Our approach to examinations and the assessment of examination outcomes

Summary

This JFSC policy document explains how the Commission conducts examinations of supervised entities and how it rates and responds to examination findings. It was updated following industry feedback and recommendations from the MONEYVAL Mutual Evaluation Report, and is intended to support risk-based supervision and improve clarity for supervised persons on examination outcomes.

• Updated report format: Examination reports now include risk ratings for findings, a more concise executive summary, stated objectives for each focus area, a matrix linking findings to risk ratings, better use of tables and appendices, and simplified presentation of obligations.
• Rating scale: Findings are rated minor (systems and controls substantially effective), moderate (moderately effective), or major (ineffective), based on the inherent risk of the obligation and the entity's level of compliance.
• Seriousness assessment: Where findings are moderate or major, JFSC assesses whether the overall examination outcome is potentially serious, considering factors such as customer base, regulatory history, repeat findings, systemic issues and business model.
• Response tools: For potentially serious outcomes, JFSC may apply enhanced supervision, engage a heightened risk response, use regulatory tools (directions, written warnings, legal notices requiring a regulatory consultant), or refer the matter to Enforcement.

The document is primarily explanatory, setting out JFSC's internal methodology rather than creating new compliance rules for entities, though it signals that entities will be informed verbally of potentially serious outcomes and given the chance to respond during a factual accuracy review before any regulatory strategy is finalised.

Key obligations

• Entities subject to a legal notice may be required to engage a regulatory consultant to test that remediation of examination findings is effective and sustainable
• Entities may be required to comply with directions requiring them to undertake or refrain from specific actions as part of a regulatory strategy following a potentially serious examination outcome

Applies to

supervised persons, entities regulated by the JFSC