Undue Diligence: How banks do business with corrupt regimes

Global Witness' new report Undue Diligence names some of the major banks who have done business with corrupt regimes. By accepting these customers, banks are assisting those who are using state assets to enrich themselves or brutalise their own people.
This corruption denies the world's poorest people the chance to lift themselves out of poverty and leaves them dependent on aid. The report sets out what governments, regulators and banks need to do in order to tackle this complicity with corruption.

The world has learnt during 2008 and 2009 that failures by banks and the governments that regulate them have been responsible for pitching the global economy into its worst crisis in decades. People in the world's richest countries are rightly angry at the increasing job losses and house repossessions.
What is less understood is that for much longer, failures by banks and the governments that regulate them have caused untold damage to the economies of some of the poorest countries in the world.
This is happening despite anti-money laundering laws that require banks to know who their customers are and what the source of their funds is. But there are huge loopholes in the system that mean it isn't working.
Undue Diligence presents evidence that:
Barclays kept open an account for the son of the dictator of oil-rich Equatorial Guinea long after clear evidence emerged that his family were heavily involved in substantial looting of state oil revenues.
A British tax haven, Anguilla, and a Hong Kong bank, Bank of East Asia, helped the son of the president of Republic of Congo, another oil-rich African country, spend hundreds of thousands of dollars of his country's oil revenues on designer shopping sprees. Read his credit card statements.
Citibank facilitated the funding of two vicious civil wars in Sierra Leone and Liberia by enabling the warlord Charles Taylor, now on trial for war crimes in the Hague, to loot timber revenues.
HSBC and Banco Santander hid behind bank secrecy laws in Luxembourg and Spain to frustrate US efforts to find out if Equatorial Guinea's oil revenues had been looted and laundered.
Deutsche Bank assisted the late president Niyazov of Turkmenistan, a notorious human rights abuser, to keep state gas revenues under his personal control and off the national budget.
Dozens of British, European and Chinese banks have provided Angola's opaque national oil company, Sonangol, with billions of dollars of oil backed loans, though there is no transparency or democratic oversight about how these advances on the country's oil revenues are used, and they have a recent history mired in corruption and secret arms deals.

Download the report:
Undue Diligence (4.5mb)

A Long Road Ahead for Portfolio Construction: Practitioners’ Views of an EDHEC Survey

In order to obtain feedback from the industry on the findings of the EDHEC European Investment Practices Survey 2008, which showed that current practice in the industry fails to draw on widely-published and freely-available techniques in portfolio management techniques, EDHEC issued a “call for reaction” asking for explanations and ways to improve portfolio construction.

When asked for the reasons behind the insufficient application of portfolio construction research to practice and for ways out of the current situation, more than half of the responding industry professionals see the level of knowledge within their profession as the main barrier.

95% of the practitioners who responded share EDHEC's opinion that improvements need to be made to portfolio construction practices. Even though the recent events in financial markets are likely to increase investors' needs for portfolio construction that take into account extreme market scenarios for various asset classes, investment managers do not fully take into account extreme risks when constructing portfolios. They also fail to employ techniques that avoid generating overly-concentrated portfolios because of poor input estimation.

86% of the professionals responding to the questionnaire report that further education and effort on the part of investment managers are highly important in closing the gap between real-word practice and academic research.

The EDHEC European Investment Practices Survey was produced with the support of Newedge, a brokerage affiliate of Calyon and Société Générale.

A copy of A Long Road Ahead for Portfolio Construction: Practitioners' Views of an EDHEC Survey can be downloaded here

Jersey: Consultation Paper on Investment Business Regulatory Fees

The Jersey Financial Services Commission has today published a Consultation Paper setting out the proposals for an increase in regulatory fees for investment business.

The proposed increase is the first for three years and will take effect when licence renewals next fall due, which is 1 May 2009.

In recognition of the difficult trading environment that investment businesses are currently operating in, the Consultation Paper sets out two alternative approaches by which the increase in fees may be implemented. One of these options allows for the increase in fees to be phased in gradually over the next three years.

Responses to the Consultation Paper are invited and should be provided in writing to either the Commission or Jersey Finance Limited in line with the timescale stated in the Consultation Paper.

The Consultation Paper may be viewed on the Commission’s website by clicking here

Sovereign Wealth Funds up 18% in 2008 to $3.9 trillion despite losses on investments

Assets under management of sovereign wealth funds (SWFs) increased 18% in 2008 to reach $3.9 trillion according to IFSL’s report Sovereign Wealth Funds 2009. The losses SWFs incurred on some investments during the past year were more than offset by inflows of new funds. There was an additional $5.5 trillion held in other sovereign investment vehicles, such as pension reserve funds, development funds and state-owned corporations’ funds and also $6.1 trillion in other official foreign exchange reserves.

The pace of growth of SWFs’ assets may slow somewhat in the next few years due to falls in commodity prices and the global economic downturn which may result in slower accumulation of foreign exchange reserves. IFSL nevertheless expects assets of SWFs to double to $8 trillion by 2015. Since the start of the sub-prime crisis SWFs, mostly from Asia, have made substantial losses on $60bn invested in US, Swiss and UK banks. Partly as a result of this and the global economic downturn, SWFs have placed more emphasis recently on injecting liquidity and helping to revive their local economies.

Countries with SWFs funded by commodities’ exports, primarily oil and gas exports, totalled $2.5 trillion at the end of 2008. Non-commodity SWFs totalled $1.4 trillion and are projected to increase their 35% share of assets in 2008 to 55% by 2015. Non-commodity SWFs are funded by transfer of assets from official foreign exchange reserves, and in some cases from government budget surpluses, pension reserves and privatisation revenue.

Marko Maslakovic, Senior Economist at IFSL said “SWFs have increased their influence on global financial markets since the start of the credit crisis. London is an important centre for SWFs both as a clearing house for transactions and a location from which some funds are managed. The many advantages it offers as a business location should allow it to capture a growing share of this market in the coming years.”

Sir Andrew Cahn, Chief Executive Officer at UK Trade & Investment (UKTI) said: “The UK’s long history of openness to foreign investment has seen SWFs be part of the UK financial services sector for more than 50 years. Economies best prepared to overcome the current global economic downturn will be those maintaining open markets to attract overseas investment, including SWFs.”

View PDF of report

UK Law Firms Climb Up Global Rankings

London has strengthened its position as one of the top global centres for legal services in 2007/08 according to IFSL’s – Legal Services 2009 report. UK firms are expected to maintain their strong international position in 2008/09 as they rationalise their operations in response to the credit crisis, in common with law firms around the world.

Based on fee revenue, in 2007/08 the largest three global law firms were from the UK, while on head-count UK firms held five out of the top seven places. The IFSL report says that most UK firms amongst the top 100 have improved their ranking during the year. This was largely due to the combination of strong growth at UK practices, strength of the pound against the US dollar during the last financial year and UK law firms’ international expansion in recent years and focus on key emerging markets such as the Middle East and Asia.

Fee income of the largest 100 law firms in the UK increased 14% in 2007/08 to a record £14.0bn. Much of this growth came in the first half of the financial year as the effects of the credit crisis spread to international markets in the second half. This resulted in less revenue in practice areas such as merger and acquisition and capital markets advisory. Revenue in 2008/09 is likely to be flat or slightly down on the previous year.

Marko Maslakovic, IFSL’s Senior Economist said, “In response to falling revenues in 2008/09, UK law firms are cutting costs by reducing partner numbers, moving lawyers between practice areas and diversifying their international exposure. There is no indication that international law firms are planning to reduce the scope of their overseas networks.”

Andrew Cahn, UKTI Chief Executive Officer said, “Not only is English the language of international business but English law is globally recognised to be fair, transparent and dependable. In the current global downturn, now is the time for UK legal firms to look into diversifying into new markets or strengthening their position in established ones to reduce risk. Despite the current global slowdown there remain opportunities within areas of the legal profession and the UK is well-placed to make the most of these.”

Click here to view PDF of report

Fifth Global Financial Centres Index

Financial centres worldwide are suffering as a result of the economic crisis, according to new research published today by the City of London Corporation. All 62 centres saw their ratings fall since the last Global Financial Centres Index (GFCI) report six months ago.

London and New York remain in first and second place respectively. Centres at the top of the table seem more resilient to the current crisis, losing fewer points than centres lower down the rankings.

Lord Mayor of the City of London Ian Luder said:

“This research confirms that the financial services industry in countries around the world has been seriously damaged by the crisis. Our task now is to climb out of the despair and to restore a sense of proportion and reality. We need to move to the reconstruction phase immediately.”

Sir Michael Snyder of the Policy and Resources Committee of the City of London Corporation said:“These new results demonstrate London’s resilience: although London’s rating has dropped, it remains the world’s top financial centre.”

The GFCI tracks the underlying competitiveness of the world’s financial centres. It is published every six months by the City of London Corporation. The rankings are compiled by Z/Yen Group from surveys of finance professionals around the world and competitiveness indicators. The survey responses were collected between July and December 2008.

As in previous GFCI reports, respondents rated the quality of the business environment – especially regulation and taxation – as the most important factor for a centre’s competitiveness.

Download GFCI 5

EDHEC sets up a research chair in ALM and Sovereign Wealth Fund Management in partnership with Deutsche Bank

The EDHEC Risk and Asset Management Research Centre has created a research chair in "ALM and Sovereign Wealth Fund Management", in partnership with Deutsche Bank, under the scientific responsibility of Professor Lionel Martellini, Scientific Director of the EDHEC Risk and Asset Management Research Centre.

The rapid growth of sovereign wealth funds and its implications pose a series of challenges for the international financial markets, but also for sovereign states. The purpose of this research chair is to focus on improving our understanding of optimal investment policy risk management practices for SWFs. In particular, we aim to analyse the optimal investment policy of a SWF in a dynamic ALM framework that will allow us to formalise the impact on the optimal allocation policy induced by the presence of risk factors affecting both the state surplus dynamics and the implicit or explicit liabilities the fund is facing, commented Noël Amenc, Director of the EDHEC Risk and Asset Management Research Centre.

Deutsche Bank is pleased to be partnering with EDHEC in the area of ALM and Sovereign Wealth Fund Management and we are looking forward to the results of expanded academic knowledge in this field. We are confident that this research will further our understanding of optimal investment policy, optimal risk management and the long-term alpha possibilities for SWFs, said Yassine Bouhara, Head of Global Markets, EMEA, at Deutsche Bank.

This research chair will include the following developments:

• Introducing a formal dynamic asset allocation model that will incorporate the most salient factors in SWF management
• Proposing an empirical analysis of the risk factors impacting the inflows and outflows of cash of sovereign funds
• Discussing how investment banks and asset managers could design dedicated solutions for SWFs based on the financial engineering of customised building blocks aimed at facilitating the implementation of hedging demands related to the presence of a variety of risk factors impacting sovereign surpluses and liabilities.

The results of the ALM and Sovereign Wealth Fund Management research chair will be widely disseminated to finance professionals, notably through the specialised website, www.edhec-risk.com, and at conferences organised by EDHEC.

Seychelles : Foundation Courses in Offshore Services

Given the enthusiastic interest and demand received for the Foundation Course in Offshore Services being held at SIM during the course of the week of the 2nd March 2009;

The Seychelles International Business Authority in collaboration with the Seychelles Institute of Management is undertaking to repeat the course on the following dates irrespective of the number of applicants:

May 2009
September 2009
March 2010
September 2010

This course is part of a new partnership between the SIBA and the SIM that will provide continuous training to persons wanting to join and persons already in the financial services industry. The course is the starting point for a much larger training scheme that will be confirmed and addressed in detail over the coming months.

The SIBA and the SIM takes this opportunity to further engage themselves to providing training of international repute which is directly relevant to the current and ever changing industry needs.

For more information contact us at training@siba.net

Insurance Banana Skins 2009

What are the risks facing the insurance industry as it grapples with the financial crisis? The CSFI's new Insurance Banana Skins survey reports on the views of more than 400 insurance practitioners and observers. Click here to download.

Madoff: A Riot of Red Flags

In a new position paper from the EDHEC Risk and Asset Management Research Centre, François-Serge Lhabitant and Greg Gregoriou, two of academia’s recognised worldwide authorities on hedge funds, have reviewed some of the red flags that any operational due diligence and quantitative analysis should have identified as a concern.

In the report, Madoff: A Riot of Red Flags, the authors highlight some of the salient operational features common to best-of-breed hedge funds, features that were clearly missing from Madoff's operations. Indeed, according to Lhabitant and Gregoriou, the list of due diligence red flags was so long and unsettling that it should have deterred potential investors.

The EDHEC position paper looks at the events leading up to the fraud and considers how the alleged split-strike conversion strategy would have worked before exploring the due diligence aspects of the case in detail.

Among the areas which should have been seen as a concern were both operational red flags (lack of segregation amongst service providers, obscure auditors, an unusual fee structure, heavy family influence, lack of disclosure, insufficient staff, etc.) and investment red flags (black-box strategy, questionable style exposures, incoherent 13F filings, excessive market size).

A copy of the EDHEC position paper Madoff: A Riot of Red Flags, can be downloaded here or here

BoE : Why Banks Failed the Stress Test

"Why Banks Failed the Stress Test", The basis for a speech by Andrew Haldane, Executive Director for Financial Stability given at the Marcus-Evans Conference on Stress-Testing, 9-10 February 2009

KPMG selects 'locations to watch' for next outsourcing boom

The credit crisis seems set to prompt a new rush for outsourcing services across the I.T. sector, with a number of new locations worldwide emerging as viable Business Process Outsourcing (BPO) hubs, according to KPMG's Advisory practice.

Launching their Exploring Global Frontiers report at this week’s NASSCOM outsourcing event in India, KPMG claims to have identified 31 cities which are rapidly emerging as leading pretenders to the BPO crown held by the traditional powerhouses such as Bangalore, Chennai or Shanghai.

As those locations rapidly approach saturation point, there is a sizable opportunity for these new and emerging locations to swallow up a large proportion of the new outsourcing work which the credit crisis is apparently creating.

The 31 locations are an eclectic mix, ranging from well-known cities in developed countries to lesser-known places in the emerging markets, well off the tourist track. Winnipeg and Belfast all feature for example, alongside Queretaro, Davao City and Cluj-Napoca.

On the KPMG list, Buenos Aires, with its population of nearly 13 million, thus features alongside tiny Port Louis (population 130,000) in Mauritius. Despite the difference in size, both are emerging as important future outsourcing centers, with the latter rapidly developing an international reputation as a disaster recovery center.

Speaking at the report’s launch, Edge Zarrella, Global Head of IT Advisory at KPMG and a partner in the Hong Kong firm, said: “Traditional sourcing locations, which have been at the forefront of the outsourcing boom, were always going to reach saturation point. Corporates now need to know which locations to consider next for their outsourcing activities. There are many locations around the world which are able to supply a credible outsourcing capability. However, there are subtle nuances in terms of labor skills, niche specialisms and government incentives which have led us to highlight these 31 locations as stars of the future.”

“The need to develop new, cost effective, viable outsourcing locations has been highlighted by the economic events of the past few months. Companies are focused on reducing their cost base, both for short-term and long-term gain. As a result, more organizations are considering savings obtained through outsourcing parts of their operations. Most importantly, they should be convinced that by doing so, they are not sacrificing performance for the sake of cutting costs. Our location study aims to highlight the benefits brought by the different city choices available to them.”

The full list of highlighted destinations includes 10 locations in the Americas (including Calgary, Guadalajara and Indianapolis); 10 in Asia-Pacific (Including Changsha, Jaipur and Ho Chi Minh City); and 11 in Europe, the Middle East and Africa (including Sofia, Gdansk and Belgrade).

The reasons for these locations making it on to the final KPMG list are varied but cities in the Americas should typically benefit from large labor pools, scalability, a more mature service offering, proximity to the major client base and multiple language skills. AsPac benefits from lower costs, younger populations, plenty of government incentives and the lessons learned from the numerous outsourcing centers which already dot the region. The Europe, Middle East and Africa region offers great diversity, excellent infrastructure and numerous niche specialisms.

Zarrella concluded: “These are fascinating times to be choosing a new outsourcing provider or location as there is simply so much choice. New cities are emerging as outsourcing contenders all the time, each boasting a different set of characteristics. Just within our 31 for example, there are specific specialisms on offer — such as accounting, R&D or even animation — driven by an apparent skills bias within the pool of locally available graduates. As a word of warning though, these locations are still ‘emerging’ and, as such, can still carry a degree of risk; an element of venturing into the unknown. This is why all outsourcing location decisions should be carefully thought through on a case-by-case basis; there is no ‘one size fits all’ approach to outsourcing.”

Exploring global frontiers

Bermuda - 400 Years of Commerce

This special commemorative publication has been published to celebrate the 400th anniversary of the settlement of Bermuda in 1609.

It explains how this small Island has developed from a trading and agricultural economy to a tourist destination, highlighting its current position as one of the world’s most important financial centres.

Charting Bermuda’s extraordinary ability to adapt to changing market forces, it focuses on the Island’s economic development and the contribution of its key sectors, outlining the strategies being implemented to enable this captivating jurisdiction to meet the needs of today’s international business and investment community, whilst addressing the opportunities and challenges appearing on the horizon in the foreseeable future.

Click here to view the eBook version of the Bermuda – 400 Years of Commerce publication.

City welcomes launch of International Centre for Financial Regulation

Centre to foster global regulatory cooperation to improve efficiency of financial markets

The International Centre for Financial Regulation (ICFR), an independent global research institute focused entirely on financial regulation, launches today (13 January) at the Mansion House in the City of London. The ICFR will be led by Barbara Ridpath as Chief Executive.

The ICFR, the first of its kind, is the product of a unique cooperation between 19 financial services institutions and HM Government. The City of London Corporation has pledged £1 million to support it. The ICFR will provide objective, non-partisan research, debate and training on financial regulation.

The current international economic and financial turmoil has accelerated the need for a more collaborative approach to global regulation and consideration of lessons to be learned. The ICFR will examine how regulation could better address and anticipate the evolution of financial markets, and how to shape international cooperation among regulators fundamental to re-establishing financial stability and confidence.

The ICFR will commission cutting-edge research to move forward thinking on regulatory frameworks and will also commission training to improve regulatory understanding, compliance and risk management. The ICFR will work in collaboration with existing bodies and standard setters providing financial training to create 'best in class' tailored provision for market participants, policy makers and regulators. The Centre, while based in London, is intended to serve constituencies well beyond the borders of the UK aiming to provide a secure international forum for open dialogue on effective regulatory collaboration and best practice.

Barbara Ridpath, Chief Executive of the ICFR said, "The continued impact of the current financial turmoil has highlighted the very real need for greater harmonisation of financial regulation globally to address the current concerns of all market practitioners. Bringing together academics, policy makers, regulators and market participants through discussion forums, working groups and independent research, the ICFR will address themes to support a more efficient regulatory environment. The launch of the Centre comes at a pivotal time when it is absolutely critical to be looking for new thinking on how to return stability to the financial markets, and how to adapt regulation to changed market structures."

Lord Mayor of the City of London Alderman Ian Luder said, "In the City of London we have long wanted an independent concentration of expertise in Financial Regulation. The ICFR is not a product of the current financial crisis – but we can expect it to play a central role in the regulatory structures we will need as we emerge from it.

The watchword needs to be transparency and the focus needs to be on perpetuating an open, honest environment based on good governance. This reassures investors and those looking for investment, not least when large sums of investment capital are needed to bring innovations to the market."

Stuart Fraser, Chairman of the City of London Corporation Policy & Resources Committee said, "The City of London has always been a hub for global talent and expertise in finance so I am delighted to support the new Centre’s launch today. I believe the ICFR will become a world-class centre of financial regulatory expertise, able to influence global developments in regulation. It will be a catalyst to connect the best academics, policy makers and practitioners within the UK and beyond."

City of London Corporation welcomes more 'joined-up' approach to financial services

12 December 2008

Stuart Fraser, Chairman of the Policy and Resources Committee, City of London Corporation, said today:

“Bob Wigley and his team have produced a thorough and timely report. I have been involved throughout as a member of the panel and I know that the review reflects months of open, pragmatic debate between experienced practitioners.”

“I support the key recommendations of today’s review, and particularly the creation of a new organisation under the leadership of the City of London Corporation to promote London’s financial services - which will bring a more joined-up approach. These are difficult times for the City as we face the financial crisis, tough competition from emerging markets and negative public opinion. So a strong voice for financial services is more relevant than ever.”

“The City Corporation has agreed to go ahead and set up the new board, which, working with the Government and the Mayor of London, will bring together the best City brains to sustain London’s position as a world-leading financial centre. The challenges which confront us in the current economic climate are huge, but with a coordinated approach, the necessary resources and the right machinery, we can meet these challenges successfully. This report sets the path and the new board can deliver the results the City needs.”

Lord Mayor of the City of London Ian Luder said: “The reputation of financial services globally has suffered in the current crisis. This board will take the lead in sustaining London’s credibility as a world leading centre for international business. ”

The Wigley Report’s key recommendations are:

1. Rebuilding the UK’s reputation for leading global financial regulation
   The industry and the regulatory authorities working together to rebuild the UK's reputation in the wake of the financial crisis.
   Supporting the FSA's planned and published move from risk based supervision to a more intense supervisory model, and supporting the creation of a new global policy framework.
   The Government must urgently review the UK's administration laws to restore trust in London based financial services subsidiaries of overseas firms.
   Statutory immunity must be granted to whistleblowers to deter insider dealing.
   An annual independent survey of UK financial services regulation benchmarking it globally, to be carried out by the new International Centre for Financial Regulation
2. Creating a Financial Services Board to promote London as a financial centre
   London should form a single powerful, properly resourced body, under the leadership of the City of London, to promote London’s position as a global financial centre.
   The agency shall promote London’s financial services sector overseas, anticipate strategically important trends and highlight domestically the industry’s contribution to the UK.
   A chairman of top industry calibre should be appointed to oversee the new body.
3. Boosting infrastructure
   That the Greater London Authority set up a “financial services infrastructure group”, in co-operation with the City of London Corporation, to plan for the long term infrastructure needs of the industry.
   The group would co-ordinate a solution to the industry’s fast-growing data processing requirements, collaborating to establish a common data centre.
4. Making London the location of choice for financial services careers
   A Chancellor’s High Level Group-led programme to ensure that London remains the location of choice for professionals starting and progressing their international financial services careers.
   The programme would help London become the centre for academic excellence in financial services, deepening the links between industry and academia and upgrading the facilities of the capital’s universities.
5. Improving the competitiveness and predictability of the UK’s tax regime
   The Review developed three specific proposals for tax reform for consideration by HM Treasury:
   Improve the process of introducing new tax policy by forming a panel of industry experts to support HMT and HMRC pre consultation
   Use the tax system to reinforce the UK as the most attractive geographic location for companies to base their headquarters or regional holding companies
   Formalise corporation tax policy to demonstrate the UK’s intention to remain globally competitive
   An annual independent international benchmarking of the UK’s tax regime to be carried out by the widely respected Oxford Centre for International Taxation

Download the full report here

Mauritius: International Arbitration Act 2008

The Mauritian Parliament passed a new International Arbitration Act (“the Act”) on 25 November 2008.

The passing of this legislation represents the culmination of two and half of years of work undertaken by the Mauritian State Law Office, assisted by the Mauritian delegate at UNCITRAL (Mr Salim Moollan, of the Chambers of Sir Hamid Moollan QC, Mauritius, and Essex Court Chambers, London), the UK delegate at UNCITRAL (Mr Toby Landau QC of Essex Court Chambers), and Mr Ricky Diwan of Essex Court Chambers, and in close collaboration with the UNCITRAL Secretariat and the Permanent Court of Arbitration at The Hague (“the PCA”). The Act is based on the UNCITRAL Model Law on International Commercial Arbitration, as amended by UNCITRAL in 2006 (“the Amended Model Law”). It will come into force on 1 January 2009. Pursuant to its Section 3, the Act will apply to all arbitrations commenced after that date (irrespective of the date when the relevant arbitration agreement was concluded) and not to arbitrations commenced before that date.

In addition to the Act itself, the drafters of the Act have – following a specific request by the Mauritian Prime Minister in Parliament – prepared Notes of the travaux préparatoires of the Act (“the Notes”), which are intended to be a companion to the Act, and to assist future users of the legislation. These were released for access to the general public on 8 December 2008. While the only official version of the Act is the English version, the Act and the Notes are being translated into French, and it is intended that they will be published in leading English and French arbitration journals over the coming months to facilitate general access thereto.

Mauritius’ strong commitment to developing international arbitration

The Act has received the direct personal backing of the Mauritian Prime Minister (Dr. the Honourable Navinchandra Ramgoolam), who has driven the project, and who – in introducing the Bill to Parliament – highlighted the following features which – it is hoped – will help Mauritius in its endeavours to become a state-of-the-art and attractive jurisdiction for international arbitrations:

(1) Mauritius has a perfect geographical situation to become a centre of reference for disputes involving Africa, South East Asia, India, China and Europe.

(2) Mauritius has the infrastructure to become such a centre, contrary to a great number of its neighbours.

(3) The extensive network of Double Taxation Agreements which Mauritius has with a large number of Investor Countries as well as Developing Countries makes Mauritius a perfect conduit for international investments, and a place for the resolution of investment disputes.

(4) The facility Mauritians have with languages, being naturally bilingual if not trilingual.

(5) The fact that Mauritius is, and is perceived, as a neutral country from both a developed world and a developing world perspective.

The Act received the support of all members of the Mauritian legislature, and was passed on an expedited basis.

The main features of the Act

The main features of the Act are as follows:

(a) The Act establishes two distinct and entirely separate regimes for domestic arbitration and for international arbitration. It covers only the latter.

(b) The provisions of the Amended Model Law have been incorporated within the Act itself (rather than in a separate schedule). In order to assist international users, a Schedule (The Third Schedule to the Act) has been prepared setting out where given Articles of the Model Law have been incorporated in the Act. The Amended Model Law has been modified by reference (in particular) to the current works of UNCITRAL on its arbitration Rules, and to the English, Singapore and New Zealand Arbitration Acts.

(c) A number of specific features have been incorporated in the Act:

• (i) The Act provides that all Court applications under the Act are to be made to a panel of three judges of the Supreme Court, with a direct and automatic right of appeal to the Privy Council. This should provide international users with the reassurance that Court applications relating to their arbitrations will be heard and disposed of swiftly, and by eminently qualified jurists.
• (ii) The Act adopts a unique solution, in that all appointing functions (and a number of further administrative functions) under the Act are given to the PCA. In order to ensure that the PCA is able to react swiftly in all Mauritian arbitrations, the Mauritian Government has negotiated and will conclude a Host Country Agreement with the PCA pursuant to which the PCA will appoint a permanent representative to Mauritius, funded by Government, whose tasks will consist inter alia of assisting the Secretary-General of the PCA in the discharge of all his functions under the Act [Signature of the Host Country Agreement should take place in February 2009].
• (iii) Specific provision has been made in the Act for the arbitration of disputes under the constitution of offshore companies incorporated in Mauritius in order to provide a link between Mauritius’ thriving offshore sector and the new intended international arbitration sector.
• (iv) The Act expressly clarifies that foreign lawyers are entitled to represent parties and to act as arbitrators in international commercial arbitrations in Mauritius.

A specific focus on investment arbitration

The Act has a specific focus on investment arbitration. First, the text of the Amended Model Law has been modified to ensure that the Act will apply to investment arbitrations conducted in Mauritius. This has been done by making the Act applicable to “international arbitration” generally rather than “international commercial arbitration” (compare Section 3 of the Act with Article 1(1) of the Amended Model Law), and the definition of “arbitration agreement” of Article 7 (Option 1) of the Amended Model has been extended to include arbitration clauses “in a contract or other legal instrument” for the specific purpose of covering investment treaty arbitrations arising under bilateral or multilateral investment treaties (see Section 4 of the Act, and para. 38 of the Notes).

In addition, a conscious decision has been taken not to include provisions as to confidentiality in the Act (contrary for instance to the detailed provisions included in the New Zealand International Arbitration Act in 2007), in order (in particular) not to hinder the application of such transparency rules as already exist or may be developed in the future in the field of investment treaty arbitration (see para. 104 of the Notes).

An invitation to all users

Despite the numerous failed attempts of one local institution (the Mauritian Chamber of Commerce and Industry) to develop a form of local institutionalised arbitration on the Island over the past twenty years, there are currently very few international arbitrations taking place in Mauritius.

As a result, the Mauritian Government has taken a policy decision not to create a Mauritian International Arbitration Centre (similar to SIAC, or to the new Dubai Centre) in the immediate future, but rather to engage with the leading arbitral institutions and to create the conditions for established form of institutional arbitrations (as well as ad hoc arbitration) to flourish in Mauritius. Contacts to that end have already been made with the leading institutions.

Feedback from interested parties

In the course of the Second Reading of the Bill, the Deputy Prime Minister and Minister of Finance and Economic. Development (Hon. Rama Sithanen) stated that the International Arbitration Act would be monitored over the years, in order to detect any problems – or possibilities for improvement – in the legislation, with a view tocorresponding amendments being implemented from time to time.

In order to facilitate this process, a specific e-mail address will be set up and publicised for users of the Act, academics, and other interested parties to provide comments and suggestions on the legislation to the Mauritius State Law Office.

STEP Mauritius: Giving a new impetus to Training in the field of trusts in Mauritius

Paper to be presented to Society of Trust and Estate Practitioners (STEP) Education Committee by the Mauritius Branch of STEP

Strategically located in the Indian Ocean at the crossroad of international investments, Mauritius has throughout the last decade forged a strong reputation as a premier international financial centre. Although the initial thrust of the business arose through the use by foreign institutional investors using Mauritius as a base to invest in India taking advantage of the generous provisions of the India-Mauritius Double Taxation Treaty, the other attributes of the jurisdiction namely the legislative and regulatory framework, low taxation, innovative financial products and competitive cost base resulted into other forms of business being attracted to the jurisdiction.

The trust industry kicked off through banks (Standard Bank and Deutsche Bank) which operated large trust operations in the Channel Islands, looking at Mauritius as an ideal base to outsource some of their back office trust administration to Mauritius, and gradually offering full fledged trust services from Mauritius, taking benefit of a very good trust legislation comparable to that of the more mature trust centers. Thereafter, other service providers followed heed and the government through its promotion agency, the Financial Services Promotion Agency, started to promote Mauritius as a competitive Trust jurisdiction. The growing number of members of the local branch of the Society of Trusts and Estate Practitioners (STEP) is a vivid testimony of the mounting interest in Trusts in Mauritius.

STEP Mauritius is committed to the growth of the trust industry in Mauritius and recognizes that this can only be achieved through the development of its human resources capabilities which are the backbone of any successful service industry. STEP Mauritius would like to work in tandem with STEP and Central Law Training (CLT) to pursue this objective and is looking ahead to a partnership which will be beneficial to the trust industry and by necessary implication to the association as a whole.

Guernsey - The Symbol of International Finance

Guernsey - The symbol of international finance highlights recent tax, legislative and regulatory changes on the Island, assessing their impact on the development of its financial services sector and just why Guernsey is considered the jurisdiction of choice in many major financial centres for corporate and individual investors. It includes the current activities and strategic vision of the Island’s authorities, the GFSC and GuernseyFinance, outlining initiatives planned for the foreseeable future, towards developing the finance sector and maintaining Guernsey’s impressive economic growth.

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Legal Aspects of Financial Services Regulation and the Concept of a Unified Regulator

Kenneth Kaoma Mwenda

Senior Counsel

Legal Vice Presidency

The World Bank

Over the years, financial regulation and supervision in many countries has been organized around specialist agencies that have distinct and separate responsibilities for banking, securities, and insurance. In recent years, however, there has been an emerging trend in some countries towards restructuring the financial supervisory function, and in particular creating unified regulatory agencies (agencies that supervise two or more of these areas). The fact that a number of countries are now moving towards integrating the different supervisory functions into a single agency, and that different types of financial services and products continue to spring up in the financial sector of many countries, are indications of the changing global landscape of the financial services industry. Equally important as indicators of the evolving course of financial services regulation are increases in the number of countries where universal banking is practised and in the numbers of parent and subsidiary companies providing different types of financial services and products.

This study examines the policy bases of different countries adopting various regulatory and institutional models of unified financial services supervision and addresses some of the key characteristics of these models. The study also highlights the progress achieved by the unified regulators in adopting a consistent framework for the regulation and supervision of all financial intermediaries they oversee. Practical problems faced by countries in setting up unified regulators are identified, and the study highlights important legal and policy issues that should be considered when developing regulatory and institutional models of unified financial services supervision.

This study deals with legal and policy issues underpinning the development and strengthening of the regulatory and institutional framework for unified financial services supervision. The study discusses developments in a number of jurisdictions, among them Australia, Canada, Estonia, Germany, Hungary, Ireland, Latvia, Malta, the Scandinavian countries, the United Kingdom, and the United States.

Chapter 1 examines conceptual issues to be taken into account in designing a sound regulatory and institutional framework for financial services supervision. The chapter also provides a working definition of “regulation” and delves into the intricacies of designing the appropriate regulatory framework. Chapter 2 analyses the concept of an independent financial services regulator, arguing that a unified regulator that is both independent and accountable would help promote the development of a sound financial sector. Chapter 3 discusses the concept of a unified regulator, examining the question of whether every country should adopt a model of unified financial services supervision. Chapter 4 provides country studies, addressing the efficacy of the framework for unified financial services supervision in Latvia, the United Kingdom, and the Scandinavian countries. Finally, Chapter 5 spells out policy recommendations and possible constitutional and legal challenges that might be encountered when a country is considering unifying its regulation of financial services.

SEO Economic Research: The Dutch Trust Industry

This report describes the main results of a study commissioned by the International Management Services Association (VIMS), supported by the Dutch Fiduciary Association (DFA) and carried out by SEO Economic Research. Interviews with stakeholders and a questionnaire among trust offices and extensive desk research are the main pillars of this study. The aim of this inquiry is answering the following questions:

• What services does the Dutch trust industry provide?
• How and to whom are services provided?
• What is the economic impact of the Dutch trust industry on the Dutch economy?
• What is the (competitive) position of the Dutch trust industry in an international perspective?

In order to answer these questions, SEO Economic Research carried out interviews with trust offices, industry organizations, regulators and providers of related professional services. In addition, SEO Economic Research set out a questionnaire among all trust offices in the Netherlands in possession of an ASTO-license and reviewed existing literature.

SEO Economisch Onderzoek: The Dutch Trust Industry

Het rapport The Dutch Trust Industry: facts & figures geeft inzicht in de activiteiten van trustkantoren, de rol van trustdiensten in het internationale financiële systeem en de omvang van de trustsector binnen de Nederlandse (financiële) economie. 

Globalisering en het daarmee gepaard gaande opknippen en uitbesteden van (delen) van de productieketen, doen het belang van de transactiekosten verder toenemen. Regio’s met een adequate financiële infrastructuur hebben vanuit dat perspectief een concurrentievoordeel als vestigingsplaats. Nederland heeft zo’n infrastructuur. Die is onder andere gelegen in een op internationale handel georiënteerd fiscaal stelsel, via de participatievrijstelling, een uitgebreid netwerk van belastingverdragen en een betrouwbaar en stabiel fiscaal klimaat. Een ander sterk punt van Nederland is de aanwezigheid van een grote en professionele financiële sector, die ingesteld is op internationaal zaken doen. 

Bedrijven die zich administratief in Nederland vestigen, doen dat om hun grensoverschrijdende financiële transacties af te handelen, en hun belastingplanning op concernniveau te optimaliseren. Administratieve vestiging in Nederland loopt via zogeheten doelvennootschappen: rechtspersonen in Nederland, met buitenlandse aandeelhouders, waarvan er meer dan 20.000 zijn. Trustkantoren zijn in veel gevallen de beheerders van deze doelvennootschappen en vervullen daarmee een belangrijke functie in de Nederlandse transactie-economie.

Mauritius : Offshore Fund / Collective Investment Scheme holding a Category 1 Global Business Licence (Global scheme)

A Collective Investment Scheme (“CIS”) is defined under the Securities Act 2005 (“SA 2005”) as a scheme approved by the Financial Services Commission (“FSC”) in Mauritius:

• whose sole purpose is the collective investment of funds in a portfolio of securities, or other financial assets, real property or non-financial assets as may be approved by the FSC;
  
• whose operation is based on the principle of diversification of risk;
  
• that has the obligation, on request of the holder of the securities, to redeem them at their net asset value, less commission or fees; and
  
• where the participants do not have day to day control over the management of the property, whether or not they have the right to be consulted or to give directions in respect of such management.

A "Global scheme" is defined under the Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008 (“Regulations”) as a company or any other legal entity approved by the FSC, holding a Category 1 Global Business Licence (GBL 1) and authorized to carry out activities falling within the definition of a Collective Investment Scheme.

Conditions applicable to Global schemes

The FSC may grant an authorisation for a Global scheme provided that:

1. information relating to the CIS Manager and the custodian as prescribed in the Regulations is submitted with the application for authorisation;
   
2. a CIS administrator [e.g. OCRA (Mauritius) Limited] with a place of business in Mauritius is appointed;
   
3. the accounting and reporting services are carried out by the CIS Manager, or the CIS Administrator of the scheme, having a place of business in Mauritius.
   
4. The prospectus or other offering document contains the following statements in a prominent position -
   
   "Investors in [name of the Global scheme] are not protected by any statutory compensation arrangements in Mauritius in the event of the fund's failure."
   
   "The Mauritius Financial Services Commission does not vouch for the financial soundness of the fund or for the correctness of any statements made or opinions expressed with regard to it."
   
   
5. a certified copy of the prospectus or other offering document filed in a jurisdiction where the collective investment scheme is regulated or exempted from regulation is filed with the FSC;
   
6. information is provided on the CIS Manager and the custodian, including name and registered addresses and where regulated, if applicable;
   
7. information is given on whether the collective investment scheme is regulated, or shall be subject to regulation, in any jurisdiction and if so, a copy of the authorisation or similar consent of the regulator and if not, indication on what basis it is exempted from securities regulation in other jurisdictions;
   
8. adequate measures are taken to prevent money laundering and financing of terrorism and provided that the FSC is satisfied that these measures meet legislative requirements.

An authorisation under section 97(5) SA 2005 may be granted subject to such terms and conditions the FSC considers necessary or desirable for the protection of participants.

Subject to FSC approval, a Global scheme may appoint and retain a CIS Manager and/or a custodian established in a foreign jurisdiction.

The Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008

Part VIII of the Securities Act 2005 contains substantive provisions relating to collective investment schemes. These provisions are supplemented by the Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008 ("the Regulations"). The Regulations introduce a comprehensive legal regime for the establishment, management and regulation of collective investment schemes.

The Regulations provide a wider array of vehicles that could be used for structuring collective investment schemes. Further, the Regulations clarify the responsibilities of the operators and functionaries of a collective investment scheme and introduce measures to improve corporate governance in relation to collective investment schemes in general and to their functionaries in particular.

Double Tax Treaties

International double taxation results when the same income is being taxed twice: once in the state where the income arises (Country of Source) and another time in the state where the income is received (Country of Residence).

International double taxation arises because each country has its own sovereign right to tax income and own set of tax rules. The areas in which two countries’ tax systems could differ include:

• The scope of taxation

Some countries are on the territorial system whereas others have adopted a worldwide taxation basis.

• Source rules for income

The source rules determine whether income is sourced in the state where income arises, or in the state where the income is received. Conflict of source rules can result in an income having a source in both countries.

• Rules for determining the tax residence of an individual or a company.

• Measures provided for under a country’s domestic laws to relieve double taxation.

Double taxation invariably increases the burden of tax on foreign income. This has a negative impact on cross-border movements of investment, technology and expertise.

To mitigate the effects of double taxation on its residents deriving income from outside its own national boundary, one measure that a country can take is to conclude a Double Tax Treaty (“DTT”) on a bilateral basis with other countries.

The DTT is an agreement usually entered into between two countries seeking to avoid double taxation. The main objective of a DTT is to provide certainty regarding when and how tax is to be imposed in the country where the income-producing activity is conducted or payment is made. In a DTT, the taxing right of each country is defined and there are provisions for one of the countries to give tax credit or exemption to eliminate double taxation.

Under a DTT, the taxation rights over income derived by a resident of one country from the other country can be allocated in any of the following ways:

1. full rights to tax only in one country, i.e., the other country exempts the income. The full rights may be allocated either to the country of source or residence;
2. full rights to tax by both countries but with tax in the source country limited to no more than a specified level and the country of residence giving a credit for tax paid in the source country. This form of allocation normally results in a sharing of tax between the two countries;
3. full rights to tax by both countries without limitation and the country of residence giving a credit for tax paid in the source country.

Although an item of income may be deemed to be sourced in a particular country under that country’s domestic laws, that country could give up totally or partially the source taxation by agreeing to share the rights to tax with the DTT partner.

Mauritius International Finance Centre

The future of business is in Mauritius and the International Finance Centre is an outstanding building designed specifically for businesses looking for an exclusive location.

The International Finance Centre boasts a sleek design with ultra modern facilities. A symbol of prestige and prominence, designed to suit your business needs and personal requirements .

An abundance of office space, equipped with state of the art facilities and technology, the International Finance Centre will help your business to soar by ensuring that you have everything you need at your fingertips, including a gym and coffee shop to fulfill your personal requirements.

The international finance centre will be located in the Finance and IT hub of the Ebene Cybercity. It is situated just 10km from Port Louis, the capital of Mauritius, and not only acts as a link between African and Asian markets but it is also a cable landing point of the SAFE high-speed submarine communications cable between South Africa and Malaysia.

Foreign firms looking to invest in Mauritius are offered low corporate tax rates, free repatriation of profits and exemption of custom duties on resources. So, all in all Mauritius is the place to be if you want your business to thrive.

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Mauritius: Financial Services Consultative Council (FSCC)

Section 12 of the Financial Services Act 2007 provides for the establishment of a Financial Services Consultative Council (FSCC) which shall consist of –

1. the Minister who shall be the Chairperson;
2. the Financial Secretary, who shall be the Vice-Chairperson;
3. the Governor of the Bank of Mauritius;
4. the Chairperson of the Financial Services Commission (FSC);
5. the Chief Executive of the FSC; and
6. not more than 6 other members designated by the Minister from amongst persons of high calibre and of international repute in their relevant fields.

The objects of the FSCC shall be to act as a think-tank and to serve as a platform for discussions of the latest concepts and international trends in the field of financial services and global business and to formulate suggestions and ideas for the development of the financial services and global business sectors.

What it takes to succeed

Not only low taxes but a great deal besides

Places in the sun

Offshore financial centres are booming, thanks to their easy-going tax regimes. But the best of them are more than tax havens: they are good for the global financial system, argues Joanne Ramos

Mauritius: Registered Agent

Appointment of registered agent

(1) A company which intends to apply for a Category 2 Global Business Licence shall, by a resolution of its directors appoint a registered agent in Mauritius.

(2) Every registered agent shall, within 14 days of his appointment apply to the Financial Services Commission ("FSC") for a Registered Agent Licence.

(3) An application under paragraph (2) shall -

(a) contain such information and particulars as may be acquired therein and shall be made in such form and in such manner as may be approved by the FSC.

(b) be dealt with in the same manner, as is provided for under section 20(3) and (4) of the Financial Services Development Act 2001.

(4) Where an application for a Registered Agent Licence is approved by the FSC, the Chief Executive shall, after payment by the applicant of the annual fee specified in item 4 of Part II of the Fourth Schedule of the Financial Services Development Regulations 2001, issue the Registered Agent Licence on behalf of the FSC subject to such terms and conditions as the Board of the FSC may impose.

(5) Where the annual fee in respect of a Registered Agent Licence is not paid within one month after the date when payment becomes due the FSC may, in writing, notify the holder of the licence that the licence has lapsed.

Change of registered agent

(1) A company holding a Category 2 Global Business Licence may, by a resolution of its directors, change its registered agent.

(2) The company shall, within 7 days of the resolution changing its registered agent, give written notice simultaneously to the FSC and to the Registrar of Companies ("RoC") of the change and of the name and address of the new registered agent.

Resignation of registered agent

(1) Where a registered agent proposes to resign as registered agent in respect of a company holding a Category 2 Global Business Licence and is unable to agree with the company on his replacement, he shall give notice in writing at least 60 days before his resignation-

(a) to the director or officer of the company at his last known address;

(b) where he has no notice or knowledge of any change in the name and address of any director or officer of the company from the one on his records, to the person from whom he last received instructions concerning the company;

(2) (a) A copy of the letter of resignation shall be submitted forthwith simultaneously to the FSC and to the RoC.

(b) The resignation of the registered agent shall take effect on the sixtieth day after submission of the letter of resignation to the FSC and to the RoC.

(3) Where-

(a) before the expiry of the notice by the registered agent under paragraph (1), the company fails to inform the FSC and the RoC of any change of name and address of his registered agent.

(b) The RoC has reasonable cause to believe that a company holding a Category 2 Global Business Licence does not have, or is likely to find itself without a registered agent.

The RoC shall cause to be published in the Gazette a notice that the company is to be removed from the register unless the company notifies him within 30 days from the publication of the notice of the name and address of its registered agent.

(4) The RoC shall-

(a) in accordance with the Companies Act 2001, remove from the register any company holding a Category Global Business Licence which fails to comply with a notice under paragraph (3); and

(b) cause to be published in the Gazette a notice to that effect.

Maurice : L’offshore impliqué dans le scandale « Oil for Food » irakien

Lors de sa mission à Maurice entre le 25 et le 31 octobre, M. Courroye, travaillant de concert avec les responsables du State law Office, avait sollicité et obtenu un Judge’s Order ordonnant la Deutsche Bank de fournir tous les détails des comptes bancaires opérés au nom de Teillac SA. Après examen dans des conditions d’extrême confidentialité de ces documents bancaires, le juge d’instruction français a décidé de procéder à l’audition des employés de deux compagnies engagées dans l’offshore à Maurice.

Cette audition des employés d’AAMIL Limited, une offshore management company et de The Deutsche International Trust Corporation (Mauritius) Limited, s’est déroulée mardi de la semaine dernière en présence de la Deputy Master and Registrar, Mme Rehana Mungly-Gulbul, aux termes des dispositions de la loi. À ce jour, très peu de détails ont transpiré de cet exercice.

Click on link for article

The Standard: Offshore Financial Services Guide 2005-06

Snapshot and description of 30 major offshore centres

Directory of offshore service providers

Thought-provoking articles on leading issues.

Mauritius: FSPA “Training on Double Tax Treaties”

In line with its objective to develop professionals in the financial services and to be abreast of new developments in the sector, the Financial Services Promotion Agency (FSPA) will be organising a seminar on ‘Double Tax Treaties’ in November 2005.

Professor Jean Marc Tirard from Paris will give a series of ten lectures on the subject over five afternoons during the week from 7^th to 11^th November, 2005.

He is one of the leading international tax practitioners in France and President of STEP France. He is also the leading expert on common law trusts in civil law countries, including France. Mr Tirard will be making extensive use of French case studies (and other countries of relevance to Mauritius) on various treaty issues as well as will work on examples from other common law countries.

Course details

Lectures: Double Tax Treaties

Course Leader: Mr Jean Marc Tirard

Venue: 1^st Floor, Le Labourdonnais Waterfront Hotel

Time: 14:00hrs – 17:30hrs

Fee/participant: Rs 10,000

Please note the following:

• The deadline for enrolment is Monday 31^st October, 2005.
• Enrolment for the course will be on a first come first serve basis.
• Payment along with dully filled in Registration form should reach the FSPA at latest by 31^st October, 2005.
• Certificate of attendance will be provided at the end of the seminar
• MQA approval is in process and you will be advised as soon as approval is granted.

Mauritius: FSC Practice Notes on Managed Corporate Service Providers

The Financial Services Commission wishes to announce that it has, on 06 January 2005, issued Practice Notes on Managed Corporate Service Providers under section 7(1)(a) of the Financial Services Development Act 2001. These Practice Notes will come into operation on 02 February 2005.

A draft version of the Practice Notes on Managed Corporate Service Providers was released for consultation in September 2004. Management Companies were invited to respond before 11 October 2004 and a number of valuable comments and suggestions were received.

On the whole, the proposals were well received and the Commission has fully considered each and every comment submitted in finalising the Practice Notes on Managed Corporate Service Providers.

Practice Notes on Managed Corporate Service Providers

1. Management Companies are licensed by the Financial Services Commission ("FSC") under section 24 of the Financial Services Development Act 2001 (“the Act”) to set up and manage global business companies , to provide nominee and other services to the latter or to act as corporate trustee or qualified trustee under the Trust Act 2001.
2. A Management Company (“MC”) is licensed on the basis that it will operate as a full fledged stand alone operation. Current practice requires Management Companies to have a permanent establishment locally and to operate from business premises with adequate logistics and staff of adequate number, skills, knowledge and experience to undertake and fulfil their duties. The only exception is where the operation of a MC is managed under a Management Agreement by a fully established Management Company having the resources to provide such a service.
3. The FSC is responsible for supervising Global Business. The FSC’s role is to reduce the risk of money laundering and other financial crime and to protect the good repute of Mauritius as a financial centre. The FSC discharges this responsibility in different ways, for example, by promoting and enforcing legislation, statements of policy and principles, guidelines and codes of practice or practice notes.
4. In particular, practice notes explain the manner in which the principles already established under legislation or a guideline will be interpreted and implemented. Practice notes are issued under section 7(1)(a) of the Act. They do not have the force of law in that breaches will not by themselves constitute criminal offences – although they may entail regulatory sanctions. However, where as a result of a breach or failure to comply with practice notes, the FSC directs the Licensee under section 7(l)(d) of the Act to comply with any practice notes or any part thereof, failure to do so will constitute a contravention of the law and may lead to prosecution- quite apart from any other regulatory action that may be taken.

The downloadable PDF version of the Practice Notes is available here