manner as it thinks fit, the affairs or business of every prescribed financial institution carrying on business in Jamaica or elsewhere for the purpose of being satisfied that the provisions of this and any relevant Act are being complied with and that the institution is in a sound financial condition;” FSC 20133

4. The Securities Act: Pursuant to Section 4(3) of the 2001 amendment to the Securities Act, the FSC shall - “(a)carry out such … examinations in relation to the securities industry – (i) as it considers necessary for the purpose of ascertaining whether the provisions of this Act are being complied with; or (ii) as may be referred to it by the Minister in connection with that industry;” FSC 20134

5. Jamaica’s Securities Industry FSC issues licences for the purposes of carrying out the operations of:  Securities Dealer  Investment Adviser  Unit Trust  Mutual Fund  Stock Exchange  Central Securities Depository FSC 20135

6. Why Examine?  To foster compliance with Securities Industry rules and regulations;  To detect violations of these rules and regulations; and  To ensure steps are taken to correct non-compliance issues. FSC 20136

7. 7 Pre-field Work Field Work Post Field Work Select licensee Determine type of exam Pre-Exam Preparation Opening Conference Request for documents Conduct tests, reviews, verifications and interviews Prepare Exam Reports Exit Conference Prepare deficiency Letter, receive and assess licensee’s response

8.  Systemically Important Institutions  Recommendations based on risk assessments  Information obtained that may indicate that a licensee may be operating contrary to Securities Legislation or be in financial difficulty  The Licensee has not been examined before  The time elapsed since the last on-site examination FSC 20138

9. Routine Examination Aimed at assessing a Licensee’s compliance with the provisions of the Securities Act and attendant regulations. Follow-up Examination Necessary to ensure that violations and/or concerns are addressed as promised by the Licensee’s management. Special/Targeted Examination Necessary where, for example, the FSC receives complaints from the public or otherwise has reasons to suspect that the licensee is in breach of the Securities Act or Regulations, or any other matter that may be of supervisory concern. FSC 20139

10.  Examination notification letter issued to licensee;  Gather and analyze in-house records regarding the selected licensee;  Prepare a Planning Report and Examination Brief; and  Schedule a planning meeting FSC 201310

11.  Attendees include senior management of the licensee;  The FSC examination team - ◦ Outlines the examination process; ◦ Clarifies any issues raised on the examination questionnaires; ◦ Establishes the liaison persons; and ◦ Address queries FSC 201311

12.  Procedural/Operations Manuals;  Board/Committee Minutes;  Marketing/Promotional Material;  Management Accounts;  All Funds under management and corresponding assets  Client Listing/Files  Complaints Log/File; FSC 201312

13.  General Administration  Review of Procedure Manuals  Financial Position and Reporting  Conduct of Business – Trading  Conduct of Business – Operations  AML/CFT Operations FSC 201313

14. General outline of Examination Report:  Executive Summary  Company Background and Core Activities  Summary of Financial Results  Violations of Acts & Regulations  Concerns (Deviation from Best Practices)  Actions Arising from Examinations  Recommendations FSC 201314

15. EXITCONFERENCE Violation of Securities law Operational issues Breaches of regulations Practices Inconsistent with Guidelines Deviations from Best Practices FSC 201315

16.  Use of non-allowable assets for repo transactions  Inadequate Record Keeping  Deficient Request for Proposal Forms  Non-Compliant Client Statements  Non-Compliant Contract  AML Deficiencies  Inadequate segregation of client funds FSC 201316

17.  Enhance monitoring of the licensee and increase licensee reporting frequency  Require the licensee to give an undertaking signed by the majority of its board members to take such corrective actions as agreed between the licensee and the FSC  Give Directions to the licensee  Issue Cease & Desist order  Assume the temporary management of the licensee FSC 201317

18.  Suspend, cancel or revoke the licensee’s dealer’s licence or registration  Enforcement Department prepare file on violation of securities legislation for submission to Director of Public Prosecution  Present to the court a petition for the winding up of or an application for the reconstruction of the licensee FSC 201318

19.  Long delays in presenting requested information  Deficient information systems  Complex or manual business processes  Lack of capacity in specialized fields  Refusal to allow photocopying of documents FSC 201319

20. THANK YOU FSC 201320