World Bank Increases Transparency through Inaugural Publication of Sanctions Board Decisions

Marking another advance in openness and accountability in its anti-corruption work, the World Bank Group today published for the first time a set of decisions issued by the World Bank Group’s Sanctions Board in cases of alleged fraud and corruption. 

"The World Bank Group takes a hard line against corruption, and we believe that greater transparency must be part of that effort,” said World Bank Managing Director Sri Mulyani Indrawati.  “By publishing Sanctions Board decisions, we are making all parties involved in the sanctions process more accountable.  This move should deepen the deterrent effect of debarments and enhance the educational value of the Sanctions Board’s findings." 

The first published decisions were announced at a panel discussion hosted by the World Bank Group Sanctions Board Secretariat to take stock of recent developments and consider ongoing challenges for the Bank Group’s sanctions system. At the discussion, the Bank Group also announced the appointment of two new Sanctions Board members:  Mr. Yves Fortier, an international arbitrator and former Canadian Ambassador to the United Nations, who will serve as Chair of the Sanctions Board; and Ms. Catherine O’Regan, President of the International Monetary Fund Administrative Tribunal and former Judge of the South African Constitutional Court.

The Sanctions Board, an independent administrative tribunal with a majority of external members, serves as final decision-maker in all contested sanctions cases.  Decisions are taken based on an adversarial process that includes written arguments and evidence and, where requested, an administrative hearing.  More than 530 firms and individuals have been sanctioned by the World Bank Group for fraud, corruption and collusion since the sanctions system was established in 1999.  Most of these sanctions have been in the form of debarments, where firms or individuals are rendered ineligible to participate in Bank Group-financed operations.

From December 2011, the Sanctions Board Law Digest has made publicly available summaries of past cases and the legal principles applied over time.  The publication of full Sanctions Board decisions goes a step further and creates an unprecedented level of transparency by presenting the Sanctions Board’s detailed review of each new appeal to determine whether misconduct occurred and if so, what sanctions should apply.

"Publication of our decisions furthers the Sanctions Board's goal to fight fraud and corruption through the rule of law," said Fathi Kemicha, the first external Chair of the Sanctions Board.  "Parties that come before the Sanctions Board, as well as our partners in the international community, will now have a more robust understanding of our process, case law, and careful examination of each case."

The decisions published today can be accessed on the World Bank’s external website, and explain the rationale for sanctions imposed in eight cases recently considered by the Sanctions Board:

• Sanctions Board Decision No. 46 (Sanctions Case No. 151):  Income Electrix Limited debarred for six months for fraud. 
• Sanctions Board Decision No. 47 (Sanctions Case No. 121):  M/s. Concept Pharmaceuticals Limited debarred for fraud, with conditional release after three years.
• Sanctions Board Decision No. 48 (Sanctions Case No. 118):  Zhonghao Overseas Construction Eng. Co., Ltd. debarred for two years for fraud, with conditional early release after one year.
• Sanctions Board Decision No. 49 (Sanctions Case No. 130):  De Lorenzo of America, Corp., S.A. de C.V., and its affiliate Marketing Enterprises Latin America, LLC., each debarred for fraud, with conditional release after two years.
• Sanctions Board Decision No. 50 (Sanctions Case No. 117):  ASDECON Corporation Company Limited debarred for corrupt practices, with conditional release after five years.
• Sanctions Board Decision No. 51 (Sanctions Case No. 145 and Sanctions Case No. 146):  
• Sanctions Case No. 145:  General Consulting Training (GCT) and Mr. Ali Safi each debarred for one year for fraud.
• Sanctions Case No. 146:  TEAM Engineering & Management Consultants (TEAM) debarred for fraud, with conditional release after two years.
• Sanctions Board Decision No. 52 (Sanctions Case No. 134):  Contransimex Nigeria Limited debarred for fraud, with conditional release after two years.

 All sanctions are reflected on the World Bank Listing of Ineligible Firms & Individuals (www.worldbank.org/debarr).

Winners of African Banker Awards 2012

African Bank of the Year: 

Ecobank (ETI), Togo

African Banker of the Year: 

Olusegun Agbaje, Managing Director, Guaranty Trust Bank, Nigeria

Best Regional Bank in Africa: 

Attijariwafa Bank, Morocco (North Africa); 

BGFI, Gabon (Central Africa);

Bank of Kigali, Rwanda (East Africa); 

Access Bank, Nigeria (West Africa); 

BCI, Mozambique (Southern Africa).

Investment Bank of the Year: 

Renaissance Capital

Award for Innovation in Banking: 

Equity Bank, Kenya

Socially Responsible Bank of the Year: 

BMCE Bank Group, Morocco

Award for Financial Inclusion: 

Groupe Banque Populaire, Morocco

Deal of the Year: 

Jinchuan's Acquisition of Metorex - Standard Bank Group

Best Bond Deal: 

Republic of Senegal: Sovereign Bond Issue - Standard Chartered Bank

Investment Fund/Private Equity Fund of the Year: 

Citadel Capital, Egypt

Best Retail Bank in Africa: 

Coris Bank International, Burkina Faso

Central Bank Governor of the Year: 

Mustapha Kamel Nabli, Central Bank Governor, Tunisia

Finance Minister of the Year: 

Kerfalla Yansané, Minister of Finance, Guinea

Lifetime Achievement Award: 

Arnold Ekpe

African Banker Icon: 

Dr Eleni Gabre-Mahdin, Founder and CEO, Ethiopia Commodities Exchange

India: B4U International Holdings Ltd vs. DCIT (ITAT Mumbai)

Despite Retro Law By Finance Act 2012, “Royalty” Not Taxable as DTAA prevails

The assessee, a Mauritius company, made payment to Panamsat, USA, for hire of a “transponder satellite”. The AO held that the said hire charges constituted “royalty” and that the assessee ought to have deducted TDS u/s 195 and that as it had not done so, the amount was to be disallowed u/s 40(a)(ia). Before the Tribunal, the department argued that though as per Asia Satellite 332 ITR 340 (Del), the hire charges were not assessable as “royalty”, this verdict was no longer good law in view of the amendment to s. 9(1)(vi) by the Finance Act 2012 w.r.e.f. 1.4.1976 to provide that such hire charges shall be assessable as “royalty”. HELD by the Tribunal:

(i) In Asia Satellite 332 ITR 340 (Del) it was held that in order to constitute “royalty”, the payer must have the right to control the equipment. A payment for a standard service would not constitute “royalty” merely because equipment was used to render that service. A similar view was taken in Skycell Communications 251 ITR 53 (Mad). In De Beers (Kar) & Guy Carpenter (Del) it was held that to “make available” technical knowledge, mere provisions of service was not enough and the payer had to be enabled to perform services himself. The department’s argument that the amendments by the Finance Act, 2012 changes the position is not acceptable because there is no change in the DTAA between India and USA and the DTAA prevails where it is favourable to the assessee;

(ii) Even otherwise as the payment is made from one non-resident to another non-resident outside India on the basis of contract executed outside India, s. 195 will not apply as held in Vodafone International Holdings B.V. 341 ITR 1 (SC). As s. 195 did not apply, no disallowance can be made u/s 40(a)(i);

(iii) Further, as prior to the insertion of s. 40(a)(ia) in AY 2004-05, payments to a resident did not require TDS, under the non-discrimination clause in the DTAA, the disallowance u/s 40(a)(i) in the case of non-residents cannot be made as held in Herbalife International 101 ITD 450 (Del), Central Bank of India & Millennium Infocom Technologies 21 SOT 152 (Del).

Note: The view that the retrospective amendments to the Act have no impact in view of the DTAA remaining unchanged may apply to taxation of “software royalties” as well. On s. 195 not applying to non-resident payers, see Explanation 2 to s. 195 inserted by FA 2012 w.r.e.f. 1.4.1962

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Mauritian Financial Sector should Re-invent Strategies to Stay Competitive

The Financial sector of Mauritius, despite its reliance on Europe, should constantly keep reinventing strategies so as to remain competitive and face forthcoming challenges, said the Vice-Prime Minister and Minister of Finance and Economic Development, Mr Xavier-Luc Duval, this morning at the opening of a one-day summit meeting on “Leadership in a Globalised World: Nurturing New Partners”, at the Grand Baie Conference Centre.

Mauritius should spare no efforts into maintaining the good reputation of its financial sector as a sound, stable, transparent and internationally recognised by its counterparts, said Mr Duval. Government, he said, is fully committed to make of Mauritius a fully-fledged regional hub and a trading and services platform for Africa in view of its future economic development.

Vice-Prime Minister Duval further stated that Mauritius already offers good opportunities for investment in emerging as well as existing sectors namely, Seafood Hub, Agro Business, Tourism and Hospitality, ICT/BPO, Financial Services, Property and Real Estate Development, Health and Wellness, Education and Distribution and Logistics.

With regards to money laundering, Mr Duval recalled that Mauritius has one of the most stringent anti-money laundering legislation and therefore cannot be used as a platform for such unlawful practices. According to him, Mauritius has so far, fully collaborated in all money laundering cases that have been referred to the country. He also expressed concerns about the White paper on black money issued last week by the Indian authorities.

For his part the Minister of Industry, Commerce and Consumer Protection, Mr Cader Sayed Hossen, highlighted that as Africa emerges as a new frontier for investment and trade, Mauritius, with its special relations with countries as part of regional and continental initiatives under COMESA, SADC and the African Union, can act as a platform for a triangular cooperation that will link India and Africa. This is a new area which both the private sectors of India and Mauritius together with Africa should explore, he added.

The Indian Minister of State for Communications and IT, Mr Sachin Pilot, pointed out that India has emerged as a new economic force in the global scene and is reckoned as a world class player in many vital sectors. Many Indian enterprises are evolving into a major power houses and are looking offshore for investment opportunities, he added. He recalled that several Indian companies are already operating in Mauritius in various sectors.

Some 200 business leaders and policy makers from across Asia and Africa are participating in the summit which forms part of the continuing Global Business Leaders Series, a unique programme to link businesses in emerging markets.

A joint initiative of the All India Management Association (AIMA) and the Board of Investment, Enterprise Mauritius, Mauritius Chamber of Commerce and Industry and the Indian High Commission, the summit focused on building through leadership in emerging markets. The new competitive challenges, financial and social issues in the current times of uncertainty, Re-inventing strategies for emerging markets; Building competitive advantage through global partnerships, Igniting innovation, and Skills and Talent Management- Investing for Growth, were also on the agenda.

Mauritius to Host Summit Meeting on Leadership in Emerging Markets

“Leadership in a Globalised World: Nurturing New Partners’ is the leading theme of a one-day summit meeting which will be held on 30 May 2012 at Grand Baie Conference Centre. This meeting is a joint initiative of the All India Management Association (AIMA) and the Board of Investment, Enterprise Mauritius, Mauritius Chamber of Commerce and Industry and the Indian High Commission.

The opening ceremony will be performed by the Vice Prime Minister and Minister of Finance and Economic Development, Mr Xavier-Luc Duval, GCSK, in the presence of the Minister of Industry, Commerce and Consumer Protection, Mr Cader Sayed-Hossen, and the Indian Minister of State for Communications and IT, Mr Sachin Pilot.

The summit forms part of the continuing Global Business Leaders Series – a unique programme to link businesses in emerging markets. This meeting, which is the first of its kind with a focus on building through leadership in emerging markets, will bring together business leaders and policy makers from across Asia and Africa to discuss the new competitive challenges, financial and social issues in the current times of uncertainty. It will be an ideal opportunity for big and small business to get involved and look at the emerging trends in the ensuing future.

Discussions will centre on how management innovations have influenced companies and the navigational challenges that leaders will be faced with in the near future. With the waning of the developed markets, emerging markets are the flavor of the decade and now represent the reshaped global economic map. These economies are throwing up new dynamics of management and will be drivers of future economic growth, but they will also throw up complex challenges.

Several themes will be discussed, namely: Reinventing strategies for emerging markets: Building competitive advantage through global partnerships, Igniting innovation, and Skills and Talent Management- Investing for Growth. Participants will also have the opportunity to hear eminent global business leaders discuss the challenges of our times.

Some of the speakers include, Mr Gautam Thapar, chairperson of The Avantha Group India; Mr Claude Ibalanky, Chief Executive Officer, Bantu Investments,  Democratic Republic of Congo; Mr Sunil Kant Munjal, chairperson, Hero Corporate Services India; Mr Shivinder Singh, Managing Director Fortis Healthcare India; Mr Chris Parsons, Senior Partner Herbert Smith UK; Ms Liliane Masala, Advisor for International Affairs to the President of the Republic of Gabon;  Mr Jean-Pierre Dalais, Chief Executive Officer, CIEL Capital, Mauritius; and Mr Philip Erzinger, Chief Executive Officer, St Gallen Foundation for International Studies Switzerland.

Mauritius: White Paper on Black Money tabled in the Indian Parliament on 21 May 2012

Communique by the Ministry of Finance and Economic Development of the Republic of Mauritius

The White Paper on Black Money tabled in the Lok Sabha on Monday 21 May 2012.

It is with satisfaction that Mauritius notes the acknowledgement by the Indian authorities of the robustness of our information sharing system with India and more particularly, as underscored in the White Paper, the fact that officers from the International Tax Overseas Unit stationed in Mauritius has been very helpful to the Indian authorities.  In Mauritius we stand ready to consider other forms of collaboration with a view to addressing India’s concerns on the operation of the Mauritius-India Double Taxation Avoidance Convention (DTAC).

The White Paper does however contain certain misrepresentations. We are deeply concerned by a statement contained in the Paper to the effect that investments into India are apparently routed through Mauritius for avoidance of taxes and/or for concealing the identities from the revenue authorities of the ultimate investors, many of whom could actually be Indian residents, who have invested in their own companies, through a process known as round tripping.  No case involving Mauritius has been mentioned in the White Paper.  This is a clear example of erroneous perception. This is the more so regrettable in view of the significant and consistent efforts Mauritius has continuously made to address India’s concerns on the Mauritius-India tax treaty and our unflinching support and collaboration for an efficient exchange of accounting, banking and identity information with India.

The DTAC alone contains no specific provisions dealing with round tripping.  In spite of that, Mauritius has voluntarily introduced licensing conditions to require companies investing in India to certify that no Indian source funds are being reinvested into India.  This certification has to be confirmed by a recognized auditor which can be an Indian auditor as authorized by our legislation. It is for this very purpose that we have consistently indicated that Mauritius stands ready to act once the Indian authorities advise us of any breach which is known to them.  Mauritius has not received any official report of a round tripping offence from the Indian authorities.

Since the inception of its Financial Services sector, Mauritius has taken all appropriate steps to safeguard the credibility of its jurisdiction. Mauritius has a stringent legal and regulatory framework recognized by the IMF, Financial Stability Board (FSB) and the OECD to combat money laundering. Furthermore, Mauritius appears on the OECD White List of Jurisdictions that have substantially implemented the internationally agreed tax standards.  Recent peer review of Mauritius by the OECD Global Forum, further upholds that Mauritius has all the essential elements in place for an effective exchange of accounting, banking and ownership/identity information with other countries.  

Mauritius is also compliant with norms prescribed by IOSCO, IAIS, FATF and the Basel Committee and has enacted necessary legislation.  In this regard, the Mutual Assistance in Criminal and Related Matters Act and the Financial Intelligence and Anti-Money Laundering Act 2002 which provides a framework for exchange of information on money laundering with members of international financial intelligence groups are cases in point. The Asset Recovery Act which we have recently promulgated and which enlarges the scope for freezing ill gotten assets is a further example of legislative consolidation at our end to deter stashing of black-money.

Mauritius is committed to working closely with the Indian Government. Mauritius has always shown its willingness to address concerns expressed by India.  We are convinced that through our on-going dialogue with India, within the framework of the Joint Working Group, the mutual interest of our two friendly countries would be safeguarded.

Mauritius: Foundations Bill

In line with Government’s efforts to promote Mauritius as an international financial centre of global repute and to diversify the product range, Cabinet has agreed to the introduction into the National Assembly of the Foundations Bill, which provides for the opening up of significant business opportunities from jurisdictions where the concept of Trust is unknown, and for the setting up of Foundations to promote Mauritius as a platform for wealth management, services, succession and estate planning, as well as pension funds.

Validation Workshop to Identify Skill Gaps in ICT Sector in Mauritius

A validation workshop to address the shortage of skilled labour in the ICT sector in Mauritius was held yesterday at Cyber Tower 1, Ebène yesterday at the initiative of the Human Resource Development Council (HRDC).

In his speech at the opening ceremony, the Minister of Education and Human Resources, Dr. Vasant Bunwaree, underscored the importance for Mauritius to build and maintain a sustainable and world class ICT workforce to meet the current and future needs and ensure that the economy continues to achieve greater productivity. With expected vibrant economic developments, Mauritius needs the right quality and quantity of manpower, he said.

Dr Bunwaree reiterated Government’s determination to use technology as a key lever to enhance our country’s role in the international economic value–chain. “Unless we know the skills and competences requirements of the ICT, we would not be able to provide the necessary support”, he said.

The Minister further recalled that Government’s ultimate aim is to ensure that no new business fails to start or existing businesses fail to grow, just because of a lack of skilled and competent people. On that score, Government is leaving no stone unturned so as to restore confidence and growth in the economy.

According to Dr Bunwaree, Mauritius is committed to collaborate with partners to develop talents which can respond to global industry shifts and help strengthen the role of the country at regional and global levels. Commending HRDC’s present initiative, the Minister spoke of Government’s plan to come up with programmes that would equip people with in-depth industry domain knowledge and skills in order to help enterprises in various economic sectors leverage on talents for business growth.

BoE: Monetary policy and the damaged economy

In a speech delivered at the Society of Business Economists Annual Conference, David Miles – External Member of the Monetary Policy Committee (MPC) – explains why he believes there is a case for making monetary policy more expansionary, even when inflation has surprised repeatedly on the upside. Miles explores the interdependence between inflation, output and potential output.  He discusses how potential output may have evolved since the crisis started, and how it might evolve in the future under different assumptions for GDP growth. 

Miles begins by discussing the wide gap between the current level of GDP (at 4% lower than in 2008), and where it might have been in the absence of the crisis (about 10% higher than in 2008).  He questions how much of that gap reflects a fall in the amount the UK could produce rather than the current output gap (the between actual production and the economy’s potential output).  He argues that this is a central question for monetary policy, and inflation.  Miles highlights the importance and difficulty of estimating potential output, noting that different measures are now giving very different signals.

Miles reviews the evidence on the degree of spare capacity (or slack) and on the impact of a given degree of spare capacity on inflationary pressures, bearing in mind the difficulties in measuring each of these directly.  He notes that the level of GDP and of labour productivity suggest there is currently lots of spare capacity in the UK. But surveys suggest the degree of slack may not be so large. And while the path of inflation is at present a reflection of cost pressures not really affected by UK spare capacity, inflation inertia does suggest that the degree of slack may be having less of an impact than usual, a phenomenon that he suggests could be linked to the disruption of credit. 

If this is right it means that the so-called Phillips curve – which shows the link between slack and inflation pressures – is flatter than had seemed likely. “My own view is that rather than interpret the recent slightly greater inertia in inflation as simply reflecting much less slack in the economy I would ascribe a significant part to a smaller downward impact of a given amount of slack on inflation pressures...If spare capacity does have a weaker impact on domestically generated inflation pressures it changes the costs and benefits of bringing inflation back to target faster or slower...In a situation where weak demand is likely to be having a negative impact upon productive capacity the cost of having a tighter monetary policy to bring inflation back to target fast will be some long lasting damage to incomes.”

This leads Miles to look at the policy implications.  He concludes that the existence of significant slack, a flatter Phillips curve and a high degree of dependence of productive potential upon demand are all likely. He concludes: “I believe they are consistent with the evidence and that they make an exceptionally expansionary monetary policy appropriate. No one on the MPC feels comfortable with the prolonged and substantial overshoot of inflation above its target level.  But that does not mean bringing inflation back to target very rapidly is the best thing to do.”

BoE: What is the FPC for?

In a speech to the Society of Business Economists’ Annual Conference, Alastair Clark – member of the interim Financial Policy Committee (FPC) and Senior Adviser for Financial Stability, HM Treasury – explains how the lessons from the financial crisis are being reflected in changes to UK regulatory arrangements, and discusses some of the issues that have arisen in developing a framework for the FPC.

He begins by reviewing the actions taken in the UK to address the weaknesses in regulation exposed by the crisis.  He highlights the regime now in place to resolve a failing bank and the greater clarity about ‘who’s in charge’ in a crisis.  He also notes the changes being made to the organisation and approach to supervision of individual institutions and recognition of the fact that there needs to be greater attention to system-level developments in focussing micro-supervision.  That has led to the creation of the FPC, which is currently operating in interim form. 

Alastair Clark outlines the objective of the FPC.  He explains that the FPC is not a vehicle for managing crises.  “It is the fire prevention officer not the fire brigade.”  Neither will it second-guess micro-regulatory judgements made by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). The role of the FPC is to conduct macroprudential regulation: “...to monitor, analyse and respond to risks in the financial system as a whole”. This objective requires the FPC both to respond to risks that are building in the system, and to put in place structural features that make it less prone to the build-up of risks.  But he warns that this wide remit could make quantitative monitoring of the FPC’s performance and success more difficult.  The FPC is also charged with ensuring that it does not harm economic growth by consistently erring on the side of excessive caution when faced with potential threats to financial stability.  But, as he points out, “...to go further and seek to promote credit growth separate from any financial stability considerations is a different matter.”

Turning to the FPC’s instruments and powers, Alastair Clark explains that there is relatively little empirical evidence on the effectiveness of potential instruments.  That has led to the FPC taking a cautious approach in reviewing the instruments it might use.  It has also led to a tiered approach in its interventions.  The most informal channel is warnings and guidance provided in public statements, which can highlight issues and condition expectations.  More formally, the FPC can issue recommendations, in principle to anyone, which Alastair Clark notes may be especially useful to address structural issues.  The FPC will also be able to make recommendations to the PRA and FCA regulators on a “comply or explain” basis.  And finally, the FPC will be able to issue directions to the PRA and FCA with which they must comply, but only in relation to the – initially probably limited – set of instruments over which it has explicitly been given a power by Treasury Order.

Finally Alastair Clark raises three general points regarding the operation of the FPC.  First, he stresses that structural features of the financial system as demonstrated by, for example, its increased interconnectedness, are a legitimate concern for the Committee.  Second is the need to “...strike the right balance between, on the one hand, encouraging banks to strengthen their financial position and, on the other, avoiding any undue constraint on the availability of credit”, a topic that has been heavily discussed by the FPC.   This raises in turn the general question of sequencing policy actions in pursuing parallel but separate policy objectives.  Third, in terms of the relationship between the FPC and the MPC, he suggests that the need to give systemic financial stability a higher profile argues for maintaining separate identities and Committees, with each having “...a mandate to address a distinct objective and with accountability for doing so.”

In conclusion, Alastair Clark says that “The FPC is not, and was never intended to be, the all-singing, all‑dancing, one-stop-shop for delivering financial stability.  And it is important we make that clear.  But it can make an important contribution to achieving that goal.”

Guernsey funds grow nearly £9 billion in Q1

The total value of funds business in Guernsey grew by £8.7 billion (3.3%) during the first quarter of the year.

New figures from the Guernsey Financial Services Commission (GFSC) show that the first quarter growth follows a drop of just more than £10 billion in the final quarter of last year and has taken the total net asset value of funds under management and administration in the Island to £270.1 billion at the end of March 2012.

This represents growth of £6.4 billion (2.4%) year on year.

Fiona Le Poidevin, Deputy Chief Executive of Guernsey Finance – the promotional agency for the Island’s finance industry, said: “It is very pleasing to see that the depreciation in the value of our funds business during the final quarter of last year was almost completely recovered during the first three months of 2012. Looking at the figures, we can see that there was an increase in fund values across the board but the vast majority of the growth can be attributed to a number of closed-ended and non-Guernsey schemes launching during the quarter.

“What I am hearing from the funds sector is that much of this business is coming from managers who have used Guernsey in the past and are providing repeat business. This demonstrates confidence in Guernsey as a jurisdiction and in particular, the experience and expertise of our service providers. The fact that it also comes in the face of generally gloomy economic conditions is very positive but we must also be conscious that external events, such as developments in the Eurozone, will continue to have an impact on our business.”

The new figures from the GFSC show that Guernsey domiciled open-ended funds reached a net asset value of £55.8 billion at the end of March 2012, which was an increase of £0.5 billion (0.9%) during the quarter but down £1.8 billion (3.1%) year on year.

The Guernsey closed-ended sector was valued at £123.9 billion at the end of March – up £4.8 billion (4%) during the first three months of 2012 and up £9.1 billion (7.9%) compared to twelve months earlier.

Non-Guernsey schemes, where some aspect of management, administration or custody is carried out in the Island, grew by £3.4 billion (3.9%) during the quarter to reach £90.4 billion at the end of March 2012, which is £0.8 billion (0.9%) lower than the value at the end of March 2011.

Horace Camp, the new Chairman of the Guernsey Investment Fund Association (GIFA), said: “It is encouraging to see this growth in the value of Guernsey funds business during the first quarter of the year. The fact that this is largely the result of new business coming to the Island is a major vote of confidence in the standards of our fund administrators, custodians and support services. The general economic malaise, particularly in the Eurozone, does mean that we need to be cautious but this has been a promising start to the year.”

Mauritius: Growth rate of 3.6% projected for 2012

The Mauritian economy is maintaining its economic resilience with a Gross Domestic Product (GDP) growth rate of 3.6% projected for 2012, despite the negative impacts of the euro zone crisis affecting the world economy. The focus for this year will be on investment, increased productivity of businesses and diversifying the markets, the Vice-Prime Minister, Minister of Finance and Economic Development, Mr Xavier-Luc Duval, said this morning, at a press conference in Port Louis.

Mr Duval underlined that Mauritius will be encouraging more foreign direct investment (FDI) from emerging economies such as China and will also tap the African continent to reduce its dependence on the European market given the fact that Sub-Saharan African economies are growing at a fast pace with a forecast growth rate of over 6% in the coming years.

The Vice-Prime Minister pointed out that various sectors of the Mauritian economy, namely tourism, exports, fish production, ICT/BPO, financial services, global business, domestic oriented industry and construction have registered positive growth. Nonetheless, he added that the country should be well prepared to better respond to the new set of challenges looming ahead in the context of uncertainties prevailing in the world economy.

As regards the key economic indicators, Mr Duval stated that inflation rate will decrease to reach around 4.5% in 2012 with a positive Balance of Payment of around Rs 2.5 billion. Budget deficit will be around 3.8% along with a decrease in public debt to 57%. Investment would grow by 0.5% in 2012 and FDI would revolve around the same figures as for 2011 that is an estimate of Rs 10 billion, he added.

Commenting on the India-Mauritius Double Taxation Avoidance Convention (DTAC), Minister Duval said that the Mauritian Government is fully collaborating with the Indian authorities. He is optimistic that both sides can conclude a mutually acceptable package that would yield a win-win outcome for both parties. Mauritius, he said, is attentive to the concerns expressed by the Indian authorities arising from the operation of the DTAC. He recalled that Mauritius has offered, as part of an all-inclusive package, to consider changes to the treaty that would address the Indian concerns, while ensuring that these do not affect the mutually beneficial effects of the treaty. Concrete proposals to that effect have been made to India.

IoM: The Tax Treatment of Foundations

The Foundations Act 2011 came into force on 1 January 2012. This Practice Note provides guidance on the treatment of foundations for Isle of Man income tax purposes.

EDHEC-Risk: Is the crisis financial?

By Noël Amenc, Professor of Finance, EDHEC Business School and Director, EDHEC-Risk Institute

It has become fashionable to blame the financial industry for its alleged role in the current crisis. It is certainly true that high-flying bankers, who often arrogantly flaunt their large bonuses and academic achievements, are the perfect scapegoats. However, with the facts at hand, this search for an ideal culprit is perhaps a bit too simple to be fair. In the present article, we review several issues over the past five years in which political expedience seems to have taken precedence over scientific facts.

FSC Mauritius and Nigeria Sign MoU on Exchange of Information

The Financial Services Commission of Mauritius (FSC) and the Securities and Exchange Commission (SEC) of Nigeria signed last week a bilateral Memorandum of Understanding (MoU) on co-operation, consultation and exchange of information.

The agreement was signed by the Chief Executive of the FSC, Ms. Clairette Ah-Hen and the Director General of the SEC, Ms. Arunma Oteh, in the margin of the annual conference of the International Organisation of Securities Commissions (IOSCO) which was held last week in Beijing.

The MoU establishes a common framework of cooperation between both regulatory bodies to foster mutual assistance and facilitate exchange of information in their respective duties. Through the MoU, both the FSC and the SEC acknowledge the importance of regional co-operation into developing and maintaining a sound domestic financial services industry in Mauritius and Nigeria.

It also underlines the importance of increasing international activities in the supply of financial services and the corresponding need for mutual co-operation and sharing of information with regard to the administration, enforcement of laws, regulations and rules in the financial services industry of the two countries.

According to Ms Ah-Hen the MoU with the SEC of Nigeria reinforces FSC’s commitment to ensure effective cross-border cooperation, information sharing and capacity building with its African counterparts.  She pointed out that the FSC has collaborated closely in the past with members of the Africa/Middle East Regional Committee (AMERC) Sub-Committee of the IOSCO adding that the MoU will further strengthen cooperation in this field.

World Bank Group Finds over 80 percent of Investment Promotion Agencies’ Efforts Falling Short

Even as countries compete to attract investments, 80 percent of national investment promotion agencies are failing to respond to investor inquiries in the key sectors of agribusiness and tourism, according to the World Bank Group’s Global Investment Promotion Best Practices 2012 report. 

The report assessing 189 economies’ responsiveness to investors finds that investment promotion agencies are less responsive to direct investor inquiries than they were three years ago. In the areas of inquiry-handling and website performance over the past two years, two regions showed improvement—the Middle East and North Africa, and Latin America and the Caribbean. 

"In difficult times, governments may be tempted to cut funding for investment promotion. However, this can cost them opportunities to secure investments and jobs,” said Pierre Guislain, Director of the Bank Group's Investment Climate Department. “Skilled investment promotion agencies can give economies a competitive advantage by helping investors choose a suitable location and set up operations that create jobs and promote growth.” 

The report shows that limited resources need not be an obstacle to effectiveness. For example, Cyprus Investment Promotion Agency, one of the world’s top-performing agencies, has only 10 staff members spread across a range of functions.  It also finds investment promotion websites to be a bright spot, with 62 percent of agencies implementing best practices. 

Nicaragua’s investment promotion agency PRONicaragua emerged as the world’s top investment facilitator, becoming the first developing country to do so. PRONicaragua achieved best-practice standards in website performance and response to investor inquiries. 

"We believe that the level of service an Investment Promotion Agency offers influences an investor’s first impression of a country’s investment climate, as it demonstrates that Government’s attitude and commitment towards investors. It is with that vision, through commitment to offering high quality service and insuring that each and every investor get the information they need, we try to build a strong sense of comfort about doing business in our country and promote economic development." said Javier Chamorro, CEO of PRONicaragua. 

The report was produced by the Investment Climate Department of the World Bank Group (which includes IFC, MIGA, and the World Bank) and sponsored by ProInvest, a European Commission partnership program for the countries of Africa, the Caribbean, and the Pacific, and by the government of Spain.

India: White Paper on Black Money

The objective of this paper is to place in the public domain various facets and dimensions of black money and its complex relationship with the policy and administrative regime in the country. The paper also presents the framework, policy options, and strategies that the Government of India has been pursuing to tackle this issue, especially recent initiatives and developments. The paper is expected to contribute to the ongoing debate on the issue of black money and help develop a broad political consensus regarding the future course of action to address it.

Download White Paper [PDF]

Tribunal upholds FSA decision to ban and fine former UBS advisers £1.3m for not being fit and proper in relation to an unauthorised trading scheme

The Upper Tribunal (Tax and Chancery Chamber) has directed the Financial Services Authority (FSA) to fine Sachin Karpe £1.25 million and Laila Karan £75,000 and ban them both from performing any role in regulated financial services for failing to act with integrity, in breach of Principle 1 of the FSA’s Statements of Principles and Code of Conduct for Approved Persons (“APER”) and for not being fit and proper persons.

Between January 2006 to January 2008, Karpe was Desk Head of the Asia II Desk at UBS AG (UBS) international wealth management business in London. Between February 2007 and January 2008, Karan worked as a Client Advisor on the Asia II Desk, reporting directly to Karpe. The Asia II Desk provided services to customers resident in India, or of Indian origin.

Karpe

During the relevant period Karpe carried out substantial unauthorised trading, predominantly in FX instruments, with a gross value of billions of pounds across 39 customer accounts.  He also made unauthorised transfers and loans between client accounts in order to conceal losses arising from the unauthorised trading. He directed others (including Karan) to assist him in arranging the transfers and loans, and creating false documentation for the unauthorised trading.  His scheme resulted in substantial losses for 21 customers. UBS has since paid compensation to the affected customers in excess of US$42 million.

Karpe also established an investment structure to enable a major (Indian resident) customer (via an investment fund incorporated in Mauritius) to breach Indian law in clear contravention of UBS guidelines. Ultimately, the customer invested over US$250 million in the fund.  Karpe deliberately and repeatedly misled compliance in order to accommodate his customer.

Karpe also misled UBS and senior management about paying compensation to a customer using monies from another customer account.

The Tribunal found that: “Mr Karpe induced others serving on his desk to participate in what was an obviously dishonest course of conduct...we infer that the whole motivation was to benefit him indirectly and in the long term by obtaining new clients through his apparent prestige, increasing funds under management and thereby advancing his career and increasing his bonuses.”

The Tribunal accepted that the compliance failings at UBS might have created an environment within which staff could “get away with” misconduct – however, this was no excuse for Karpe’s sustained dishonesty.

Karan

Karan did not instigate the unauthorised trading; however, she was aware that unauthorised activity was occurring on some customer accounts for which she was responsible. Between February 2007 and January 2008, rather than escalating this knowledge, Karan assisted Karpe in concealing the unauthorised activity.  In particular, Karan prepared false, handwritten telephone attendance notes purporting to record customer instructions she had received when she had taken no such instructions; routed transactions through a suspense account in order to conceal their origin and destination; signed a number of UBS documents recording the approval of transactions on the accounts without having received instructions or authorisation from the customers;  and failed to escalate her knowledge of unauthorised loans between customers.  Ms Karan also failed to escalate her knowledge that Mr Karpe had misled UBS and senior management about paying compensation to a customer using monies from another customer account.

The Tribunal noted that: “We recognise that Ms Karan had been placed in an extremely awkward situation through the manipulation of Mr Karpe.  The fact, however, is that over and over again she chose to go along with and, on occasions, to facilitate Mr Karpe’s wrongdoing.”

Tracey McDermott, acting director of enforcement and financial crime, said:

“Karpe exploited and abused his position of trust, and persuaded more junior employees to engage in misconduct to assist him.  Such behaviour is in breach of his obligations to his employer, his clients and his colleagues as well as to the regulator. It has no place in the financial services industry.  We welcome the Tribunal’s confirmation that as well as banning Karpe, a significant financial penalty should also be imposed.  This sends a clear message of the consequences of such behaviour.

“Karan sought to categorise herself as a victim in this matter.  The Tribunal (as had the FSA) recognised that she did not initiate the misconduct, and was placed in a difficult position by Karpe.  However, the findings and the resulting sanctions send a clear message that an approved person must take responsibility for their own actions.  Where an approved person is aware that colleagues are engaging in misconduct, we expect them to blow the whistle, not to become involved themselves.

“Those who take on the responsibility of being an approved person should be in no doubt about our commitment to take the strongest action to tackle behaviour which falls below the high standards we expect.”

In November 2009 the FSA fined UBS £8million for systems and controls failures in relation to the unauthorised activity which occurred on the Asia II Desk. In December 2011 Jaspreet Singh Ahuja and in November 2009 Andrew Cumming, both former Asia II Desk client advisers, were banned and fined £150,000 and £35,000 respectively.

IoM FSC: Observations & feedback from AIFMD questionnaire

Thank you very much for your responses to the AIFMD questionnaire. This document is intended to provide some observations and feedback on the content of the questionnaires and also to bring to your attention some matters that you may need to consider further.

General comments

Firstly, it is clear from the responses that there are some licenceholders that do not undertake Class 3 activity (services to collective investment schemes) but which undertake Class 2 or Class 4 activity (investment business / corporate services) that are caught by the AIFMD’s scope because of its wider definition of fund (“AIF”).

It was also apparent that some licenceholders will be relying on the continuance of national private placement regimes with effect from July 2013, and a smaller number are interested in EU passporting and full AIFMD compliance in due course (which is anticipated to be available from 2015).

Licenceholders managing an EU AIF

Those licenceholders that will be managing an EU AIF will need to apply to the competent authority of the EU Member State of Reference for appropriate authorisation. The Commission expects relevant applications to be made in good time, and the licenceholder’s Relationship Manager at the Commission should be kept fully informed of these applications and their ongoing progress in relation to this.

Private placement - licenceholders managing non-EU AIFs or providing relevant services to a fund marketed into the EU

It is important that those licenceholders that will be:

• managing a non-EU AIF which is marketed into the EU; or

• undertaking (under a delegation) portfolio or risk management of an EU AIF or a non-EU AIF that is marketed into the EU,

under the private placement regime from 22 July 2013 (or earlier if your target EU Member States transpose the AIFMD earlier than this date), become fully aware of the AIFMD’s requirements in this area – known as the transparency and asset stripping requirements - and be compliant with them.

The requirements, which can be found at Articles 22 to 24 and Articles 26 to 30 of the AIFMD, include the provision of an annual report with specified content, disclosures to investors and reporting obligations to competent authorities. If these requirements will apply to structures which your business provides services to, please inform your Relationship Manager at the Commission of your plans for compliance with them.

Marketing into the EU

It was also apparent from responses, that despite providing portfolio or risk management functions to non-EU funds, many licenceholders felt that they were not within the reach of the AIFMD because the AIFs are not marketed into the EU.

This may be the case – but it is important to understand the definition of marketing for the purpose of the AIFMD. This can be found at Article 4(1)(x):

“marketing - means a direct or indirect offering or placement at the initiative of the AIFM or on behalf of the AIFM of units or shares of an AIF it manages to or with investors domiciled or with a registered office in the Union”

It can be seen that the marketing of the AIF does not have to be directly undertaken by the licenceholder providing the portfolio / risk management, and that the term includes the offering or placement of units or shares, by or on behalf of managers, in relation to the funds under their management. This could cover any solicitation to invest in the AIF at the initiative of the manager or on behalf of the fund manager, whether direct or indirect, for example, if it is promoted via intermediaries and distribution or placement agents, etc. in the EU. If this occurs the AIF may be classed as being marketed to EU investors and those firms will be within the AIFMD’s reach.

If an arrangement constitutes marketing, the transparency requirements mentioned above would therefore also apply, and you should contact your Relationship Manager to discuss your plans for compliance with those requirements.

India: SEBI notifies SEBI (Alternative Investment Funds) Regulations 2012

The SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) have been notified today. 

AIFs Regulations endeavour to extend the perimeter of regulation to unregulated funds with a view to systemic stability, increasing market efficiency, encouraging formation of new capital and consumer protection. Salient features of the AIF Regulations, inter alia, include the following:

Scope of the Regulations and applicability to existing funds

• All AIFs whether operating as Private Equity Funds, Real Estate Funds, Hedge Funds, etc. must register with SEBI under the AIF Regulations.
• SEBI (Venture Capital Funds) Regulations, 1996 (“VCF Regulations”) have been repealed. However, existing VCFs shall continue to be regulated by the VCF Regulations till the existing fund or scheme managed by the fund is wound up. Existing VCFs, however, shall not increase the targeted corpus of the fund or scheme as it stands on the day of   Notification of these Regulations. Such VCFs may also seek re-registration under AIF regulations subject to approval of 66.67% of their investors by value.
• Existing funds not registered under the VCF Regulations will not be allowed to float any new scheme without registration under AIF Regulations. However, schemes floated by such funds before coming into force of AIF Regulations, shall be allowed to continue to be governed till maturity by the contractual terms, except that no rollover/ extension or raising of any fresh funds shall be allowed.
• Existing funds not registered under the VCF Regulations which seek registration but are not able to comply with all provisions of AIF Regulations may seek exemption from the Board from strict compliance with the AIF Regulations.

Categories of funds

The Regulation seeks to cover all types of funds broadly under 3 categories. An application can be made to SEBI for registration as an AIF under one of the following 3 categories:-

                 i.    Category I AIF – those AIFs with positive spillover effects on the economy,  for which certain incentives or concessions might  be considered by SEBI or Government of India or other regulators in India; and which shall include Venture Capital Funds, SME Funds, Social Venture Funds, Infrastructure Funds and such other Alternative  Investment Funds as may be specified. These funds shall be close ended, shall not engage in leverage and shall follow investment restrictions as prescribed for each category. Investment restrictions for VCFs are similar to restrictions in the existing VCF Regulations.

                 ii.    Category II AIF – those AIFs for which no specific incentives or concessions are given by the government or any other Regulator; which shall not undertake leverage other than to meet day-to-day operational requirements as permitted in these Regulations; and which shall include Private Equity Funds, Debt Funds, Fund of Funds and such other funds that are not classified as category I or III.  These funds shall be close ended, shall not engage in leverage and have no other investment restrictions.

                 iii.    Category III AIF – those AIFs including hedge funds which trade with a view to make short term returns; which employs diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives.     These funds can be open ended or close ended. Category III funds shall be regulated through issuance of directions regarding areas such as operational standards, conduct of business rules, prudential requirements, and restrictions on redemption, conflict of interest as may be specified by the Board.

Other salient features

• The Alternative Investment Fund shall not accept from an investor an investment of value less than rupees one crore. Further, the AIF shall have a minimum corpus of Rs. 20 crore.
• The fund or any scheme of the fund shall not have more than 1000 investors.
• The manager or sponsor for a Category I and II AIF shall have a continuing interest in the AIF of not less than 2.5% of the initial corpus or Rs.5 crore whichever is lower and such interest shall not be through the waiver of management fees.
• For Category III Alternative Investment Fund, the continuing interest shall be not less that 5% of the corpus or rupees ten crore, whichever is lower.
• Category I and II AIFs shall be close-ended and shall have a minimum tenure of 3 years. However, Category III AIF may either be close-ended or open-ended.
• Schemes may be launched under an AIF subject to filing of information memorandum with the Board along with applicable fees.
• Units of AIF may be listed on stock exchange subject to a minimum tradable lot of rupees one crore. However, AIF shall not raise funds through Stock Exchange mechanism.
• Category I and II AIFs shall not be permitted to invest more than 25% of the investible funds in one Investee Company. Category III AIFs shall invest not more than 10% of the corpus in one Investee Company.
• AIF shall not invest in associates except with the approval of 75% of investors by value of their investment in the Alternative Investment Fund.
• All AIFs shall have QIB status as per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.
• The Regulations provide for transparency and disclosures and mechanism for avoidance of conflict of interest.

Jersey’s pioneering legislative and regulatory frameworks have positioned it ahead of the game

Jersey’s pioneering role in developing a strong judicial and regulatory framework is enabling it to continue attracting compliant and high quality private client business, according to panelists at a conference held in London this week.

An expert panel of speakers at the Jersey Finance Annual London Conference, held on 16th May at the British Museum, told an audience of over 200 wealth management professionals that Jersey’s ability to develop high quality legal and regulatory systems has earned it a global reputation as a leading centre for the right kind of private client work.

In the two expert panel sessions at the debate, which included a number of international, UK and Jersey practitioners, it was also suggested that there were specific opportunities for Jersey to focus on and grow its wealth management services for ultra high net worth individuals. The increasingly blurred definitions of ‘reasonable’ and ‘egregious’ tax avoidance schemes were also discussed.

Keynote speakers at the event were broadcaster Nick Robinson, who offered the audience an overview of the current global political landscape and his views on what this means in terms of future wealth creation, and Tom Purves, former CEO of Rolls Royce, who discussed the challenges in creating wealth and the importance of integrity and a strong, credible brand.

Geoff Cook, chief executive of Jersey Finance, who introduced the conference, said:

"A clear message to come out of this conference was that Jersey should take confidence in knowing that the private wealth management services it offers are world class, and that it should continue to focus on what it does best in order to succeed in an increasingly challenging world. It was pleasing to hear the panelists explain that Jersey has really set the pace with its product range, depth of expertise and commitment to enforcing stringent regulatory standards and that, although other jurisdictions have attempted to replicate what Jersey has done, they have by and large not done so well. Jersey is still considered to be ahead of the game, a position it clearly wants to maintain.

"It was a really excellent turnout at this week's conference, particularly in terms of the high proportion of attendees from the City and elsewhere in the UK. It demonstrates the continued attraction of Jersey for high quality wealth management services amongst UK professionals and reinforces the strong links with and the enormous contribution Jersey makes to the City of London.”

Lord Ashton of Hyde: "FSA has lost its sense of proportion in implementing Solvency II"

HL Deb, 16 May 2012, c430

My Lords, it is a privilege, but a rather daunting prospect, to address this House for the first time. I am lucky to have had the right reverend Prelate to pave the way with such an impressive speech. I thank the noble Lord, Lord Myners, for his kind words-I think they were kind. His facts were right, but the conclusions were wrong: I am not a confidant of the Prime Minister. In fact, he did actually write me a letter the other day, which was very kind of him, but he got my name wrong.

I echo the right reverend Prelate in thanking all those who have made my short time here so welcome and interesting, especially Black Rod and his staff, the clerks, the doorkeepers and particularly my mentor, my noble friend Lady Sharples. She has treated me with affectionate discipline, rather as one would treat a wayward spaniel, and I am very grateful to her.

In many ways, it would have been obvious to have spoken in the debate about constitutional affairs. My great-grandfather came to this House in 1911, at the height of the furore over what became the Parliament Act. He had for many years been a Liberal MP, from a long line of northern non-conformists. Just over 100 years later, we are still talking about many of the same issues.

Apart from my Liberal heritage, I am able to speak here today because I was elected-albeit, I must admit, not by a huge electorate. I was elected under the alternative vote system, so one could say that I should be a natural supporter of the coalition. It seems, however, that there is very little to say about constitutional affairs that has not been said in the past couple of days, so I thought I would talk about a subject near, if not dear, to my heart-regulation. In doing so, I should declare an interest as the chief executive of two insurance companies and a member of the Council of Lloyd's.

At the beginning of the gracious Speech, Her Majesty said:

"Measures will be brought forward to further strengthen regulation of the financial services sector".

I am certainly not advocating a return to light-touch regulation. This would be impossible, and we have seen only in the last week the sort of things that can go wrong at JPMorgan Chase. We expect regulation to be firm and consistent; no business that thinks it is any good wants to be undercut by cowboys acting irresponsibly. However, we also want it to be pragmatic, proportionate and targeted correctly. This is where the implementation of regulation as set out by Parliament is so important. It can make the difference between sensible, prudential regulation and expensive self-serving bureaucracy.

I shall give an example from my own industry, the insurance industry. It is labouring at the moment under the introduction of Solvency II, which is the most far-reaching reorganisation of the way insurance companies organise themselves and their accounts for 30 years. It is driven entirely by EU directives and has produced a tidal wave of bureaucracy and expense which seems to be largely unnoticed outside the industry. Lloyd's alone reckons that it will spend £300 million on complying with the Solvency II requirements, not to mention the cost of ongoing compliance.

The Lloyd's Internal Model application pack alone will be 6,000 to 7,000 pages long. It is estimated that the insurance industry is going to produce 500,000 pieces of paper to support the Solvency II application to the FSA. To put that into perspective, if you pile boxes of photocopying paper one on top of the other, 500,000 pages is almost exactly the height of Nelson's column. Nor is this a light read: it is full of complicated mathematics and mind-numbing details-for example, verifying the complex assumptions in the very detailed and complex stochastic models.

I think that what Parliament might not realise, when it makes perfectly sensible regulations at a high level, is the cost of compliance with the detail. I do not see this improving if this House is full of 450 elected, professional politicians. Everything from minutes of meetings, policies, terms of reference and succession plans to detailed descriptions of the data in a company and all its interdependencies now has to be documented in minute detail. In the words of modern regulators, "If it isn't written down, it hasn't happened". These documents have to be written, reviewed, signed off-often by the board-checked, monitored and reviewed regularly for ever more. The idea that more documentation in itself is useful regulation should, in my view, not be accepted as given.

There is a strong feeling that the FSA has lost its sense of proportion in implementing Solvency II. It is very sensitive to the charge of gold-plating regulation but many in the industry feel that, in its insistence on more and more documents, it has lost its perspective in regulating the process rather than the outcome. You cannot help wondering whether all this detail and the requirements are more to help the regulators regulate, and to attribute blame if something goes wrong, than being about proportionate, risk-based regulation. To cope with this regulatory burden, the FSA has proposed a whopping 37% increase in the annual funding requirement for 2012-13 for the insurance industry. That is on top of the huge cost of Solvency II.

I remind your Lordships that this is all for an industry which did not cost the taxpayer a penny during the financial crisis, employs 350,000 people and contributes £10 billion to the Exchequer each year. I very much hope that when my noble friend the Minister further strengthens regulation of the financial services sector, he will do his utmost to ensure that it is implemented at individual company level in a proportionate way under the new arrangements, and in a way which addresses the outcomes rather than the process itself.