The Tribune

More than 200 Financial and Corporate Services Provider (FCSP) representatives and other stakeholders attended two Securities Commission briefings to update the sector on its regulatory direction.

The Securities Commission is also the Inspector of Corporate and Financial Services Providers, and its executive director, Dave S. Smith, said it is working to rectify a number of legacy issues impacting FCSPs, ranging from delinquent fees to ambiguity in regulations.

Representing the Commission’s Inspections Department, Robertha Davis said it was moving to a Risk-Based Approach (RBA) to determining the frequency and depth of on-site inspections.

Ms Davis also confirmed that the Securities Commission would move away from the use of accountants as ‘Inspector’s Agents’ for on-site inspections of FCSPs, beginning in 2014.

Accountants were previously used to assist with assessing the appropriateness of the Know Your Client (KYC) procedures and processes at FCSP registrants - at the expense of the FCSP being inspected.

Mr Smith said the move to take inspections in-house was the responsible and prudent course for the regulator.

Coupled with the RBA, he said it would reduce the regulatory burden on the Inspector while providing more meaningful supervision of the KYC processes in place for registrants.

Mr Smith added that he believed the many businesses falling under the ‘financial services’ definition would also welcome the savings from having the Commission conduct the inspections itself.

A survey has been issued by the Commission to help determine the risk inherent in specific Financial and Corporate Service Providers (FCSP) businesses.

The Securities Commission will also be inspecting FCSP business conducted by attorneys, as it does currently with other registrants.

Mechelle Martinborough, its legal counsel, said that a court challenge to the constitutionality of the Financial and Corporate Service Providers Act 2000 had been raised shortly after its promulgation, related to the matter of legal ‘privilege’.

The move to inspect attorneys’ FCSP business is based on the Inspector’s legal obligations, and the fact that the challenge to the constitutionality of the legislation had stalled.

Ms Martinborough also clarified requirements regarding the maintenance of client records.

An Organisation for Economic Co-operation and Development (OECD) ‘Peer Review’ report on the Bahamas, released in November 2010, found recordkeeping requirements relating to certain sectors of the financial industry to be deficient.

Ms Martinborough said that, subsequent to the passing of amendments to financial services-related legislation in 2011, financial records must be maintained and be reliable, reasonably accurate, and show, among other things, money received and expended and the assets and liabilities of the entity.

The records must allow an assessment of a company’s financial status and the generation of financial statements, although the amendments do not require the preparation of audited financial statements.

Ms Martinborough said a number of proposed fees for the industry are being revised downward or eliminated, based on the feedback received to an initial consultation paper issued in May. She presented reduced fee schedule proposals the Securities Commission is now considering.

Representing the Securities Commission’s authorisations department, senior officer Sherinn Munnings said the determination of which financial services activities fall under its regulatory ambit had been clarified.

Services such as money lending, financial leasing, payday and cash advances, money broking, mortgage broking and escrow services were given as examples of the activities which are regulated by the Inspector.

Munnings said the definition of financial services being used by the Securities Commission was informed by the definition adopted by the World Trade Organisation (WTO).

The Securities Commission’s service delivery standard for processing FCSP applications was also described by Munnings.

It is targeting acknowledgement of receipt of an application within three days, and a response on whether the application was approved or declined, with any conditions placed on an approval, within 40 days.

Applications that are complete in all material respects may be processed in as little as 10 days, Munnings said.

The Securities Commission said it would undertake the process of generating proposed legislation to repeal and replace the FCSP Act 2000 during 2013.