Guidance Note: Integrity and Competence (2018-07-19)

Summary

This guidance note explains how the JFSC interprets and applies the 'integrity' and 'competence' threshold conditions under Article 9 of the Financial Services (Jersey) Law 1998, which apply on an ongoing basis to registered persons, principal persons and key persons. It was issued following the Royal Court's judgment in Francis v JFSC (2017) and sets out the legal authorities and non-exhaustive behavioural indicators the JFSC will use when assessing whether someone meets these standards.

• Integrity is not the same as honesty: The JFSC treats lack of integrity and dishonesty as distinct concepts; a person can lack integrity (e.g. an ethical compass pointing the wrong way) without being dishonest.
• Examples of behaviours indicating a lack of integrity: Turning a blind eye to obvious concerns, failing to manage conflicts of interest, preferring personal interests over customers', producing misleading or back-dated documents, reckless or wilful misstatements, failing to deal openly with the JFSC, and failing to comply with law, regulatory requirements or professional standards.
• Competence assessment: Competence is assessed on qualifications, relevant experience, and ability to comply with the regulatory framework; the JFSC also looks at collective board competence and the nature/volume/jurisdiction of business undertaken.
• Examples of behaviours indicating a lack of competence: Failing to document or escalate concerns, authorising transactions without understanding them, failing to act on red flags, acting outside one's skill set, failing to adhere to professional standards, laws or regulatory requirements, and failing to seek independent advice.
• Trust Company Business specifics: The Code of Practice for Trust Company Business requires registered persons to assess and monitor staff competence, retain supporting evidence (e.g. references, qualification records), meet minimum qualification thresholds for Category A and B employees, and notify the JFSC in specific qualification-related circumstances.

The note is explanatory guidance rather than a standalone rule; it clarifies how existing threshold conditions and Codes of Practice provisions on integrity and competence will be interpreted and assessed by the JFSC Board of Commissioners on a case by case basis.

Key obligations

• Registered persons must ensure directors, partners, senior managers and other employees are fit and proper for their roles.
• Registered persons must assess and monitor the working practices, competence and probity of directors, partners, senior managers and other employees on an ongoing basis.
• Registered persons must obtain and retain documentary evidence (e.g. employer references, qualification evidence) used to assess employee competence, both initially and ongoing.
• Trust company business employees must collectively hold a balance of qualifications and skills appropriate to their technical and non-technical functions.
• At least 75% of Category A trust company business employees must be suitably qualified, and 75% of Category A and B employees cumulatively must be suitably qualified.
• A registered person must notify the JFSC in writing if the percentage of suitably qualified (or studying) Category C trust company business employees falls below 50%.
• Where complex transactions or structures are involved, registered persons must consider requiring more specialised qualifications, experience and competencies, and demonstrate adequate supervision.
• Requests for variance to professional qualification requirements must be made in writing, describe the individual's role, explain why the alternative qualification is appropriate, and confirm the syllabus is available to the JFSC on request.
• A registered person must notify the JFSC in writing when a Category A, B or C trust company business employee is awarded a qualification other than by direct examination.

Applies to

registered persons, principal persons, key persons, trust company business employees, applicants for registration under the Financial Services (Jersey) Law 1998