FSC_annual-report-2016-final-november-29 (2)

July 29, 2016
The Honourable Audley Shaw CD MP
Minister of Finance and the Public Service
Ministry of Finance and the Public Service
30 JNualytio3n1a, l2H01er6oes Circle
Kingston 4
Dear Minister Shaw:
In accordance with section 13(1) of the Financial Services Commission Act, 2001,
I hereby submit to you, the Annual Report of the Financial Services Commis-
sion (FSC) for the Financial Year 2015/2016 and a copy of the FSC’s Financial
Statements for the year ended March 31, 2016, duly certified by its Auditors.

Sincerely,

Janice P. Holness
Executive Director

| 2Annual Report 2015/2016

Since its establishment in August 2001, the FSC has
worked arduously to achieve its mandate of protect-
ing the users of financial services in the insurance, pri-
vate pensions and securities industries. The FSC’s achieve-
ments are underpinned by the promotion of international
standards and best practices which manifests in its super-
vision and monitoring of the regulated sector. The FSC’s
employees are the mainstay of its excellence as it is they who
vigilantly monitor to enforce the FSC-administered laws.

Enabling Legislation

The FSC’s enabling legislation is the Financial Services Commission Act 2001 (FSC
Act). Section 6 of the FSC Act mandates the FSC to discharge the following duties:

• Supervise and regulate financial institutions that provide services to the
public in the fields of insurance, securities and pensions (“prescribed financial
institutions”);

• Promote the adoption of procedures designed to control and manage risk, for
use by the management, Board of Directors and trustees of such institutions;

• Promote stability and public confidence in the operations of such institutions;
• Promote public understanding of the operation of prescribed financial insti-

tutions; and
• Promote the modernization of financial services with a view to the adoption

and maintenance of international standards of competence, efficiency and
competitiveness.

| 3Annual Report 2015/2016

CoCnotnetennttss

WHO WE ARE ......................... 6
CHAIRMAN’S STATEMENT .......................... 11
EXECUTIVE DIRECTOR’S MESSAGE ........................... 13
BOARD OF COMMISSIONERS’ REPORT ........................... 17
CORPORATE GOVERNANCE REPORT ........................... 23
THE FSC WELCOMES THE WORLD ........................... 27
A DYNAMIC & PURPOSEFUL INSURANCE INDUSTRY ........................... 29
34
A ROBUST SECURITIES INDUSTRY ........................... 41
A TRUSTED PRIVATE PENSIONS INDUSTRY ..........................
46
UPHOLDING MARKET INTEGRITY THROUGH 49
INVESTIGATION & ENFORCEMENT ........................... 50
51
REGULATORY REFORMS ........................... 53
INVESTOR EDUCATION & EMPOWERMENT ........................... 61
STRENGTHENING HUMAN RESOURCES ...........................

APPENDICES ...........................
INDEX TO FINANCIAL STATEMENTS ...........................

AML GlosGsloassrayry
BOJ
CAPS Anti-Money Laundering
CFATF Bank of Jamaica
CGSR Caribbean Association of Pension Supervisors
CIC Caribbean Financial Action Task Force
CIS Caribbean Group of Securities Regulators
CFT Compliance & Internal Control
CYFI Collective Investment Scheme
DB Counter Financing of Terrorism
DC Child and Youth Finance International
EFF Defined Benefit
ERP Defined Contribution
FISSC Extended Fund Facility
FSC Economic Reform Programme
FY2014 Financial Inclusion Strategy Steering Committee
FY2015 Financial Services Commission
FY2016 2014-2015 Financial Year
FUM 2015-2016 Financial Year
GDP 2016-2017 Financial Year
GOJ Funds Under Management
GPW Gross Domestic Product
IMF Government of Jamaica
IAIS Gross Premium Written
IFRS International Monetary Fund
IOPS International Association of Insurance Supervisors
IOSCO International Financial Reporting Standards
JSE International Organisation of Pension Supervisors
MCCSR International Organization of Securities Commissions
MCT Jamaica Stock Exchange
MEFP Minimum Continuing Capital and Surplus Requirement
MEV Minimum Capital Test
MMOU Memorandum of Economic Financial Policies
MOU Mutual Evaluation
MOFP Multilateral Memorandum of Understanding
NIR Memorandum of Understanding
USD Ministry of Finance and Planning
Net International Reserve
United States Dollars

Who We Are

Our Board of Commissioners

Colin Bullock, B.Sc., M.Sc. Janice P. Holness, B.Sc., JD Erwin Jones, B.Sc.

Mr Colin Bullock is the Chairman of the Board Ms Janice P. Holness was appointed Execu- Mr Erwin Jones is a graduate of the Univer-
of Commissioners of the FSC. He is the Di- tive Director of the FSC in March 2013. Ms sity of the West Indies and has over 37 years
rector General and Chairman of the Board Holness oversees the operations of the FSC of experience as a Civil Engineer. He has su-
of the Planning Institute of Jamaica (PIOJ) which boasts 127 employees and has re- pervised numerous projects and served as a
and an advisor to the Minister of Finance and sponsibility for regulating, monitoring and Director of several companies including Fas-
Planning. He also chairs the Board of the Ja- supervising the insurance, private pen- trak Construction Engineers Company Lim-
maica Social Investment Fund and serves on sions and securities industries in Jamaica. ited, Jamaica Ethanol Processing Ltd. and E.
the Board of the Petro Caribe Development With almost 21 years’ experience in finan- D. & F Man Jamaica Ltd. He also served as
Fund. He is also a lecturer and senior lecturer cial services regulation, her experience spans the Chairman of Technological Solutions Ltd.
in the Department of Economics at the Uni- multiple jurisdictions. She was previously Mr Jones now serves as the Chairman of the
versity of the West Indies in Macroeconom- employed to the FSC between 2003-2011 as BoardofPetrojamLimited. Healsocurrentlysits
ics, Monetary Economy and Public Finance. the Director, Investigation and Enforcement, on the Boards of the National Investment Bank
Prior to joining the FSC’s Board of Commis- where she was instrumental in the FSC’s en- of Jamaica and the National Energy Council.
sioners, he served as Director and Deputy forcement thrust in combatting unlawful
Governor of the Bank of Jamaica and Financial financial operations and led the FSC’s suc-
Secretary in the Ministry of Finance. He has cessful efforts in cross-border cooperation
over 22 years of experience in economic nego- and collaboration on investigation and en-
tiation with multilateral financial institutions. forcement actions involving financial crimes.
These efforts resulted in successful civil and
criminal prosecutions in several jurisdictions.
Prior to joining the FSC in 2003, she lived
and practiced as an attorney in New York
with McCarter and English, LLP where she
represented major insurance companies in
matters involving policy interpretation, ben-
efits entitlement and sales and marketing
practices. She also served as a law intern with
the United States Securities and Exchange
Commission (Enforcement Division) work-
ing on a variety of securities matters result-
ing in the prosecution and forfeiture actions.
Ms Holness holds a Bachelor of Science (BSc)
degree, summa cum laude, and a Juris Doctor
degree from St. John’s University in New York as
well as a certificate in Small Countries Financial
Management from the University of Oxford,
Saïd Business School in the UK. She is a member
of the board of the Bank of Jamaica and the FSC.

| 6Annual Report 2015/2016

Who We Are cont’d

Our Board of Commissioners cont’d

Donna Scott-Mottley, LLB Michael Vaccianna, LLB Winston Hayden, B.Sc., MBA

Mrs. Donna Scott-Mottley earned a Bach- Mr Michael Vaccianna is a senior partner in the Mr Winston Hayden holds a Bachelor’s De-
elor of Laws (LLB) degree from the University law firm Vaccianna & Whittingham. He has a gree in Professional Management and a Mas-
of the West Indies, Cave Hill, a Certificate of wide range of experience in corporate and com- ter of Business Administration (MBA) with
Legal Education from the Norman Manley mercial matters spanning the areas of banking, distinction from Nova University. He also
Law School in Jamaica and a Diploma in Cri- investment, mining and energy, international holds a Diploma in Computer Programming
sis Management from the U.S. State Depart- trade and mergers and acquisitions. He is cur- from the Career Training Institute (Boston,
ment. She practices in the areas of litigation rently the Chairman of the Boards of the Hotel Massachusetts). He has more than 30 years’
and conveyancing and has specialized knowl- Four Seasons and Kingston College. He is also experience in public and private sector man-
edge and experience in relation to the Carib- a member of the Jamaican Bar Association. agement and is currently the Managing Direc-
bean Heritage and Culture Legislation. She Mr. Vaccianna holds an LLB degree from tor of Clarendon Alumina Production (CAP).
was awarded the prestigious Musgrave Medal the University of the West Indies and a Mr. Hayden has served as Chairman of the
(Silver) in 2007 for her outstanding service to Certificate in Legal Education from the Micro Investment Development Agency and
the development of culture through legal skills. Norman Manley Law School in Jamaica. sat on the boards of several publicly and pri-
Mrs. Scott-Mottley has served as the Chair- vately owned entities, including the Civil Avia-
man of the National Land Agency Advisory tion Authority of Jamaica; Fiscal Services Lim-
Board, President of the Southern Bar Associa- ited; the Revenue Board; the National Health
tion of Jamaica and consultant and advisor to Fund and the Agricultural Credit Bank (now
the United Nations Educational, Scientific and a part of the Development Bank of Jamaica).
Cultural Organization (UNESCO) for Jamaica,
Dominica, Grenada and Guyana. She currently
chairs the Board of the Sugar Company of Ja-
maica Holdings Limited. She is also the Deputy
Chair for the Private Security Regulations Au-
thority, the Michael Manley Foundation and
the General Legal Council. She also sits on
the Board of Governors of Clarendon College.

| 7Annual Report 2015/2016

Who We Are cont’d

Our Board of Commissioners cont’d

Diahann Gordon Harrison, B.A., LLB Justice Karl Harrison, CD

Mrs Diahann Gordon Harrison is an Attorney- Justice Karl Harrison earned his LLB from
at-Law by profession with over fourteen (14) the University of the West Indies. He was ap-
years of experience since she was called to the pointed as Resident Magistrate in 1983 and
bar in 2000. Mrs Gordon Harrison served as a later served as Acting Registrar of the Supreme
Deputy Director of Public Prosecutions within Court; Master in Chambers; Judge of the Court
the Office of the Director of Public Prosecutions of Appeal and Acting Judge of the Grand Court
(DPP). Currently, she is the Children’s Advo- of Cayman Islands. He received several na-
cate of Jamaica, a role she assumed in January tional honours including the National Com-
2012 following her appointment to this posi- mander of the Order of Distinction (CD).
tion by His Excellency Sir Patrick Allen, Gov-
ernor General of Jamaica. She is a Board mem- Justice Harrison is well published. His publica-
ber of the University Council of Jamaica and a tions include: Harrisons’ Law Notes; Harrison
Commissioner of the National Parenting Sup- on Personal Injury Claims (1997); Harrisons’
port Commission. She holds a B.A in History, Assessment of Damages- Personal and Fatal Ac-
an LLB from the University of the West In- cident Claims; and the Practitioner’s Handbook
dies and a Certificate of Legal Education from of Fees and Costs. He is currently the Chair-
the Norman Manley Law School in Jamaica. man of the Criminal Records Board and Dep-
uty Chairman of the Accreditation Committee
of the General Legal Council. He sits on the
Boards of the Corruption Prevention Commis-
sion, the Electoral Commission of Jamaica and
the Firearm Licensing Authority Review Board.

| 8Annual Report 2015/2016

Executive Management Team

The Executive Director leads the executive management team in creating and implementing strategic and op-
erational direction in order to fulfil the FSC’s mandate of protecting users of financial services in the areas of
insurance, securities and pensions.

Ms. Janice P. Holness Mrs. Janet Johnson Haughton Mrs. Amina Maknoon
Executive Director Acting Deputy Executive Director Senior Director, Investigation and Enforcement

Ms. Ingrid Pusey Mrs. Nicolette Jenez Ms. Sekayi Campbell
(General Counsel & Corporate Secretary) Senior Director, Pensions Chief Actuary
Head of Legal Services, Research and Policy

Mr. Laurence Crossley Mrs. Joan Walker-Stewart
Senior Director, Securities Senior Director, Corporate Services

| 9Annual Report 2015/2016

| 10Annual Report 2015/2016

Chairman’s Message
Colin Bullock

The 2015 financial year (FY2015/16) • Jamaica’s credit rating being 1. Advancing legislative amendments in
represents the third year of Jamaica’s Ex- upgraded by the big three rating 2015/2016:
tended Fund Facility (EFF) arrangement agencies - Standard and Poor’s, i. With the amendment of the In-
with the International Monetary Fund Moody’s and Fitch. Fitch was the surance Act in February 2016,
(IMF). In a context of the associated last of the three agencies to do so insurance companies will, among
Economic Reform Programme (ERP) in- and in February 2016, it upgrad- other things, be required to im-
cluding a prudent macroeconomic sta- ed Jamaica’s long-term foreign prove their risk management
bilization policy as well as fortuitously and local currency issue ratings practices and provide enhanced
low oil prices, the Jamaican economy has to ‘B’ from ‘B-’ and revised the disclosures to policy holders
demonstrated positive trends such as: outlook from positive to stable. whose entitlements are affected
by the average clause provisions
• Real quarterly Gross Domestic These positive economic indicators con- in general insurance contracts;
Product (GDP) growing since tributed to the building of both local and ii. The Securities (Collective In-
the March 2015 quarter; foreign investors’ confidence. Based on the vestment Scheme) Regulations,
survey conducted in the quarter ended 2013 were amended to ful-
• Debt to GDP1 ratio declining March 31, 2016, the consumer and busi- fil the promise of the FSC and
from 137.3 per cent at the end of ness confidence indices were both above GOJ to review the new regula-
FY2014/15 to 124.5 per cent in 144 points, which represented an increase tion, taking into account con-
FY2015/16; over the points recorded at the end of 2015 cerns raised by the industry;
and the highest seen in fifteen years. There iii. The Securities (Retail Repurchase
• The Government of Jamaica was also an oversubscription for GOJ’s in- Agreements) (Amendment) Reg-
(GOJ) achieving its primary ternational securities issues in July 2015. ulations, 2014 was amended to
surplus target for three con- These positive economic developments enhance the FSC‘s ability to ef-
secutive years – FY2013/14 to will support the government’s intensi- fect a smooth and timely transi-
FY2015/16; fied campaign to facilitate greater eco- tion of the retail repo agreements
nomic growth and advance job crea- into a trust based arrangement in
• The annual average unemploy- tion. It is widely accepted that financial order to meet the benchmark
ment rate being reduced from services contribute more effectively to agreed to under the EFF; and
15.2 per cent for 2013 to 13.5 economic growth when the macro-envi- iv. Major progress was made with
per cent for 2015; ronment is stable and the financial mar- the Phase II legislative reforms
ket is properly and efficiently regulated. in relation to the private pen-
• Inflation falling from 6.4 per The FSC’s strategic goals and objectives sions industry. With the comple-
cent in FY2014/15 to 3.1 per for the FY2015/16 and the medium term tion of a lengthy and interactive
cent for FY2015/16; are aligned to Jamaica’s growth agenda consultation process and with
through strengthening and maintain- the requisite Cabinet approval,
• The rate of depreciation of the ing well–regulated non-deposit–taking the drafting of the Bill began.
Jamaican dollar against the US financial sectors that protect users, iden-
dollar decreasing from 14.4 per tifies and manages risks, and facilitates
cent in the calendar year 2013 to financial services and investment. As
7.8 per cent in 2014 and to 5 per such, the FSC has taken a number of stra-
cent in 2015; tegic initiatives including the following:

• The Net International Reserves
(NIR) increasing from US$884
million at the end of March 2013
to US$2.4 billion at the end of
March 2016; and

1 This is based on the EFF’s definition of total debt which includes
Central Government, Bank of Jamaica, net PetroCaribe debt, and
external and domestic guaranteed debt

| 11Annual Report 2015/2016

Chairman’s Message cont’d

2. Facilitating product and services iii. collaboration with other pub- Following this brief summary of the
diversification as the regulatory lic sector stakeholders2 to iden- activities of the FSC in the past fis-
framework continues to be proactive tify and address systemic risks cal year, further details will be pro-
and responsive to market conditions, and monitor systemically im- vided in the body of the report.
by: portant financial institutions; I wish to take this opportunity to thank
i. The issuing of guidelines to my fellow Commissioners and the Execu-
facilitate the offering of Ja- iv. membership in a multi-agen- tive Director, for the tremendous work
maica Depository Receipts on cy working group to enhance done over the past four years. I also ex-
the Jamaica Stock Exchange Jamaica’s crisis management tend my sincere gratitude to the manage-
(JSE) while ensuring adequate and crisis resolution powers; ment team and the staff of the FSC for
levels of regulatory protection; their loyalty, dedication and hard work.
ii. The commencement of a process v. pursuing of the invigoration of
for the development of a compre- efforts to establish a compensa- Colin Bullock
hensive regulatory framework for tion scheme for the non-depos- Chairman
micro insurance products; and it-taking sector. This will be an
iii. Continued collaboration with essential component of the cri-
other ministries, departments sis management initiative; and
and agencies, such as the Jamaica
International Financial Services vi. developing its consolidated
Authority which has done sig- supervision and risk-based
nificant work to create a legal and supervision frameworks.
regulatory environment that will
establish Jamaica as an Interna- The Board of Commissioners is convinced
tional Financial Services Centre. of the tremendous value and importance of
It is expected that the proposed proper and effective corporate governance
International Trust and Corpo- not only by regulated entities but also by
rate Services Providers Bill will go the FSC itself. The FSC’s Executive Man-
before the Parliament in FY2016. agement Team led by the Executive Direc-
With the approval of both Hous- tor has also demonstrated a similar level
es of Parliament, the FSC will of commitment and purpose as shown by:
regulate international trust and
corporate services providers. i. The annual staging of FSC’s
corporate governance semi-
3. Ensuring the continued protection of nar in September, 2015;
customers of the non-deposit taking
sector and soundness of the financial ii. The significant role played by
markets by: the FSC’s Compliance and In-
i. Continuing its routine assessment ternal Control Division (CIC)
and monitoring of the prudential which implemented the organi-
performance and conduct of the zation’s enterprise risk manage-
non-bank financial institutions; ment framework and conducts
ii. the successfully implemen- internal audit and risk assess-
tation of critical reforms ments of the FSC annually; and
to the retail repo product;
iii. The compliance of the FSC’s
Annual Report with the Pub-
lic Bodies Management and
Accountability Act (PBMA).

______________________
2 The public sector stakeholders are the Ministry of Financ and Planning, the
Bank of Jamaica and the Jamaica Deposit Insurance Corporation. These along
with the FSC are members of the Financial Regulatory Council (FRC).

| 12Annual Report 2015/2016

Executive Director’s Message
Janice P. Holness

The Financial Year 2015 (FY2015) was in- Developing Jamaica’s Regulatory Frame- By virtue of the above appointments, the
deed a year of progress for Jamaica. In ad- work and Image by Advancing Regional and FSC is better placed to (i) advocate issues
dition to the improvement in the country’s International Regulatory Collaboration that are critical and unique to Jamaica and
macroeconomic performance, gains were With continued cooperation with its re- the region, and (ii) garner and transfer
made in the business environment. Jamai- gional and international counterparts, knowledge and experience. The appoint-
ca was recognised by the World Bank as the FSC kept its pulse on developments ments also improve the FSC’s profile as a
the top country in the Caribbean for do- and trends in the international arena and regulator and by extension, enhance the
ing business and was also cited as one (1) to ready itself for market innovations. reputation of Jamaica‘s financial market
of the ten (10) countries showing the most This active participation and recogni- as a whole, signalling to the world that
notable improvement in performance on tion serve to benefit our local industry. Jamaica’s regulatory framework is among
the Doing Business indicators based on In recognition of the vital impact that the “best in class”.
data as of June 1, 2015.1 Jamaica has con- collaboration plays in the performance Through the deepening relationship with
tinued its trajectory towards growth and of the FSC, deliberate efforts were made other regulators and international stand-
stability in FY2015 and during that period over the period to heighten the presence ard-setting bodies, the positive image of
the private pensions, securities and insur- of the FSC in international standard- the JAMAICA BRAND is enhanced. This
ance industries in Jamaica remained stable setting bodies by offering itself for vari- also aids in boosting confidence in Ja-
in spite of the uncertainties surrounding ous leadership roles in these organiza- maica and attracts investments to generate
the transition of retail repurchase agree- tions, some of which are listed below: economic growth. The improved reputa-
ments into the new trust based system. tion and image of the FSC, and ultimately
The 2015 calendar year was one of un- • Member of the Board of the In- Jamaica, will greatly assist the Jamaica
precedented success for the Jamaica Stock ternational Organization of Se- International Financial Services Author-
Exchange (JSE). They were awarded the curities Commissions (IOSCO); ity when it begins to market Jamaica as an
“Best Performing Stock Exchange” by international financial services centre.
Bloomberg. While other stock exchanges • Co-chair for the Inter-American Advancing Consumer Protection through
around the world declined in value; the Regional Committee (IARC) of Financial Education & Inclusion
JSE’s Main Index and the Junior Market IOSCO for the term 2016-2018; Studies show that sectors of the Jamaican
Index grew by 97.4 per cent and 160.3 per population are largely un-served or under-
cent respectively. The JSE also success- • Member of the Executive Com- served by our financial sectors. This means
fully launched the Caribbean’s first on- mittee (the Board) of the In- that low income individuals have little or
line trading platform in May, 2015. This ternational Organization of no access to some or all of the conventional
platform will allow Jamaicans in the Dias- Pension Supervisors (IOPS) services offered by the country’s financial
pora and the Jamaican youths at home to for the period 2015-2017; services providers such as property and
more conveniently and easily trade stocks. life insurance or health coverage. There-
The FSC no doubt also played a signifi- • Vice Chair of the Financial In- fore, they are generally unable to cope or
cant role in the markets’ performance clusion Working Group of the to recover from unexpected events, such
as it strengthened its legislative frame- International Association of as illnesses, death of loved ones, natural
work for the securities and investment Insurance Supervisors (IAIS); disasters and property losses. In light of
markets as well as for the insurance this, the GOJ signalled its commitment to
industry and continued to give guid- • Member of the Governing improve the level of financial inclusion in
ance and oversight to industry players Council for the Access to In- Jamaica and established a multi-agency Fi-
in order to ensure that they adhere to surance Initiative (A2ii); and nancial Inclusion Strategy Steering Com-
industry standards and best practices. mittee (FISSC) to develop a National Fi-
• Four (4) employees trained nancial Inclusion Strategy.
1 World Bank. 2016. Doing Business 2016: Measuring Regula- as assessors to conduct Mu-
tory Quality and Efficiency. Washington, DC: World Bank. DOI: tual Evaluation on behalf of
10.1596/978-1-4648-0667-4. License: Creative Commons Attribution the Caribbean Financial Ac-
CC BY 3.0 IGO tion Task Force (CFATF).

| 13Annual Report 2015/2016

Executive Director’s Message cont’d

The aim of the strategy is to achieve a fi- In partnering with a number of lo- With financial inclusion and the avail-
nancial system where the un-served and cal organisations, in the FY2015/16, ability of financial services to increased
underserved members of our popula- the FSC accomplished the following: numbers of persons in Jamaica, comes
tion have access to financial services that the need for enhanced consumer protec-
are affordable and of acceptable qual- • Increase from 8 to 10, the num- tion. Therefore, financial awareness and
ity as well as to ensure that there are ber of high schools participat- education form a major component of the
mechanisms in place to maintain con- ing in the Schools Financial FSC’s strategy for consumer protection.
tinued protection for especially the Education Programme (SFEP); For the upcoming FY2016/2017, the
most vulnerable within the society. FSC will take steps to gauge the ef-
The FSC understands the role of financial • For the first time, the FSC spon- fectiveness of its financial education
education and financial inclusion in re- sored a school that was not a par- programme by identifying gaps and
ducing poverty in Jamaica and is therefore ticipant in the SFEP for educational thereafter implementing the necessary
committed to playing its part in the overall tours of the FSC, Bank of Jamaica measures to improve its effectiveness.
national effort, while continuing its own (BOJ) and the JSE. The students par- One of the most recent and significant
self-directed “pet” projects aimed at im- ticipated in meaningful discussions strides of the FSC in its effort to en-
proving the reach of financial services and about financial goal-setting through hance consumer protection was the re-
the level of financial awareness of the public. budgeting, investments, credit form of the regulatory framework for re-
At the national level, the FSC is repre- management and cyber security; tail repurchase agreements (repos). The
sented on the FISSC as well as chairs FSC amended its laws to secure greater
the Consumer Protection and Fi- • The FSC participated in the Junior protection for investors by requiring
nancial Capability Working Group. Achievement of Jamaica’s (JAJ) Biz- greater disclosures by the securities deal-
At the international level, the FSC deep- Town Summer Camp. The students ers and by requiring that the securities
ened its relationships with global institu- were exposed to a wide range of use- underlying the repos are transferred to
tions including the Child and Youth Fi- ful information such as the work of a trustee for the benefit of the clients.
nance International (CYFI), a worldwide the FSC, entrepreneurship, workforce Internship Programme Contributing to
network dedicated to enhancing the finan- readiness, confidentiality, invest- Development of Future Talents
cial capabilities of children and youths. At ments, credit bureaus and their im- The FSC intends to continue to employ
the Caribbean Group of Securities Regu- portance to one’s credit history; and creative approaches to increase finan-
lators’ (CGSR) Conference and Workshop cial awareness and consumer protec-
held in Jamaica in April 2015, the CYFI • With support from the FSC, ap- tion. One approach, already in train, is
presented insightful information to the proximately 500, Grades 11 and 12 to educate young professionals such as
regional regulators on advancing financial students from around the island aspiring lawyers and actuaries since they
education and inclusion among youths. benefited from the JSE Youth Town are the service providers and/or investors
The FSC’s on-going financial education Hall meeting which exposed them of the future. This is achieved through
campaign plays a critical role in improv- to information on wealth creation. the FSC’s internship programme. One
ing financial inclusion as the campaign practical effect of the programme is to
provides relevant and appropriate infor- Micro Insurance instil in the trainees, the need for proper
mation to Jamaicans to enable them to Another initiative spearheaded by the FSC to market conduct, prudence and adher-
make sound and informed financial de- advance financial inclusion in Jamaica is its ence to best practices. This augurs well
cisions particularly in the areas of budget- work in developing a regulatory framework for the future as this programme prepares
ing, savings, investments, insurance and for micro insurance. Micro insurance aims them to deliver services and manage their
retirement planning. Financial awareness to protect the underserved against unex- own affairs from an informed position.
will inspire individuals to access and con- pected events by offering insurance products Further, the FSC is aware of the need
sume financial services, and thereby de- at premiums that are designed to fit their for tomorrow’s leaders to be guided
rive the benefits to be gained from them. abilities to pay. The FSC partnered with the and given the opportunity to develop
Micro Insurance Centre (MIC), the Access their skill and talents. As a result, the
to Insurance Initiative (A2ii) and the Inter- FSC continues to enhance its intern-
American Development Bank (IADB) in or- ship programme to maximise the ben-
der to accomplish the objective of creating efits to both the participants and the FSC.
a suitable regulatory framework. The FSC
also established and chairs a local Inclusive
Insurance Committee comprising stakehold-
ers from the private sector to assist in devel-
oping the appropriate regulatory framework.

| 14Annual Report 2015/2016

Executive Director’s Message cont’d

Improved productivity and reduction in and registrants; providing guid- securities dealers and pension
the backlog in some divisions were not the ance and training to licensees plans. Other measures taken to miti-
only benefits that the FSC gained from ex- and registrants; and conduct- gate the risks included the following:
panding the internship programme. Oth- ing AML/CFT examinations;
er benefits included grooming future full- • In August 2015, the FSC completed
time employees, the introduction of new • The FSC amended its Guidelines for the retail repo reform programme,
ideas, and an increased awareness and en- Anti-Money Laundering & Coun- which addressed the legal, finan-
hanced reputation of the FSC among ter- ter-Financing of Terrorism (for cial and operational risks associated
tiary students and their families. However, Entities regulated under the Insur- with the retail repo product, conse-
the greatest benefit to the FSC is the oppor- ance, Pensions, & Securities Acts quently reducing the systemic threats
tunity to give back to Jamaica by support- & Regulations) to reflect amend- to the financial system, while offer-
ing students in their career development ments made in 2013 to the Pro- ing greater protection for customers;
and to demonstrate the FSC’s commit- ceeds of Crime Act (POCA) and the
ment and contribution to nation building. Terrorism Prevention Act (TPA); • On March 31, 2016, the FSC
Deterring Money Laundering and Terror- implemented a Strategy for
ism Financing to Bolster Jamaica’s image • The FSC underwent its Fourth Round Prudential Tightening, in
and Reputation of its Financial Markets of Mutual Evaluation (ME) con- order to enhance its prudential su-
The FSC continues to ensure that Jamai- ducted by the Caribbean Financial pervision of the securities industry;
ca has an effective anti-money launder- Action Task Force (CFATF), the re-
ing framework that is aligned to inter- gional arm of the Financial Action • Collaboration between the FSC and
national standards in order to establish Task Force (FATF). The ME is the BOJ in (i) assessing the adequacy
and maintain a stable financial sector, process by which peer reviews of each of recovery plans of securities deal-
as well as the image and reputation of member country are conducted on ers and (ii) conducting stress test-
the country’s financial sector. Therefore, an on-going basis to assess levels of ing for the deposit-taking and non-
the FSC, as the Competent Authority compliance with and implementation deposit taking institutions; and
for the insurance, securities and private of the FATF Recommendations; and
pensions industries under the Proceeds • The amendment to the Insurance
of Crime Act (POCA) and the Terror- • FSC’s employees were trained Act to strengthen the FSC’s author-
ism Prevention Act (TPA), continued its in the methodology of con- ity to prescribe regulations for in-
work and on-going efforts and initiatives ducting Mutual Evaluations. surers to establish risk manage-
to strengthen the anti-money launder- ment procedures such as stress
ing and counter-financing of terrorism In addition to the above efforts, the FSC testing and asset liability management.
(AML/CFT) compliance regime. These kept abreast of and actively participated in
initiatives included, but are not limited to: a number of forums with other local and Commencing December 2016, secu-
• The FSC created an Anti-money overseas agencies in order to address the rities dealers will be required to sub-
challenges of de-risking. De-risking4 can mit stress testing results to the FSC.
Laundering and Counter-financing have a tremendous adverse impact on not
of Terrorism (AML/CFT) Unit. The only banks and remittance companies, but
unit is responsible for coordinating on every segment of Jamaica’s financial
and executing the AML/CFT super- markets and the wider Jamaican economy.
visory functions of the FSC including
representing the FSC on the National Responding to Risks
Anti-money Laundering Commit-
tee; liaising with local, regional and In order to identify, measure and miti-
international stakeholders and part- gate threats to the financial consum-
ners; communicating with licensees er and to the wider financial markets,
the FSC conducted its routine risk as-
sessments on insurance companies,

__________________________________
4 De-risking refers to the phenomenon of financial institutions terminating or restricting business relationships with clients or categories of
clients to avoid rather than manage a risk. While the term “de-risking” has recently been used frequently concerning money laundering risk,
generally the risk could be of any nature. See http://www.fatf-gafi.org/publications/fatfgeneral/documents/rba-and-de-risking.html

| 15Annual Report 2015/2016

EOFxSUeCcTu’SLtiOPveEODRKFirFOeOcRtRMorTA’sHNMECeFEssUaSTgNeUAcoRPntES’dHOT &
Management of Resources
The Board of Commissioners hereby provides its report in pursuant to sections 22 and 23 of the Public Bodies Management and Ac-
IncoFuYn2t0a1b5il/i2ty01A6c,t t(hPeBMFSAC).mThaidseRpeproogrrtessesrvaess iats caobnr-ief highlight o•f theCmoantttienrus erequiretod in thceoPnBscMieAntaiosudselytails ariedteontbie- found else-
tinwuheedreitisn tdhriisvAe ntonuianlcRreepasoert.efficiency and to have fy and implement measures to eliminate
maximum cost efficiencies while ensuring that req- waste and control operational expenses.
uteigRsiitcEeVtraeIrsgEoeWutsrcaeOnsdFareFesYsaev2nat0iila1al5blylefutolfiml ietsetmcaonrpdoartea.te stra-
With I take this opportunity to thank the Chairman and
my fellow board members for not only their insight-
our most critical asset being our human resources,
weOpcoernattiinouneadl Rtoevibeuwild our institutional capacity in ful and sound advice but also their commitment to
etcftaatgAroueieexgivnaeDiw(cdsaircararscecnneieimstionsepsouemoitiassug.gsf)metdtsec.sultmuhrwhsedtittaWiltSeptealontenahsuaaxhIednlreoFtssgtnyMetihrcefwediuftoiftvdnooohointeocwr2ebpFFiwaufmgn8csoccl,0irttYiultett0eesefthetir1pctifnhavshrs2aeavdh-5oilpsenasesskis0seepeCmenutroitdet1dbeasetisohiourdFeFmm5eoyonrepeetmPrYs,iSlnudhiecnpiauettetrsCvc2normeehnhixrpenoeen0sodraaacnioesnrtimdt1eavmtIttishraefsbtnsio5dicaesvbrtoesapyshii/nsdd.ehicclrnropno2tuesecidoehkhnetaief0cscsirpnhiseasevtae6tTa1trtteitirigAheiekuicen-6ohovogrttacesons,ccnefnceFeonegtotsofetoddssihSxretrtnrl,vc,nooesh(eCeetemtetowe,FrhtragicdoeSa’hsngrsSbtuteiamueifetpesheanitConrtiFhccanlirtnoieeFemattustccvSseAdaihrati;tiehieerCsniunarecesnc)oiEsaiaatufoo.cnttaoetamtefnniFiti(ennnrIetinvnaeeeaisoneFdrcscs----)agtdl;nosintihnin,nibacaviatitulejlthegheiviesecoanesetTbmtvtitaPmymtttbtgdeeooiinersnFehsuvvjrsroauuneeSeeetbneelyeontnaicccitarCfsslnefann------utiFf..fdtlcceg-rnShrcgaemCedtitmootdhieiivnorucernieeitdacwsgsmaslkeAaeoedltclcMoicfrooaooktunmfphonmLretaati/pyiphhtsnoCeiaawwpdedveoaxendaiFdfnsasuaensgenohfeTertrdecsncaedaroeivdocutnnok,ne.pseiitettufdnvisetdilrweLinacovhieosntooloateiepwdeegatefcnfsnieiorernrcitnoFe.stadlaFvlnecocmsildy.SnmenunSaelCucildbACtIsgumtaboomisstseabeoupsm’teneasiigreeonrtotmdltteyfmusrpirrawofgtdnnooeaiesoalsceanrguttonrautipinisputtecretoadsossrtieronlmlneovnu,oltaooessuetdoacros----ff.annittsafartchittelen,eiearcoantIpotnntharMpSpdiFcTga,scnteroneerrnuhImhitsgoearnNacarieisueFsrvznvlenijSAcelnueSgiintddtcfhndwrCnsgrFaiNoeauenatencSi3s’nvwgstrtCaattCd1ehtaiduhinaninhIwfoCt,atnleuAdcihIegarn2toooniehldt0Lanryimnatwfsacifo1ltkeietnojRnahns6nfirmoaastrosikanaa.EryhhstldrnninyaaetVasTtohdttdastcdthsnpifhhehIimniieolesedaoEmoeemednrlhewnpWsioffefasaatosioripisnsftalnnnruotdl“ihofhdtlFaca---Ff.tosoosnnhiSiwnuftcceCiilaiiniodtanan”hpnllgceet,bsyiihcrtnaeeoafoFilaostpmiRerrarneemmcreemraacepnanedaopetodnncirnornietdciarttsndges--tl.
Mt(eoidiii)eunmrhemaTneacrienmtpOhreubdjqeeucntaitlviiaetylslyansodunefdfi.cIinenocyrdeorf stakeholders and the wider public in a
broad range of public initiatives designed INCOME & EXPENDITURE
If2stineont0rcmifsuFit1tnareutSeshoa6itrgepdvCeamnrmreegdvi,a–rtrlsieeebytihcvkwwsireeoik2asrioaant0isotwnsrhooaa2rbskdonsleo0ejsstregse)f.eekascs.uencsAnmttaflhssaoifadsmvuinneftcSegronadiiceeosercertoansomamnytrntaultatdoshenselpbfvaysoaadr,l,osenlatiosirsfdmtedsfithhstxihaehitsoeeattntenacwehfhemnghtdFeeicocaFtiFsoSareinrseSeSkCmgumarCsCsetpiop,sietcteobkhldihceowcrntj-aoimvaeoslbustilntcinl,aamseltmtbitsitianisiovehnonrpatndeee---unautseledrirssgaimunnteetceldtifesolaiooduxuena(tukcprdeienape.rhstdeefen,dorty-n:.aoc(adniimesaiedn)lod(itcniit)toeisginenet(rshfipii.v)endricoieFnenmtASfhcoCoJEdeearstdx’emsniienicnoitcpetcgipoudoetrehroftnP,riifepnava.inoletaHFaiasnoSDnoaencnCdfllicifnsra-oiteearlorces(lotstisgstfaiboauimre)rblwehaieugltaenienuvrtddye--- The FSC achieved a net surplus of $158.53
FbetseaRrsouiasxdaSegttrasdCgRMDRilFatneanaatemphsiudbaaseeenntderaactllidvvpevcicationhiwsiiorlseeletnseeahaioectcenlitew,ogosatgorAdniaahtelipuwltlbclermcealepptiienloainstciosrnretthnsbk(tdtteoaocinthIrarttvnecaArsetriatekireelyydohgamioe)ndsnsaulle,ahbuitanuawglneautosautaandrshnmnildne(sltpcmeyotadEeieidrodudonnsgeedoRearsanFeaercmnnvptmMtmssslsSooeeddrusCiwmmraoe)mnpfasttsnmntooiottgeenemetiaeahtrarsrhiacpngnenvsuwhliteetdyinitenppnnsmreisadftotroeiroeliesohrhcolqifnspgrultdiEsraeiecugyouhokrmtctsnreleheeelw.yasoavdatnrsd.enacedcitesuccToucrcaaFordIertepitenlrhernopttoeenisrrdoovders--t.faeiiosnntaerietdescmsnsuhe;hainractiattwetTrnntiihhavRrrninshwooiaostntitueeeodeiksennneereriscrnirrrlkseFdlksFeeF(--ln;;;laiiSpSSamnianC)tCoCgtdiaiwto’sAonrdnepnagamesriraagvtnhsooraleoitunmpsstiapettcedsnaaedinapfdnwnhtftrad.etoieatta(asinhTtioronoicshd)nuodeti-prtrssearhicrtenenicoehetsstsgmtreoiaictvtnrlhoooeuFegmnetgtS(enisiruiuConi)etslln’hpsatsstJitettare-piornetmraeourdsetgnswestaeewignoiavnoectltinerncuhatalshd’yss----. million compared to $245.81 million for
the previous year. Highlights of the income
and expenditure are presented as follows:
Income

• The FSC is funded mainly through fees
• charged to licensed financial institutions
• and investment managers/administrators
• of private pension plans that are regulated
and supervised by the FSC. The amount
insurers, its intention to have all insur- opment and modernization of the local fi- charged to individual institutions is de-
ance companies to conduct stress testing nancial market in regard to products, com- termined according to the fees formulae
and also for life insurance companies to petence, efficiency and competitiveness. set out in the respective Regulations. The
implement asset liability management. FSC developed a costing system designed
to allocate the costs incurred by the FSC
based on the time spent supervising and
regulating each industry. As a result, each
industry is expected to pay fees to cov-
er its supervisory and regulatory costs.

During the FY2015, the Board exam-
Also, all securities dealers, in keeping with ined local and international standards
the Securities (Prudential) Regulations and practices regarding board evaluation;
(2014) and with the FSC’s Strategy for Pru- however, no Board evaluation was done.
dential Tightening, will be required to com-
mence stress testing by December 2016.

11

| 16Annual Report 2015/2016

6

Board of Commissioner’s Report

The Board of Commissioners hereby pro- Securities dealers, in keeping with the the appraisal of the Executive Director’s
vides its report pursuant to section 22 of Securities (Prudential) Regulations performance is derived from the outcome
the Public Bodies Management and Ac- (2014) and the FSC’s Strategy for Pru- of the performance review of the organi-
countability Act (PBMA). This report dential Tightening will be required to sation’s strategic objectives. This review
serves as a brief highlight of the matters commence stress testing by Decem- is conducted annually by the Compli-
required in the PBMA as details are also to ber 2016. The FSC itself has developed ance and Internal Control Division (CIC).
be found elsewhere in this Annual Report. its own internal model to carry out Refinement of the Organizational Structure
REVIEW OF FINANCIAL YEAR (FY) focussed stress testing of that group. During FY2015/16, the organizational
2015/2016 As part of its on-going market conduct structure of the FSC was tweaked to allow
OPERATIONAL REVIEW campaign, the FSC promoted the adop- for greater strategic alignment of some
The financial year (FY) 2015/2016 (April tion and development of an effective departments. The role of the Public In-
1,2015 to March 31, 2016) was a suc- AML/CFT programme to mitigate the formation Unit was expanded and hence
cessful year for the FSC. In addition risk of its regulated entities being used to it was renamed the Office of Communica-
to achieving its 2015 deliverables un- launder money and/or finance terrorism. tion and International Relations (OCIR).
der the IMF agreement, the FSC main- Public Education The OCIR, Management Information
tained its surplus as well as achieved Public education has and will continue Systems (MIS) and the Human Resources
its strategic objectives for that period. to be a critical component of the FSC’s & Administration Department now fall
During the 2015/2016 period, the FSC strategic initiative. In 2015/2016, the FSC under the direct supervision of the Ex-
continued to conduct its examinations of engaged its stakeholders and the wider ecutive Director. The Property Officer
financial institutions. This aspect of the public in a broad range of public educa- now reports to the Human Resources and
FSC’s operations is essential to fulfilling its tion initiatives designed to promote (i) Administration Manager. The Deputy
mandate as these examinations provide a informed financial behaviour, (ii) con- Executive Director now has direct over-
basis for the FSC to ensure that the entities fidence in the FSC-regulated financial sight of the Records Department and the
(i) comply with their respective govern- service sector; and (iii) understanding Actuarial Division. These changes, ap-
ing legislations; (ii) engage in proper con- of the operations of regulated entities. proved by the Board of Commissioners,
duct; and (iii) remain prudentially sound. Additional efforts were made to promote were interim measures taken to achieve
In order to enhance the quality and ef- financial stability such as (i) the FSC’s greater internal alignment/synergies as
ficiency of its examinations, the FSC, in proposal to amend the Financial Servic- well as eradicate silos, pending the com-
2015/2016, continued the work of estab- es Commission Act (FSCA) to enhance prehensive organizational restructur-
lishing frameworks for risk-based supervi- the FSC’s resolution powers; and (ii) ac- ing and job reclassification exercise.
sion and consolidated supervision. While tive representation and participation in Enterprise Risk Management
the frameworks were being developed, a multi-agency working group that was Enterprise Risk Management (ERM) is a
the FSC continued to carry out risk as- mandated to strengthen Jamaica’s cri- critical component in how the FSC sets
sessments and collaborated with both sis management and resolution powers. and achieves its strategic objectives. The
local and overseas regulators in order Board Evaluation FSC is constantly customizing its ERM
to conduct assessments of entities that During FY2015/16, after research was con- policies and procedures and integrating
are members of a group of companies. ducted, a presentation, outlining local and them into the operations of the organisa-
With the recent amendment of the Insur- international standards and models for tion in order to identify and mitigate the
ance Act (IA), the FSC is now empow- conducting board evaluations, was made risks that the organisation currently and
ered to prescribe regulations, in keeping to the FSC’s Board of Commissioners. Af- potentially faces. Additionally, the ERM
with international standards, relating to ter the presentation, the Board indicated framework is intended to facilitate the
the establishment of risk management that it would further consider the MOFP’s encouragement of a culture in the FSC,
procedures by insurance companies. The template and the models presented as well where risk is proactively assessed and
FSC had previously communicated to in- as any guidance from the MOFP to deter- managed at every level of the organization.
surers, its intention to have all insurance mine a broad evaluation methodology that The risk management function pro-
companies undertake stress testing and is appropriate for a regulatory body such as vides a critical link between the op-
to have all life insurance companies ap- the FSC. In keeping with the directives of erations of the organization and
ply rigorous asset liability management. the Ministry of Finance and Public Service, the interests of its stakeholders.

| 17Annual Report 2015/2016

Board of Commissioner’s Report cont’d

As part of the implementation and administration of the FSC’s FINANCIAL REVIEW
ERM programme, the Risk Officer reviews the ERM frame- The following comments provide an analysis of the per-
work routinely in an effort to improve its effectiveness. In or- formance of the FSC during the FY2015/2016 period and
der to reinforce the risk management culture and practices at should be read in conjunction with the financial statements.
all levels of the organisation, the Risk Officer conducts train- The financial statements in this report present the fi-
ing sessions designed to sensitise all employees on risk man- nancial position, operating results and cash flows of the
agement concepts as well as their responsibilities in that area. FSC for the financial year ended March 31, 2016 based
During FY2015/16, detailed operational audits and risk as- on International Financial Reporting Standards (IFRS).
sessments were conducted on various functional units of the Income and Expenditure
FSC. The objective of those exercises was to identify any de- The FSC achieved a net surplus of $158.3 million com-
ficiencies and any exposure of the FSC to strategic, financial, pared to $245.81 million for the previous year. Highlights
and operational risks outside the acceptable limits of the FSC. of the income and expenditure as well as balance sheet items
Human Resources are presented as in Chart 1 titled “5 Year Financial Statis-
A new and comprehensive Human Resource Policy & Pro- tical Review”. A brief explanation of these items follows.
cedure Manual was developed. It will serve as a guide for
FSC’s team members with regard to the terms and condi-
tions of their employment and the maintenance of effec-
tive and productive team member/manager relationships.
A Leadership Development Programme is planned for
the management team and other senior officers, during
FY2016/2017. This will be a precursor to the comprehen-
sive development of a succession plan for the organization.
The FSC devoted much of its resources during this period to
(i) strengthening relationships with other regulators and in-
ternational standard-setting institutions; and (ii) training
staff consistent with the FSC’s mandate to promote the de-
velopment and modernization of local financial markets.

| 18Annual Report 2015/2016

5 Year Financial Statistical Review 2015 - 2016
FINANCIAL SERVICES COMMISSION
$ Millions RECEIVABLES

REVENUES OPERATING EXPENSES INTEREST INCOME LIQUIDITY $159

$931 $808 $54 $38 -14%

6% 21% 12% -32%

METRIC THIS YEAR (2015/2016) LAST YEAR (2014/2015) % CHANGE 5 YEAR TREND
REVENUES $930.55 $875.24 6%
$54.30 $48.52 12%
Interest Income $5.60 $0.04
Miscellaneous Income $1.66 $0.58 13900%
Fees from Seminars $868.99 $826.10 186%
Licensing/Registration 5%
$154.65 $140.69
Securities Industry $45.68 $49.49 10%
Annual Licensing/Registration $11.69 $14.24 -8%
Stock Exchange & JCSD -18%
Application fees $304.85 $289.44
$20.58 $17.71 5%
Insurance Industry $7.99 $7.03 16%
Annual Licensing/Registration 14%
Annual Fees Intermediaries $322.16 $306.59
Application fees $1.38 $0.92 5%
50%
Pension Industry $808.03 $665.42 21%
Annual Licensing Fee $0.65 $0.74 -12%
Application fees $3.20 $2.50 28%
OPERATING EXPENSES $1.75 $1.65 6%
Advertising -$0.86 -1645%
Appeal Tribunal $13.21 $0.25 108%
Audit $0.52 $8.98 44%
Bad Debt $1.74 55%
Bank Charges $12.90 32%
Building Maintenance $2.69 $15.00 21%
Commissioners' Fees $19.73 32%
Depreciation & Amortization $19.79 26%
Office Expenses $23.81 $1.86 -37%
Printing & Stationery $19.96 -2%
Professional Fees $2.45 $18.86 23%
Public Education $25.19 1%
Motor Vehicle & Parking $11.87 $9.74 79%
Salaries & Related Expenditure $442.45 -9%
Subscriptions $9.54 -32%
Training and Conferences $545.21 $19.17 -14%
Utilities $17.83 -5%
LIQUIDITY $19.40 $26.22 -47%
RECEIVABLES $31.96 $55.62 -21%
Trade Receivables $23.79 $184.55 6%
Prepayments $37.74 $133.84 27%
Other Receivables $158.71 $41.11 -7%
Interest Receivables $127.51 50%
PAYABLE $21.77 $2.77
Trade & Other Payables $6.83
Employee Benefits $2.18 $60.73
$7.25 $24.21
$77.43 $36.52
$22.59
$54.84

| 19Annual Report 2015/2016

Board of Commissioner’s Report cont’d

Income b. Bad Debt Expense Conferences and meetings
The FSC is funded mainly through fees Bad debt expenditure for as a result of the FSC’s af-
charged to entities. Licensing and Regis- the year FY2015/16 was filiation and elected leader-
tration fees for the FY2015/16 increased $12.36 million more than ship roles in the internation-
by approximately 5 per cent compared to that for the previous year. al standard-setting bodies.
the previous year. The increase in fees col- Balance Sheet Performance
lected was due mainly to the following: c. Building Maintenance Liquidity
• 3 per cent increase in fees from Building maintenance costs The FSC ended the year with cash and
increased by 44 per cent in cash equivalents of $37.74 million com-
the Securities Industry as a result FY2015/16 when compared to pared with the $55.62 million at the end
of a 3 per cent growth in assets; FY2014/15. The increase re- of FY2014/15. Resale agreements (short
sulted from steps taken to im- term investments) were $1.02 billion,
• 6 per cent increase in fees from the prove the physical condition and which was $204 million higher at the
Insurance Industry based on the fact the air quality of the building. end of the previous financial year. Ex-
that the total assets of the Life insur- cess funds in the current account are
ance and General Insurance Indus- d. Office Expenses normally placed on short term deposits.
tries experienced a growth of 8.2 per Office expenses for the year to- Accounts Receivable and Prepayments
cent and 9.5 per cent respectively; talled $23.81 million which Accounts Receivable and Prepay-
• 5 per cent increase in fees from the was $4.08 million more than in ments were $158.72 million which is
pensions industry, which is as a re- the previous year. There were $25.83 million lower than at the end
sult of the growth in Pension assets. major increases in expenses of the previous year. Trade receiva-
for office as well as copier and bles are shown net of an allowance for
printer maintenance supplies. impairment losses of $13.22 million.
Non-Current Assets
Interest Income e. GCT Irrecoverable Expense Non- current assets at the end of the
Interest Income for FY2015/16 was $54.30 Effective June 1, 2014, the FSC year were $54.61 million (net of depre-
million representing $5.78 million more was required to pay GCT on ciation) or $23.85 million more than
than the previous year. During the pe- all goods and services directly the end of the previous year. During the
riod, an additional amount of $150 mil- to the Government. The GCT FY2015/2016, the final 10 per cent for the
lion was placed on investments. Inter- of $15.44 million paid during purchase of the EDRMS system was fully
est rates earned on short term deposits FY2015/16 represented payment paid and the total cost of $31.52 million
for FY2015/16 were between 5.30 per for the entire financial year while was transferred from prepayments to as-
cent and 6.40 per cent per annum com- the $9.6 million paid during the set. The FSC also installed a new elevator
pared with a range of 6.45 per cent to FY2014/15 was for only 9 months. in August 2015 at a cost of $7.4 million.
7.40 per cent per annum for FY2014/15. Property, plant, equipment and intangible
Expenses f. Professional Fees assets were depreciated/amortized on the
Total expenses for FY2015/16 were Professional fees of $25.19 mil- straight line basis at annual rates to write
$808.03 million, which was $142.61 mil- lion were 26 per cent more down the assets to their estimated residu-
lion more than that for the previous year. than for the previous year. al values over their expected useful lives.
The following provides a brief explanation The depreciation rates were as follows:
for the changes in selected expense items: g. Salaries and Related Expenditure
“Salaries and related expendi- Motor Vehicles 20%
a. Appeal Tribunal ture” was $545.21 million for Leasehold improvement, of- 10% &
Expenses of $3.2 million relating FY2015/16 or $102.76 million fice furniture and equipment
to the operation of the FSC Ap- more than the previous year. 25%
peal Tribunal for FY2015/16 were Computer equipment and
28 per cent more than the previ- h. Training and Conferences software 25 %
ous year. This was due to (i) an The training and conferences
increase in the salary and (ii) out- expenditure of $31.96 million
standing retainer fees for the pe- was 79 per cent more than for
riod December 2014 - February the previous year. There was
2015, were paid in the FY2015/16. an overall increase in the num-
ber of employees exposed to
training initiatives as well as
attendance at International

| 20Annual Report 2015/2016

Board of Commissioner’s Report cont’d

Accounts Payable
Trade payables, at the end of FY2015/16,
of $22.59 million included the following:

• An accrual of $10.91 million for
statutory payments as at March
2016 which was payable on April
14, 2016. This was paid on April
8, 2016, and

• Accrued operating expenses of
$11.68 million

PROPOSED CHANGE IN THE NATURE
& SCOPE OF THE FSC’S ACTIVITIES
As Jamaica develops its International Fi-
nancial Services Centre, the role of the FSC
is likely to be expanded to include the reg-
ulation of providers of non-deposit-taking
financial services to clients residing outside
of Jamaica. It is expected that the proposed
International Trust and Corporate Services
Providers Bill will go before the Parliament
in the FY2016/2017. With the parliamen-
tary approval, the FSC will administer the
legislation and regulate the international
trust and corporate services providers.
CHANGES TO ITS CORPORATE PLAN
& SUMMARY OF ITS ACHIEVEMENT
AGAINST TARGETS
For the FY2015/2016, there were no
changes to the FSC’s Corporate plan.
Chart 2 outlines the FSC’s performance
against its FY2015/2016 objectives and
targets.

| 21Annual Report 2015/2016

Board of Commissioner’s Report cont’d FORECAST AND PROJECTIONS OF KEY
FINANCIAL & OPERATING MEASURES
FINANCIAL PROJECTION FOR 2016 -2017
Chart 3: FSC’s Financial Projections for 2016-2017 ($’ 000) With a projected 14 per cent growth in revenue and
a 35 per cent increase in planned expenditure, the
Actual Projected FSC will have a surplus of $5.2 million at the end of
2015-2016 2016-2017 FY2016/2017. See Chart 3. The expected growth in
expenditure is due to the following planned increases:
($’ 000) ($’ 000)

INCOME: 868,990 903,428 • Wages in keeping with the agreement be-
Fees 54,304 43,608 tween the GOJ and the public sector unions;
Interest Income 7,264 4,380 • Public education campaign initiatives; and
Other 0 112,500 • GCT on all goods and services are be-
IOSCO Conference ing paid directly to the Government.
TOTAL INCOME 930,558 1,063,916 The FSC will undertake measures to contain the
increased cost as well as to increase its revenues
EXPENSES: 649 651 e.g. through grants by donor agencies et cetera.
Advertising Dividend
Appeals Tribunal 3,205 3,307 The FSC is funded mainly through fees charged to regu-
Audit 1,750 1,750 lated entities on a cost-recovery basis and is a not- for-
Bad Debts 13,216 profit organisation. As a result, the FSC does not pay
Bank Charges - dividend and therefore, for the purposes of Part 1 to the
Building Maintenance 519 688 Second Schedule to the PBMA, it is not necessary for
Commissioners Fees 12,905 12,692 the FSC to provide notification of payment of dividend.
Data Security 2,690 3,508 CONCLUSION
Depreciation and amortisation 9,740 Overall, it was another successful year for the FSC.
Motor Vehicle and parking expense 8,612 36,860 The Board of Directors expresses gratitude to
Office Expenses 19,799 11,673 the management, staff, clients and partners for
Irrecoverable General Consump- 24,436 their continued support, dedication and commit-
tion Tax 9,545 40,355 ment to the organization during the FY20I5/2016.
Printing and stationery 23,811
Professional fees 15,443 Colin Bullock
Public Education Chairman
IOSCO 2,451 3,590
Rent 25,193 33,952 Winston Hayden
Staff Cost 11,875 40,170 Commissioner
Subscriptions 112,500
Training and conferences 0 36,000
Utilities 36,000 631,591
TOTAL EXPENSES 545,209 27,657
19,405 36,241
Surplus/(loss) before grant 31,960 27,289
23,798 1,094,650
Grant 808,032

SURPLUS FOR THE YEAR 122,526 -30,734

36,000 36,000

158,526 5,266

| 22Annual Report 2015/2016

Corporate Governance Report

The Board of Commissioners of the FSC is committed to high standards of corporate governance consistent with international best prac-
tices. The FSC boasts a cadre of eight (8) experienced Commissioners who bring to the table a wide range of expertise in the areas of
law, international business, corporate finance, financial services regulation, strategic management, human resources administration, risk
management and corporate governance. This team ensured that leadership and corporate governance was effected in the organization
at a high standard. The Commissioners and the Executive Director were first appointed February 2012 and March 2013 respectively.
In spite of its collective expertise and track record, the members of the board recognized the need to be kept abreast of new and evolving
standards. As such, in keeping with the Board’s emphasis on continuing education, members of the board attended a corporate governance
seminar and were provided with educational material on enterprise risk management during the course of the financial year. The Chair-
man of the Board Insurance Committee attended the annual conference of the International Association of Insurance Supervisors (IAIS),
the international standard setting body for insurance, in October 2015 and other members attended various conferences held locally.

| 23Annual Report 2015/2016

Corporate Governance Report cont’d

REMUNERATION
The Board of Commissioners is remunerated as determined by the Minister of Finance. Chart 6 provides information on the remuneration
paid to the non-executive Commissioners, while Chart 7 illustrates compensation to the Executive Management Team including the Executive
Director, the Executive Commissioner.

| 24Annual Report 2015/2016

Corporate Governance Report cont’d

Audit Committee Report In FY2015/2016, the committee received regular updates from
The FSC’s Board Audit Committee (the committee) en- the CIC Division regarding compliance with the FSC’s opera-
sures compliance with the organisation’s system of inter- tional policies and procedures and the attendant risks. The com-
nal controls and with enterprise risk management. In per- mittee also reviewed reports covering financial, operational
forming its work, the committee considers the following: and compliance audits of the FSC. Recommendations for im-
• The reliability and integrity of the accounting principles and provements and/or adjustments to the operational policies and
procedures were made to the Executive Management Team.
practices, financial statements and other financial reporting; Risk Management & Internal Control
• The FSC’s enterprise risk management framework; A vital component of corporate governance is enterprise risk man-
• Systems of internal controls and procedures established by agement and having appropriate internal controls. The FSC con-
tinued to enhance and implement these strategies in FY2015/2016.
management and their effectiveness; and
• The FSC’s compliance with the FSC Act and all relevant legisla-

tion.

| 25Annual Report 2015/2016

Corporate Governance Report cont’d

Corporate Social Responsibility Report • Software that tracks paper utilization and costs, was implemented
Corporate Social Responsibility (CSR) can be defined as an or- which facilitates monitoring so as to ensure reduction in the paper
ganisation’s sense of responsibility to promote sustainable de- usage and costs;
velopment of the people, the community, and the environment
in which it operates. During the report period, the FSC con- • The FSC now utilises energy saving LED bulbs for most lighting
tributed to the community by continuing its annual support of fixtures, and is exploring the possibility of reducing the hours of use
the Sigma Run and by making donations to a number of char- for our air conditioning units;
ities including, but not limited to the Best Care Foundation,
Kiwanis Club of New Kingston and the Tivoli Dance Troupe. • Timed water faucets and energy saving water closet (toilets) are
Listed below are the measures taken as a component of used in some bathrooms thereby reducing wastage of water;
the FSC’s CSR, to support the GOJ’s Environmental Plan:
• When replacing its elevator, the FSC pro- • The FSC had discussions with recycling companies to collect the
used newspaper for recycling and to separate the garbage to facili-
cured an energy efficient model; tate additional recycling. The FSC will continue to explore solutions
• The implementation of the new electronic management to resolve the logistics issues; and

system and the proposed Integrated Regulatory System • The FSC will continue to utilise environmentally friendly cleaning
will lead to substantial reductions in paper costs and products.
paper utilization;

| 26Annual Report 2015/2016

The FSC Welcomes the World! Hosting the region- Caribbean Securities Regulators’ Conference
The FSC hosted the Caribbean Group of Securities Regulators’
The photo shows the participants who attended the Caribbean Group of (CGSR) 2015 Conference and Workshop at the Grand Bahia Princi-
Securities Regulators’ Conference and Workshop in 2015 pe Hotel in Runaway Bay, Jamaica during the week of April 22 – 24,
2015. This event provided a forum for securities market regulators in
the Caribbean to meet and discuss regulatory challenges, experiences
and solutions. This staging of the conference focused on Financial In-
clusion under the theme “Capital Market Development and the Role
of Financial Inclusion”. The conference was the outcome of collabora-
tion between the FSC, the Caribbean Regional Technical Assistance
Centre (CARTAC) and the CGSR in association with Child and Youth
Finance International (CYFI). Attendees included representatives
from Puerto Rico, the British Virgin Islands, the Netherlands, United
Kingdom, United States of America, Bermuda, Antigua & Barbuda
and Spain. The first day of the conference was dedicated to finan-
cial inclusion and presenters from CYFI provided insightful and well
appreciated information on youth finance initiatives being advanced
globally. There was also discussion on Capital Market Develop-
ment and emerging issues affecting the region’s securities industries.

Extending our hospitality to the hemisphere- IARC/
COSRA Meeting 2015
The FSC successfully hosted the 2015 Meeting of the In-
ter-American Regional Committee/Council of Securities
Regulators of the Americas (IARC/COSRA) over 2 days
(12th – 13th of November 2015) at the UWI Regional
Headquarters. The 2015 IARC/COSRA Meeting was a high
level meeting of senior regulators from leading countries
in the Americas, who used this meeting to address global
securities issues that were of importance to the region.

The photo shows the participants who attended the 2015 IARC/CORSA
meeting held in Jamaica on November 12-13, 2015

Preparing to Welcome the World!

In FY2015/16, the FSC began its preparations to host (i) the Spring 2017 Technical and Executive Committee meetings of
the International Organization of Pension Supervisors (IOPS) and (ii) the 2017 IOSCO Annual Conference. The IOSCO
conference will be hosted in the Caribbean for the first time, and this will be a remarkable achievement for our region.

| 27Annual Report 2015/2016

Overview of the Financial Markets

For 2015, the dominant features in the global econo- • The GOJ‘s bullish attitude towards economic growth.
my were low interest rates in the major economies, low Strong growth initiatives, when implemented, are ex-
commodity prices and weak economic growth. The US pected to positively impact unemployment;
generated some positive economic results and subse-
quently, the Federal Reserve increased interest rates. Oil- • Improvement in business confidence;
producing countries suffered from less revenue while oil- • The expectation that both inflation and the T-bill rates
importing countries benefitted from the depressed oil prices.
Here in Jamaica, there was increased market confi- will remain in single digits;
dence prompted by low oil prices, Jamaica’s prudent fis- • A forecast of 2 per cent growth in GDP for 2016 ;
cal and monetary policies and the successive pass- • New initial public offerings (IPOs) on the JSE and con-
ing of IMF tests. There were also positive results for
several key macroeconomic indicators for Jamaica. See Chart tinued upward movement in the stock exchange index;
8. These conditions present mixed challenges for the finan- • Projections that the exchange rate between the US and
cial institutions; nevertheless, the securities dealers and in-
surance companies remained profitable and well capitalised. Jamaican currencies will be relatively stable, and
Despite the downside risks (such as expected moderate increas- • The continuation of Jamaica’s passing of the IMF’s quar-
es in commodity prices, continued weak growth in China and in
some developed nations, the possible negative impact of Brexit terly test.
and potential adverse weather) there is a positive outlook for the
Jamaican economy in 2016. This is due to the following factors:

| 28Annual Report 2015/2016

A Dynamic & Purposeful Insurance Industry

In FY2015/2016 the Insurance Division, as part of its continued supervision of the insurance industry, conducted quar-
terly annual risk assessment reports for all insurance companies completed and completed five onsite examinations.

Overview of the General Insurance Industry

Chart 9: Number of Registrants in the Insurance Industry as at March 31, 2016

Type of Registrants Registered at Additions Less Terminations / Registered at 31/3/16
31/3/15 Cancellations
Life Insurance Companies 7 0 0 7
General Insurance Companies 10 1 0 11
Association of Underwriters 1 0 0 1
Insurance Brokers 26 1 0 27
Facultative Placement Brokers 18 0 0 18
Overseas Reinsurance Brokers 1 0 0 1
Local Reinsurance Brokers 2 0 0 2
Insurance Agents 8 28
Insurance Sales Reps. 22 294 2 3,220
Loss Adjusters 0 35
Loss Adjusters - Employed 3,095 0 169 7
Practitioners 36 1
Investigators 7 2 0 16
Claims Negotiators 0 7
Insurance Consultants 14 0 0 3
Total 7 306 0 3,383
3 0
3,249 172

For the year ended December 31, 2015, general insurers em- Chart 10: Number of Policies by Class of Business
ployed approximately 1,215 persons (2014: 1,192) and wrote (2013-2015) (’000)
363,797 policies (2014: 346,444). The accumulated sum insured
totalled approximately $4,145.4 billion (2014: $3,213 billion). Class of 2013R 2014A 2015P
Chart 10 shows the number of policies by class, while Chart 11 Business
exhibits the gross premium written6 (GPW) by class of business. 6,616 6,694 6,550
Liability 43,959 43,646 45,193
__________________________________ Property 267,094 278,388 293,036
6 Gross Premium Written (“GPW”) is the sum of gross direct premiums written and Motor 5,348 5,102 4,761
premiums on reinsurance assumed. Pecuniary
Loss 400 2,044 1,749
Marine
Aviation 3,128 10,570 12,508
&Transport
Accident

Total 326,545 346,444 363,797

A - Actual; P - Preliminary; R - Revised

| 29Annual Report 2015/2016

A Dynamic & Purposeful Insurance Industry cont’d

Chart 11: GPW by Class of Business, (2013-2015) Chart 12 shows selected indicators for the general insurance in-
dustry such as total assets and net income. The weighted aver-
Class of 2013A 2014A 2015P age Minimum Capital Test (MCT) ratio for these companies
Business at the end of 2015 was 299.5 per cent (2014: 294.2 per cent),
1,155.0 $ Millions 1,740.4 which exceeded the prescribed capital required of 250 per cent.
Liability 12,919.0 1,589.7 17,012.2 Aggregate assets amounted to $64.8 billion and reflected an increase
Property 14,970.0 16,170.2 16,793.9 of 7.7 per cent over the $60.2 billion reported as at December 31, 2014.
Motor 16,047.7 2,144.8 Aggregate invested assets amounted to $45.2 billion, representing an
Pecuniary 489.0 457.9 increase of 10.0 per cent over 2014, and accounted for 69.8 per cent of
Loss 362.6 total assets. The increase was generally due to the reinvestment of ma-
Marine 344.0 450.8 tured securities and the increase in holdings in short term deposits.
Aviation 141.3 Total revenue comprising of the three (3) income categories - net pre-
&Transport 163.0 196.5 38,195.1 mium income, net investment income and other income - amounted
Accident to $19.8 billion in 2015. (2014: $19.7 billion). Total underwriting ex-
penses in 2015 increased marginally by 2 per cent over 2014 despite
Total 30,040.0 34,912.8 the increases in claims and operating expenses by 15.1 and 4.5 per cent
respectively as net commissions earned partially absorbed these costs.
A - Actual; P - Preliminary; R - Revised

Performance of the General Insurance Companies Chart 13 displays the aggregate amount of claims by class of busi-
ness while Chart 14 exhibits the claims ratios for the industry and
Chart 12- Statistical Information and Financial Position of the Gen- by the class of business.
eral Insurance Industry

As at Dec 13R Dec 14A Dec 15P Chart 13: Aggregate Claims by Class of Business, 2013-2015
$’B $’B $’B
Class of Business 2013 A 2014A 2015P
Balance Sheet 41.1 45.2
Total Investment Assets 38.4 60.2 64.8 $’ Millions
Total Assets 56.8 34.6 35.4
Insurance Liabilities 33.4 4.9 5.9 Liability 352.0 568.8 818.7
Other Liabilities 4.7 39.5 41.4 Property
Total Liabilities 38.1 20.8 22.9 Motor 211.0 111.0 476.8
Capital & Surplus 18.4 Pecuniary Loss
(incl. reserves) 16.1 16.3 Marine Aviation &Transport 8,485.0 8,483.7 9,257.0
15.3 15.6 Accident
2.8 2.8 12.9 23.7 27.2
0.8 0.7
4.3 4.2 6.6 20.0 40.6
1.2 1.1
3.1 3.1 9.4 26.4 8.1

Profit and loss (YTD) Total 9,076.9 9,233.6 10,628.4
Net Premium Earned
Underwriting Expenses 14.3 A -Actual; P - Preliminary; R - Revised
Net Investment Income 14.3
Other Income 2.3
Income before Tax 0.9
Taxes 3.2
0.8

Income (Loss) after Tax 2.4

A -Actual; P - Preliminary; R - Revised

| 30Annual Report 2015/2016

A Dynamic & Purposeful Insurance Industry cont’d

Aggregate claims increased by 15.1 per cent over 2014. There Chart 16 - Statistical Information and Financial Position of the
were significant movements in some classes of business. Li- Life Insurance Industry
ability and property claims, which increased by $249.9 mil-
lion (44 per cent) and $365.8 million (329.6 per cent) respec- As at Dec 13A Dec 14A Dec 15P
tively over 2014, helped fuel the growth in aggregate claims. $’B $’B
Chart 14: Claims Ratios by Class of Business and for the General
Insurance Industry, 2013-2015 Balance Sheet 224.0 245.3 263.5
Total Investment Assets 250.0 261.5 281.7
Overview - Life Insurance Industry Total Assets 70.5 78.5 81.1
For the year end December 31 2015, there seven (7) registered life insur- Insurance Liabilities 116.1 121.5 132.0
ance companies; only (6) were operational and employed 1,904 persons Other Liabilities 186.6 200.0 213.1
(2014: 1,924). Total GPW in 2015 amounted to $46.8 billion (2014: $42.6 Total Liabilities 63.4 61.6 68.6
billion). Chart 15 exhibits the percentage of GPW by class of business, Capital & Surplus
while Chart 16 provides selected statistics for the period 2013-2015. (incl. reserves)

Profit and loss (YTD)

Net Premium Earned 41.6 41.8 45.9

Net Investment Income 16.0 19.4 23.0

Other Income 12.0 5.2 4.0

Policy Benefits 21.5 23.4 25.4

Operating Expenses 27.5 26.8 26.7

Taxes 0.9 0.8 3.5

Total Expenses 49.8 50.9 55.6

Net Income after tax 19.8 15.5 17.3

A -Actual; P - Preliminary; R - Revised

| 31Annual Report 2015/2016

A Dynamic & Purposeful Insurance Industry cont’d

Aggregate net income reported for 2015 was $17.3 billion RISK ASSESSMENT: Promoting sound financial health
(2014: $15.5 billion) representing an increase of 11.7 per cent within the Insurance Industry
compared to the corresponding year ended December 31, The FSC has a supervisory framework for off-site or desk
2014. Other income declined by $1.2 billion over 2015. This monitoring and on-site examinations. The FSC applies the
was partially attributed to the decline in foreign exchange CARAMELS framework in its assessment. All insurance
gains as the rate of depreciation of the Jamaican dollar against companies are subject to an annual off-site examination
its United States counterpart decelerated. Net investment based on the annual and audited statements for the year end-
income improved and recorded an increase of 18.6 per cent ed December 31 which are submitted on or before March 31.
over 2014. Total assets grew by 7.7 per cent whilst total in- The FSC utilizes a supervisory ladder to rank the company as
dustry liabilities increased by 6.6 per cent over the year ended Stage Zero or Normal, where there is no major risk identi-
December 31, 2014 to $213.1 billion (2014: $200.0 billion). fied; as Stage one, where the company is exposed to risks that
if left unattended could escalate into major challenges; as
Historically, the majority of claims were sickness and Stage Two, where the company is exposed to significant risks
health which increased by $664.5 million and repre- that threatens its financial viability or solvency; Stage three,
sented 67.0% of total claims for 2015. See Chart 17. where the company’s financial viability is in serious doubt
Capital and Stage Four, where the company is viewed as not viable
By the end of 2015, the aggregate capital base increased by and may be placed into liquidation. All companies are also
11.4 per cent to $68.6 billion (2014: $61.6 billion). For 2015, subject to a quarterly risk assessments.
the weighted average Minimum Continuing Capital and Sur- The outlook of the company is assessed quarterly and the
plus Requirement (MCCSR) for the life insurance sector stood company ranked: positive, negative or neutral. The off-site
at 362.1 per cent (2014: 357.0 per cent) which was more than analysis includes the calculation of a set of early warning
twice the regulatory benchmark of 150 per cent. The compa- indicators. Deviations from the specified benchmarks may
nies with high MCCSR ratios skewed the industry weighted trigger additional review by the FSC.
average to significantly more than the 150 per cent benchmark. The CARAMELS framework assesses insurers’ risk profile
These companies typically offer investment products which according to the following areas of exposure:
have very low mortality and morbidity risk exposures. The oth-
er companies have typical life insurance products which carry C - Capital,
much more life insurance liabilities. Each life insurance com- A - Asset Quality
pany’s MCCSR score was above the 150 per cent benchmark. R - Reinsurance,
A - Actuarial,
M - Management,
E - Earnings,
L - Liquidity,
S - Subsidiaries.
Chart 18 and 19 show the risk outlook for both general and
life insurance companies under the CARAMELS framework.

| 32Annual Report 2015/2016

A Dynamic & Purposeful Insurance Industry cont’d

| 33Annual Report 2015/2016

A Robust Securities Industry • The implementation of minimum transaction sizes for
retail repo contracts;
The Securities Division is responsible for the supervision and
monitoring of the securities industry in Jamaica through the ad- • The development of a strategy to further strengthen pru-
ministration of the Securities Act and its attendant regulations. dential standards;
During FY2015/16, the division continued to enhance its super-
vision of the industry with the implementation of key reforms in • The development of a model to conduct focused stress
keeping with the Government of Jamaica’s financial sector reform testing on securities dealers; and
programme under the Extended Fund Facility with the IMF. Dur-
ing FY2015/16, the Division spearheaded key deliverables such as: • The transformation of the existing retail repo model to a
third party trust-based arrangement.
• The establishment of a distinct legal treatment for retail
repo investors in the event of dealer insolvency;

• The designing of the key operational structures for a new
third party trust framework for the retail repo product;

Monitoring Activities
Chart 20 illustrates the various aspects of monitoring programmes conducted by the securities division of the FSC during
FY2015/16.

Overview of the Securities Industry
Chart 21 shows the number of entities and individuals licensed and registered by the FSC by category of licenses or
registration as at March 31, 2016.

| 34Annual Report 2015/2016

A Robust Securities Industries cont’d

As at March 31, 2016, there were 44 companies licensed as securities dealers in the market. Chart 22 categorises each dealer based on its
primary activities, namely core securities dealers and non-core securities dealers. The term “core securities dealers” is used to describe se-
curities dealers which are companies engaged in securities dealing as their principal activity. It therefore includes unit trust fund man-
agement companies. The non-core securities dealers are those companies that do not deal in securities as a principal activity, but are re-
quired to obtain a securities dealer’s licence in order to conduct some aspects of their businesses, for example, pension fund management.

Chart 22: Number of Licensed Securities Dealers, by Type of Company, as at March 31, 2016

1

_____________________________
7 Seven of the core securities dealers are also unit trust fund management companies. In addition, the licences of two core
securities dealers, UGI Finance and Investments Limited, and Intertrade Finance Corporation, are currently suspended.


| 35Annual Report 2015/2016

A Robust Securities Industries cont’d

Chart 23: Total Balance Sheet Assets of Securities Dealers by Type of Company, 2013-2015

Category of Securities Dealers Total Assets
(Company)

Dec -2013 Dec-20148 Dec-2015

$ Billions % of total $ Billions % of total $ Billions % of total

Core Securities Dealers 523.77 57.22 559.15 58.32 532.37 55.86
Non-Core Securities Dealers of which:
Building Society 391.65 42.78 399.67 41.68 420.59 44.14
Insurance Companies
Others 118.30 12.92 124.34 12.97 128.44 13.48
Total
248.07 27.10 259.58 27.07 275.38 28.90

25.28 2.76 15.75 1.64 16.77 1.76

915.42 100.00 958.82 100.00 952.96 100.00

Chart 23 displays the total balance sheet asset of securities dealers for the period 2013 – 2015. As at De-
cember 31, 2015, the total balance sheet assets of the securities industry (comprised of core and non-core se-
curities dealers) stood at J$952.96 billion, reflecting a decline of J$5.86 billion or 0.6 per cent over the cor-
responding period in 2015. The decline was primarily attributable to a 4.79 per cent reduction in the total
assets held by core securities dealers, which accounted for 55.86 per cent of the total assets held by the industry.

Chart 24: Total Balance Sheet Capital of Securities Dealers by Type of Company, 2013-2015

Category of Securities Dealers Capital
(Company)

Dec -2013 Dec-20149 Dec-2015

$ Billions % of total $ Billions % of total $ Billions % of total

Core Securities Dealers 69.52 47.04 74.47 49.47 73.67 47.32
Non-Core Securities Dealers of which:
Building Society 78.27 52.96 76.06 50.53 82.00 52.68
Insurance Companies
Others 17.77 12.02 19.01 12.63 19.35 12.43
Total
57.87 39.15 55.34 36.76 60.49 38.86

2.64 1.79 1.71 1.14 2.16 1.39

147.80 100.00 150.53 100.00 155.67 100.00

Chart 24 displays the total balance sheet capital of securities dealers for the period 2013 – 2015. As at December 31,
2015, the total balance sheet capital of the securities industry (comprising of core and non-core securities dealers)
stood at J$155.67 billion, a slight improvement of 3.3 per cent when compared to the similar period in 2014. Although
there was an improvement in the total balance sheet capital for the securities industry, there was a 1.07 per cent decline
in the amount of capital held by the core securities dealers, which may have been due to the reduction in total assets.

_____________________________
8 These figures were restated due to the fact that one securities dealer which was previously classified in the sub-category ‘Others’ under the category ‘Non-Core Securities Dealers’ was reclassified to the ‘Core
Securities Dealers’ category.
9 These figures were restated due to the fact that one securities dealer which was previously classified in the sub-category ‘Others’ under the category ‘Non-Core Securities Dealers’ was reclassified to the ‘Core
Securities Dealers’ category.

| 36Annual Report 2015/2016

A Robust Securities Industries cont’d

Chart 25: Total Funds under Management of Securities Dealers by Type of Company, 2013-2015

Category of Securities Dealers Funds under Management (FUM)10
(Company)

Dec -2013 Dec-201411 Dec-2015

$ Billions % of total $ Billions % of total $ Billions % of total

Core Securities Dealers 730.60 79.67 828.92 80.80 909.05 79.01
Non-Core Securities Dealers of which:
Building Society 186.40 20.33 196.99 19.20 241.48 20.99
Insurance Companies
Others 0.00 0.00 0.00 0.00 0.00 0.00
Total
156.84 17.10 172.26 16.79 209.70 18.23

29.56 3.22 24.73 2.41 31.78 2.76

917.00 100.00 1,025.91 100.00 1,150.53 100.00

Chart 25 illustrates the total funds under management (reported both on and off the balance sheet) of securities dealers
for the period 2013 – 2015. As at December 31, 2015, the total funds under management of the securities industry (com-
prising of core and non-core securities dealers), stood at J$1,150.53 billion, representing an increase of 12.15 per cent
over the similar period in 2014. Since 2013, the total funds under management has been increasing annually with the
core securities dealers accounting for approximately 79.83 per cent on average of the total amount. Although the total
funds under management increased in 2015, the total assets of the core securities dealers declined during the same peri-
od. This suggests that securities dealers may be strategically managing more of their clients’ funds off the balance sheet.

Chart 26 provides information on the earnings, expenditure and profitability of the core securities dealers over the last three
years. Collectively, the core securities dealers remained profitable in 2015 recording a net after tax profit of $J7.36 billion, despite
a 3.01 per cent reduction in total revenue when compared to 2014. Of note, total interest income continued to be the main rev-
enue source of the industry, accounting for approximately 70.52 per cent of total revenue recorded for the calendar year 2015.

_____________________________
10 FUM represents clients’ funds which are managed by securities dealers either on or off the balance sheet. The term ‘funds off balance sheet’ can refer to situations where the funds invested by
clients and the assets purchased with those funds are not reported on a securities dealer’s balance sheet. Typically, the accounting records for these transactions are kept separate from the balance
sheet to reflect that the securities dealer is not the recognized legal owner of the assets. This includes, for example, collective investment schemes (mutual funds, unit trusts etc.).
11 These figures were restated due to the fact that one securities dealer which was previously classified in the sub-category ‘Others’ under the category ‘Non-Core Securities Dealers’ was reclassi-
fied to the ‘Core Securities Dealers’ category.

| 37Annual Report 2015/2016

A Robust Securities Industries cont’d

Chart 27 summarizes selected prudential indicators for the core securities dealers for the period 2013 to 2015. The sector
remained adequately capitalized and robust despite the implementation of key reforms in the industry, namely the Retail
Repo Reform. The quality of the assets underlying repurchase agreements is however an area of concern as evident from the
fact that the average low-risk assets to repo liabilities ratio has fallen below the FSC’s minimum benchmark requirement.
Overview of Collective Investment Schemes
As at December 31, 2015, the Unit Trusts Sector comprised
twelve (12) unit trust funds, managed by five (5) fund manag-
ers. The unit trust portfolios consisted mainly of fixed income
securities, real estate and equity investments. The total funds
managed by unit trust fund management companies stood at
J$142.3 billion. This represented a 27.65 per cent increase over
the previous year’s amount of $111.4 billion. Chart 28 outlines
a summary of the activities for the three-year period ended De-
cember 2015. The growth in funds managed by the unit trusts
was due to (i) new funds; (ii) large purchases by investment
managers for pension plans; and (iii) the continued movement
of clients’ funds from retail repo products to unit trust products.

_____________________________
12 Capital base is the regulatory capital which is comprised of tier 1 and tier capital.
13 Return on assets is computed by dividing net income after tax by total balance sheet assets.
14 Return on equity is computed by dividing net income after tax by balance sheet capital.
15 Net Interest Margin is computed by dividing net interest income by total interest income.
16 Net Profit Margin is computed by dividing net profit after tax by total revenue.

| 38Annual Report 2015/2016

A Robust Securities Industries cont’d

Overview of Collective Investment Schemes cont’d
Chart 29 shows the combined net purchases over the period
December 2013 to December 2015. It illustrates the variability
of the buying and selling of units. All the quarters under review
experienced net purchases, albeit at significantly different levels.
Mutual Funds
For the year ended December 31, 2015, ten (10) overseas mutual
funds were registered with the FSC for sale in Jamaica. The mu-
tual fund investment portfolios comprised mainly of equities
and fixed income securities. The total amount invested in these
funds by Jamaicans amounted to USD 206 million. Chart 30
depicts the amount of purchases and redemptions done by Ja-
maicans during the period December 2013 to December 2015.
Overview of the Equities & Private Debt Markets
The private debt market is comprised mainly of short and me-
dium term notes; however, instruments with tenures of five
(5) years and more accounted for twenty (20) per cent of the
total instruments registered in 2015. There were eighty-five
(85) exempt distributions registered during 2015; a thirty-
one (31) per cent reduction when compared to the one hun-
dred and twenty three (123) recorded in 2014. However, the
value of the transactions was fifty eight (58) per cent more
than that recorded in 2014 (see Chart 31). The Accredited
Investor Exemption was most utilized by issuers, account-
ing for fifty four (54) per cent of the distributions in 2015.
Public Offerings
During 2015, ten (10) publicly traded equity securities were
registered with the FSC. All, but one (1), were listed on the JSE.
The combined value of these listings amounted to approximate-
ly $8.7 billion, reflecting a year-over-year increase of 383 per
cent in the value of registered equity securities (See Chart 32).

| 39Annual Report 2015/2016

A Robust Securities Industries cont’d

Listings i. Capital Adequacy – Overall, the deal- Over the next three years, the quality and
The total listings on the Junior Market re- ers remained adequately capitalized quantity of core regulatory capital will be
mained at twenty-three (23) throughout 2015. despite a few instances of a decline strengthened with the implementation of
However, the volumes traded in the Junior in balance sheet capital. The FSC key provisions in the Securities (Prudential)
Market during 2015 amounted to over 1.2 bil- continued to actively monitor this Regulations, 2014. Securities dealers will be
lion units, representing a 119 per cent increase component of the risk assessment; required to conduct stress testing and man-
over the 592 million units traded in 2014. age risks associated with large exposures. The
While the Junior Market experienced a year ii. Asset Quality – The dealers’ port- Division will therefore continue to enhance its
over year increase in volume, the Main Market folios continued to be dominated prudential supervision of the market to ensure
experienced a decline in volumes traded by 11 by securities issued or guaranteed that the levels of capital maintained by deal-
per cent, moving from 2.1 billion to 1.8 billion. by the Government of Jamaica. ers are commensurate with their risk profiles.
In 2015, both the Junior and Main Markets This indicated high levels of con- Securities dealers’ activities and their ability
experienced year-over-year increases in the centration risk. Some level of di- to diversify in foreign currency denominated
total number of transactions. The Junior Mar- versification was observed during securities continue to be restricted by Sec-
ket recorded a 77 per cent increase in the to- the period under review; and tion 22 of the Bank of Jamaica Act and the
tal number of transactions, while there was accompanying ministerial orders. In light
a 35 per cent increase in the Main Market. iii. Sensitivity to Liquidity and Interest of the challenges posed by the restrictions,
Consistent with the increase in the number rate risks – Given the significance of the FSC has made for a review of the limits.
of trades, the monetary value of the amount repurchase agreement transactions to Additionally, the contraction in the clients’
traded significantly increased by 271 per cent securities dealers’ activities, liquidity funds recorded on the balance sheets as well
over the previous year. The increase in value and interest rate risks continued to as the growth in the off balance sheet funds
traded on the Junior Market was compliment- pose a serious threat to the dealers and under management that was observed in
ed by a little less spectacular 60 per cent in- the sector as a whole. The high lev- 2015/16 is expected to continue. As the pru-
crease recorded by the Main Market in 2015. els of liquidity and interest rate risks dential standards for the industry are en-
Average stock prices, both in the Junior and were primarily attributable to the hanced, it is likely that dealers will continue
Main Markets experienced significant increas- mismatches between the maturities to move funds off their balance sheet in order
es. The average price of stocks listed on the of the repurchase agreement obliga- to reduce their financial risks and the capital
Main Market increased by 162 per cent in 2015 tions and their underlying securities. charges associated with these risks. This rea-
with 27 of the 32 stocks appreciating in value. If not appropriately managed, these lignment of the management of client funds
The Junior Market showed a year-over-year av- risks could have significantly impact- means that the financial risks will move di-
erage increase of 145.69 per cent, with 22 of its ed the securities dealers’ operations. rectly to the investors. Consequently, the Se-
23 listings appreciating in value during the year. curities Division will place additional focus on
Risk Outlook for the Securities Industry enhanced disclosures in order to ensure that
Supervisory Risk Assessment Outcome for Over the medium term, the risk assessment investors have access to adequate informa-
2015-2016 areas will be further expanded to include de- tion which can assist them in understanding
Annual assessments were conducted on 11 tailed reviews of the governance framework the risks associated with their investments.
securities dealers that accounted for ap- and control environment of securities deal-
proximately 65 per cent of the industry’s total ers. This move will be accomplished as the
funds under management as at December 31, Securities Division transitions to a fully risk
2015. The assessments focused primarily on based supervisory framework. The expected
three quantitative areas, namely: capital ad- benefit from such a transition is the enhanced
equacy, asset quality and sensitivity to liquid- supervisory oversight of activities and prac-
ity and interest rate risks. A brief summary is tices in the industry which pose the greatest
provided below: risk to the soundness of securities dealers.

| 40Annual Report 2015/2016

A Trusted Private Pensions Industry

The Pensions Division of the FSC has formulated the
following vision and mission statements as part of its
stakeholder service charter:

VISION Chart 35 shows the percentage of the employed la-
To be an effective, impartial, credible and relevant bour force. Analysis of the data also reflects that
regulator, engaging stakeholders to support the de- coverage is highest in the finance/commerce sec-
velpoment and growth of a robust pensions industry. tors and lowest in the bauxite/mining sectors.
MISSION
To enable a sustainable regulatory environment, sup-
portive of the preservation of pension benefits aimed at
improving pension adequacy, protection of members’
rights, and increased coverage through the provision of
information, guidance and oversight of all stakeholders.

Overview of the Private Pensions Landscape
As at December 31, 2015, there was a total of 801 ap-
proved pension plans. Chart 33 provides more details.

Membership in active Defined Contribution (DC) Funds Outsourcing of the administration and investment
and Schemes stood at 80,473 while active membership of management of Funds and Schemes remains constant;
Defined Benefit (DB) Funds was 21,856. The annual growth with less than 5 per cent of these arrangements be-
in the membership of DC Funds and Schemes, which re- ing self-managed. Chart 36 shows the number of ap-
flected an increase of 11 per cent, continues to outpace that proved investment managers by category as well as
of DB Funds, which registered a decrease in membership the private pension assets under their management.
of 2 per cent. Of the membership in DC Funds, there were
40,023 members in approved Schemes reflecting an in- | 41Annual Report 2015/2016
crease of 24 per cent from 32,253 members at the same date
twelve months earlier (Chart 34). In addition, 60 per cent
of total active membership was concentrated in 20 Funds
and Schemes each having more than 1,000 members. Fur-
ther, approximately 29 per cent of the active membership
was concentrated in three Schemes each having more than
5,000 members. Funds with 50 or less members accounted
for approximately 5 per cent of total active membership.
DC and DB Funds, which were inactive or being ter-
minated accounted for an additional 2,327 and 5,328
members respectively. Further, 5,024 pensioners
were being paid directly from all Funds and Schemes.

A Trusted Private Pensions Industry cont’d

Authorization
During the FY2015, 145 applications were received, representing an 11 per cent decrease compared with the 163 submissions record-
ed in the previous year. Chart 37 shows the number of submissions received and approved by categories of registrants and licensees.

Auditors and Actuaries
The FSC is required to determine the suitability of the
actuaries and auditors appointed to the pension plans
which fall within the ambit of the Pensions Act. The
FSC completed the processing of two of the three sub-
missions received from auditors during FY2015/2016.
Amendments to Constitutive Documents
For the FY2015/16, fifteen (15) Constitutive Documents of
superannuation funds with amendments were received by
the FSC (See Chart 38).
Snapshot: Pension Plans & Schemes Performance
Aggregate total pension assets as at December 31, 2015 grew by
16 per cent when compared with the previous year. See Chart
39. This growth occurred despite the fact that a few Funds and
oneSchemeinitiatedtheprocessofwinding-upduringtheyear.

_________________________________________
17 Previously the capacities of the Responsible Officers were reported by the FSC. The information in this table now reflects the actual number
of persons acting as Responsible Officers in the private pensions industry
* Includes one entity whose discontinuance has not been considered by the Board of Commissioners.
^ Prior year information has been updated.

| 42Annual Report 2015/2016

A Trusted Private Pensions Industry cont’d

The accumulated assets of Funds and Schemes combined over the past three calendar years were valued, on average, 23 per cent of Gross Do-
mestic Product (GDP). Relative to the total financial system assets, the aggregate private pension industry assets accounted for 16 per cent.

| 43Annual Report 2015/2016

A Trusted Private Pensions Industry cont’d

Supervisory Risk Assessment Outcome for 2015-2016

Off-site (Desk-Based) Examinations

Three hundred and fifteen (315) assessments of pension plans
were completed during the fiscal year and 40 assessments were
done for corporate entities. The number of superannuation
funds (Funds) and retirement schemes (Schemes) regarded as
exposed to high levels of risk remains stable. Issues relating to
funding and solvency continue to be the main contributing fac-
tor in the risk profile of the plans assessed with high levels of risk.

As at March 31, 2016, there was a 1 percentage point improvement On-site Examination
(from 93 per cent to 94 per cent) in the number of solvent Defined Two of five (5) on-site examinations, involving two (2) companies,
Contribution (DC) Funds and Schemes and a 2 percentage points two (2) retirement schemes and one (1) superannuation fund, which
increase in the number of solvent Defined Benefit (DB) Funds were conducted during the fiscal year under review, were completed.
moving from 88 per cent to 90 per cent based on available data. Winding-Up of Funds & Schemes
Two companies operating in the dual capacities as administrator and In this review period, the FSC received 15 new submissions (inclu-
investment manager and one entity in its capacity as investment man- sive of 1 partial-winding-up) for the winding-up of Funds, three less
ager were considered as having high levels of risk as a result of poor than the corresponding period for the previous year; and one in re-
risk management and weak internal controls. The number of licensees spect of a retirement scheme. Proposed schemes of distribution of
evaluated to possess moderate risk levels fell by 21 per cent over the fis- surplus assets were also filed in relation to 18 Funds. Approval for
cal period moving from 29 at end-March 2015 to 23 at end March 2016. the winding-up of 21 Funds (representing a 91 per cent increase over
The outcomes of the risk assessments are as shown in Charts 41 and the amount in the previous year) were granted by the FSC and, in
42. respect of partial-winding-ups, nine (9) non-objections were issued.

Statement of Investment Policies and Principles

A total of 86 submissions were processed during the fiscal period.

Risk Outlook

The Jamaican economy grew nominally by approximately 6 per cent
in 2015 and inflation stood at 3.66 per cent culminating the fifth con-
secutive year of single digit inflation and the lowest annual rate re-
corded in over a decade. However, the Jamaican dollar depreciated by
5.48 per cent during 2015. The private pensions industry remained
stable as local and global economic challenges appeared to be easing.
Direct investment in Government of Jamaica securities accounted for
34 per cent of the aggregate pension assets as at December 31, 2015.
This continued to represent the single most significant investment risk
exposure for pension plans as interest rates remained relatively low.

Warning Letters Investments in foreign securities and foreign assets within the ag-
One superannuation fund was issued a warning letter for failing gregate portfolio increased by approximately 22 per cent to $33
to file required statutory reports. billion; representing 8 per cent of total invested assets. As a re-
sult of the growth of investment arrangements, which account-
ed for 57 per cent of the foreign currency stock, there was an in-
crease in the pensions funds’ exposure to foreign currency risk.

____________________________________________

18 This is a DB plan where benefits are linked through a formula to the members’ wages or salaries, length of employment, or other factors.
19 This is a DB plan where benefits depended on a rate of return credited to contributions, where this rate of return is either specified in the plan rules, independently of the actual return on any supporting assets (e.g.) fixed,
indexed to a market benchmark, tied to salary or profit growth, etc.), or is calculated with reference to the actual return of any supporting asset and minimum return guarantee specified in the plan rules.
20 This is a DB plan that has two separate DB and DC components but which are treated as part of the same plan.

| 44Annual Report 2015/2016

A Trusted Private Pensions Industry cont’d

Supervisory Risk Assessment Outcome for 2015-2016 cont’d

Risk Outlook cont’d In particular, the FSC requires adequate disclosures to in-
vestors and the prudent investment of assets in accordance
The local stock market experienced phenomenal growth of 97 with the Statements of Investment Policies and Principles.
per cent during 2015. For the private pensions industry, there Outlook for the Pensions Division
was an aggregate 84 per cent increase in the value of direct For the FY2016/17, the Pensions Division has identi-
holdings of stocks and shares within the portfolio of Funds and fied the following key areas of focus as it continues to ro-
Schemes accounting for 15 per cent of the private pension as- bustly monitor and supervise the pensions industry:
sets, which are invested in equities. The improved performance
of the local stock market continues to provide opportunities for
Funds and Schemes, which need to diversify their portfolios Public Education - the Pensions Division will be actively engag-
and reduce counter party and foreign exchange risk exposures. ing its stakeholders by holding a number of meetings aimed at
Despite the termination of some pension plans in 2015, there sensitizing the industry to developing trends critical to the op-
was an increased pension coverage in comparison to 2014, due eration of the industry. In addition, publications with regards
to the growth of the number of Jamaicans participating in private to the following topics are being proposed for the fiscal year:
pension arrangement. As Fund sponsors continued to feel the
strain of the tight fiscal policies, this poses a threat to the sus- • FSC’s risk management framework;
tained provision of adequate pension coverage, notwithstanding • Information Folder;
the growth of membership of the Schemes. The sustainability • Good governance for trustees;
of increased membership in Schemes is partially dependent on • Risk management and internal controls for trustees;
the levels of disposable incomes within the Jamaican economy • Requirements for pension auditors; and
as well as the employment levels of the Jamaican workforce. • Data on the value of pension assets for investment
As the FSC continues to monitor and supervise the
market conduct and governance practices of invest- managers.
ment managers, administrators and trustees, it encour-
aged members of Funds and Schemes to be vigilant.

| 45Annual Report 2015/2016

Upholding Market Integrity Through Investigation & Enforcement

The Investigation and Enforcement Divi- • Lead and co-ordinate the FSC’s I&E’s work in receiving and investigating
sion (I&E) is the conduct arm of the FSC functions as the Competent complaints resulted in consumers becom-
charged with the responsibility of ensuring Authority for the purposes of ing more aware of the FSC as an avenue for
that individuals and entities operating in countering money laundering and addressing and resolving grievances stem-
the insurance, securities and private pen- the financing of terrorism (AML/ ming from their transactions/interactions
sions sectors comply with the laws admin- CFT). with the regulated entities. Furthermore,
istered by the FSC, and laws under which through its complaints processing mecha-
the FSC has been designated as a Compe- In addition to the core functions, the I&E nism, the FSC gained greater access to valu-
tent Authority. contributed to the FSC’s financial edu- able information on the scope, types, and se-
A critical component of the FSC’s role as cation and played an active role on the verity of the issues consumers face regarding
a credible regulator is its ability to execute Consumer Protection Working Group of their transactions/interactions with the fi-
enforcement actions grounded in the the National Financial Inclusion Strategy. nancial institutions. Access to this informa-
objectives of: Key Achievements of the Division for tion provides the FSC with crucial data to -
2015-2016
• Protecting users of FSC-regulated The FY2015/16 was marked by success- • Inform its consumer education
institutions; ful efforts by I&E to promote compliance; initiatives;
strengthen market integrity; bolster con-
• Securing fair, efficient, and or- sumer education and protection; and in- • Inform the FSC’s risk profiling of
derly financial markets; and crease the visibility of the division. These its regulated entities;
efforts assisted the FSC in its organiza-
• Promoting public and investor tional-wide strategies, both locally and in- • Enhance the dialogue with the
confidence in the integrity of ternationally, to develop and implement FSC’s licensees regarding their
those markets. policies and procedures integral to the de- obligations to their consumers
velopment and preservation of robust, well- and the general public; and
These objectives lie at the heart of I&E’s functioning markets. The following repre-
core function to detect, deter and pre- sents the highlights of I&E’s achievements: • Target appropriately the most
vent misconduct in the market place, and Investigations problematic areas of concern
to institute appropriate enforcement ac- The FSC, through I&E, conducts three requiring enforcement action.
tions. To discharge these obligations, main types of investigation:
I&E performs the following functions: Investigations into Breaches of the Relevant
• The processing and investigation Statutes
• Investigate and process the han- of complaints During FY2015/16, the I&E carried on 66 in-
dling of complaints submitted to vestigations; of which, four (4) were closed.
the FSC by consumers; • Investigations into potential viola- Of the 66 investigations, seventeen (17)
tions of the statutes governing the were fit and proper, while the remaining 49
• Conduct fit and proper assess- operations of the FSC-regulated; were for possible breaches of the legislation.
ments of applicants and persons and
employed within the FSC-reg-
ulated industries, pursuant to • Fit and proper investigations
internal referrals where specific
concerns are flagged; Processing and Investigation of Com-
plaints
• Conduct investigations into During the review period, the FSC re-
breaches of the laws that the FSC solved 39 of the 106 complaints re-
administers; ceived. Chart 43 displays the percent-
age of complaints received by industry.
• Facilitate and strengthen sharing
of information and collaboration
with local, regional and overseas
regulators and law enforcement
agencies; and

| 46Annual Report 2015/2016

Upholding Market Integrity Through Investigation & Enforcement cont’d

Fit and Proper Investigations • CFATF Mutual Evaluation: In June of 2015, Jamaica
The FSC seeks to ensure that the persons operating within the underwent a Mutual Evaluation by the Caribbean Fi-
regulated industries are of a certain calibre and fit to participate nancial Action Task Force (“CFATF”),21 which assessed
in the financial markets. I&E executes this function by conduct- the strength and effectiveness of Jamaica’s existing le-
ing fit and proper assessments of applicants for licensing and gal regime and measures to address the money launder-
registration and persons who are existing licensees/registrants ing (ML) and terrorism financing (TF) challenges faced
to ascertain, among other things inter alia, their competence, in- by the jurisdiction. On a micro level, the assessment also
tegrity, character for honesty, probity and financial soundness. evaluated the (i) FSC’s discharge of its role as a Compe-
Anti-Money Laundering & Counter-Financing of Terrorism tent Authority under POCA and the TPA for educating
(AML/CFT) and promoting compliance with those laws by its licen-
As the FSC is the designated Competent Authority for the in- sees; and (ii) the measures implemented by the FSC to ad-
surance, securities and private pensions sectors under the Pro- dress ML and TF issues affecting its regulated industries.
ceeds of Crime Act (POCA) and the Terrorism Prevention Act
(TPA), I&E is primarily responsible for advancing the FSC’s ef- • Training/Public Briefing: As part of the FSC’s re-
forts to satisfy this obligation. This is achieved through the sponsibility to educate its licensees on their AML/
implementation of a robust AML/CFT framework and the es- CFT obligations under POCA and the TPA, I&E con-
tablishment of other initiatives designed to ensure that regu- ducted the following AML/CFT training initiatives:
lated entities and individuals are adequately educated and • AML/ CFT Public Forum 2015
monitored in respect of their AML/CFT duties. I&E has un- • AML/CFT Annual Conference 2015
dertaken or established the following AML/CFT initiatives: • Issuance of Public Advisories and Updates relating
to the following;
• The Creation of an AML/CFT Unit: I&E spearheaded • The CFATF Mutual Evaluation (MEV) Exercise for
the establishment of a specialized and centralized Unit to 2015;
address all aspects of the FSC’s supervisory oversight and
regulation in relation to AML/CFT. The AML/CFT Unit
acts as the lead coordinator and repository of AML/ CFT
supervision data for the FSC and as initiator of regula tory
action relating to money laundering (ML) and terrorism
financing (TF) breaches pursuant to POCA and TFA.

• Guidelines: I&E amended and finalized the Guidelines
for Anti-Money Laundering & Counter-Financing of
Terrorism issued by the Financial Services Commission
(for Entities regulated under the Insurance, Pensions,
& Securities Acts & Regulations). These Guidelines aid
the FSC’s licensees and registrants in instituting sound
and effective AML/CFT programmes. The Guidelines
were published in the Jamaica Gazette on August 11,
2015.

_______________________________
21 CFATF is a regionally-styled body of the Financial Action Task Force (FATF). FATF is the international stand-
ard setting body for “developing and promoting policies to combat money laundering and terrorist financing.”

| 47Annual Report 2015/2016

Upholding Market Integrity Through Investigation & Enforcement cont’d

• The revised Anti-money Laundering/Counter The FSC, made its first requests for assistance under the
Financing of Terrorism (AML/CFT) Regime; and IOSCO MMOU and processed requests made by inter-
national regulatory bodies on securities-related matters.
• The Role of the FSC, as regulator, in Protecting the Outlook for the I&E Division
Financial System from AML/CFT Risks. The I&E will continue its efforts to:
• Enhance consumer protection and consumer awareness;
• Publications: • Increase the visibility of the I&E Division and, by exten-
During the period under review, the following were
published: sion, the FSC;
• Understanding the CFATF Mutual Evaluation Pro- • Strengthen cross-border and local cooperation and col-
cess (Publication in the FSC Compass),
• Al Qaida listing disseminated to FSC’s regulated laboration for enforcement and regulatory purposes;
sectors (periodically), • Bolster the FSC’s AML/CFT supervisory and legal regime;
• Advisory issued on the publication of the FSC’s • Increase its participation in global efforts to regulate the
AML/CFT Guidelines in the Jamaica Gazette, and
• Public Advisories on Unregistered Financial Opera- markets that have implications for the regulated local
tions markets;
• Implement the Zero Tolerance Policy - An initiative that
Strengthening Local, Regional, and International Enforce- was developed in 2015-16, which is aimed at holding licen-
ment Cooperation sees to a higher standard of compliance with the relevant
As the local and international regulatory landscapes be- laws and their obligations to consumers of their services;
come increasingly homogenous and continue to evolve, and
regulators need enhanced local and cross-border col- • Develop the Whistle-blower Programme - As part of its
laborative efforts and strategies to strengthen the de- efforts to safeguard the public against market abuses and
tection, investigation, and prosecution of miscon- manipulation, the FSC will continue to develop a whistle-
duct in the market place, and so enhance deterrence. blower programme designed to incentivize and encourage
I&E adopted several measures to establish and concre- the public to report misconduct to the FSC, and to protect
tize regional and international commitments to the shar- against retaliation for making such disclosures.
ing of information for regulatory purposes. Dialogue was
initiated with local and regional partners regarding par-
ticipating in bilateral Memoranda of Understandings
(MOUs) which would facilitate cooperation with our regu-
latory and provide mechanism for information sharing.

| 48Annual Report 2015/2016

Regulatory Reforms

In response to a dynamic and evolving financial market, the FSC constantly reviews and revises its legislative and supervisory frame-
work. This falls within the responsibility of the Legal Services, Research and Policy Division. The legislative achievements of the
FSC during FY2015 are set out below:

| 49Annual Report 2015/2016

Investor Education & Empowerment: Advancing Our Approach to
Literacy for Youth

The FSC recognizes that investor education creating replicas of business entities in On their visit to the FSC, the students
is inextricably linked to greater investor the financial and other service indus- met members of staff who engaged
confidence. This investor confidence is de- tries. This provided students with a them in meaningful discussion about
rived from investors’ understanding of the worthwhile opportunity to build their financial goal-setting through budget-
operations of financial markets. The FSC capacities in the areas of entrepreneur- ing, investments, credit management
places high value on its role to safeguard ship, financial literacy and workforce and protecting their personal informa-
against market manipulation and has been readiness during their time out of tion online. The tour of the Bank of
actively sharing with stakeholders about school. Keron Morris, Manager of Of- Jamaica involved a visit to the Money
the critical role to be played by the inves- fice of Communications and Interna- Museum and facilitates lively discus-
tors themselves in protecting their own fi- tional Relationships (OCIR), delivered sions on the evolution of money and
nancial interests. The expected outcome is a a presentation on “Youth Finance” to the role of the Central Bank. The par-
more resilient capital market which in turn, approximately 20 students with ages ticipants learnt about the stock mar-
drives economic growth. To this end, the ranging from 15-18 years along with 4 ket and its importance during their
FSC pursued a robust calendar of activities representatives from the JAJ. The aim of visit of the Jamaica Stock Exchange.
to promote investor education during the this presentation was to sensitize par- • Appointment to the Junior Achieve-
FY2015/16. Particular emphasis was placed ticipants on the work of the FSC, credit ment Jamaica Boards
on financial education and inclusion for the bureaus, confidentiality, investments The FSC joined both the Executive and
youth. In addition to the 2015/16 Schools’ and how to manage their credit history. Operations Board of Junior Achieve-
Financial Education Programme (SFEP), • JSE Youth Town Hall Meeting ment Jamaica (JAJ) for the first time,
the following initiatives were undertaken: The JSE hosted its 8th National Inves- during the FY2015. The FSC’s Ex-
• UWI Mona Law School tor Education Week during the period ecutive Director, Ms Janice P. Holness
September 26th to October 1st, 2015 was appointed to the JAJ’s Executive
The FSC hosted 15 final-year students under the theme: “Financial Knowl- Board, while Mr Keron Morris, Head
from the UWI, Mona Faculty of Law edge the Key to Wealth Creation”. As of the FSC’s OCIR, was appointed to
pursuing the inaugural “Caribbean a sponsor of this nationally significant JAJ’s Operations Board. The FSC’s ser-
Securities Regulation” course on the financial literacy initiative, the FSC de- vice on JAJ’s Boards demonstrates its
18th of November 2015. Presenta- livered a presentation at a Town Hall commitment to a long-term partner-
tions were made by members of the Meeting at the Jamaica Pegasus Hotel. ship with JAJ to promote and facilitate
FSC’s Legal, Securities and Investi- The address was made to an estimat- important life skills for our nation’s
gation & Enforcement Teams, fol- ed 500 youths in fifth and sixth form youth. JAJ is led by its Executive and
lowed by a tour of the FSC’s offices. from high schools across the island. Operations Boards, which comprise
The students were accompanied by The aim of this experience was to share leaders from both the private and
their Lecturer, Dr. Shazeeda Ali. valuable lessons for building a solid public sectors. Junior Achievement
• Junior Achievement Jamaica’s “Biz- financial education, which can assist (JA) is the world’s largest organization
Town” Summer Camp the young aspirants throughout life. dedicated to educating students about
The FSC has been partnering with • Merlene Ottey High workforce readiness, entrepreneur-
Junior Achievement Jamaica (JAJ) The FSC sponsored a financial educa- ship and financial literacy through
and other key stakeholders to pro- tion tour of the FSC, Bank of Jamaica experiential, hands-on programs.
vide education to Jamaican youth and the Jamaica Stock Exchange for
about financial matters. As such, 30 students and two members of
during the FY2015/16, the FSC par- staff from the Merlene Ottey High
ticipated in the JAJ BizTown Summer School in Hanover in February 2016.
Camp, which was designed to focus
on practical learning experiences by

| 50Annual Report 2015/2016