Standard Bank Jersey Limited and Standard Bank Fund Administration Jersey Limited (2010-07-27)

Summary

This is a public statement issued by the Jersey Financial Services Commission under Article 25 of the Financial Services (Jersey) Law 1998 and Article 17 of the Collective Investment Funds (Jersey) Law 1988, naming Standard Bank Jersey Limited (as Custodian) and Standard Bank Fund Administration Jersey Limited (as Administrator) in connection with their provision of Fund Services Business to the Belgravia Funds from inception to November 2008.

Following a Commission-directed accountant's report and review, the Commission found serious and repeated breaches of the Codes of Practice for Fund Services Businesses, including deficient risk management, governance, staffing, record keeping, valuation practices, and a breach of the Money Laundering (Jersey) Order 1999 in relation to one significant unitholder.

• Risk and governance failings: Failure to understand fund and SPV structures, inadequate risk identification, weak corporate governance and over-reliance on self-reporting.
• Resourcing and competence: Insufficient and inadequately qualified staff, including directors of funds and SPVs lacking understanding of their fiduciary duties.
• Controls and conflicts: Unclear division of responsibilities, poor conflict of interest management, uncontrolled payments, and insufficient monitoring of investment restrictions.
• Accounting and valuation: Failure to maintain adequate accounting records, reliance on third-party administrators, and dealing valuations based on estimates, including some using unconfirmed legal title to land.
• Client focus: Undue deference to fund managers and investment advisers over the interests of unitholders.
• AML/CDD breach: Failure to obtain adequate Know Your Customer/Customer Due Diligence information for a unitholder with a significant holding, in breach of the Money Laundering (Jersey) Order 1999.
• Regulatory openness: Failure to report issues to the Commission in a timely manner, breaching the Codes' requirement for open and co-operative dealing with the Commission.

The Functionaries co-operated with the Review, made changes to senior management, and began implementing a remediation plan in February 2009, which was presented to and agreed by the Commission in May 2010. The Commission states it will work with the Functionaries to ensure the plan is implemented to its satisfaction; the statement does not impose new obligations on other regulated firms.

Key obligations

• The Functionaries (Standard Bank Jersey Limited and Standard Bank Fund Administration Jersey Limited) must implement their agreed remediation plan to the satisfaction of the Commission.

Applies to

Fund Services Business providers, Custodians, Administrators, Collective investment funds