The JFSC Decision-Making Process and Maxwellisation
When considering whether to exercise its statutory powers of sanction against an individual, the JFSC follows its published Decision-Making Process (the “DMP”). This is a detailed, multi-stage process outlined in its issued published guidance note entitled “Decision-Making Process”. The DMP has four distinct stages.
- Stage 1 involves a meetings of a preliminary review committee considering an investigation report and relevant material to determine whether the case should proceed under the DMP. If it should, the case proceeds to…
- Stage 2 is when a Committee of the JFSC’s Executive meets to consider the papers considered at Stage 1. The Committee determines whether or not the appropriate regulatory sanction is a sanction reserved to the Board of Commissioners (i.e. revocation of an entity’s licence or prohibiting an individual from working in the Island’s finance industry). If so, all papers before the committee at Stage 2 plus the minutes of that meeting are referred to the Board of Commissioners for …
- Stage 3 when the Board of Commissioners meets for the first time and determines whether it is “minded to” issue the sanction recommended by the Executive. If so, a “minded to” letter is issued to the entity and individual(s) and the case proceeds to…
- Stage 4 when the Board of Commissioners meets with the entity/individual and legal advisers to consider any further written and oral submissions filed and to reach their final decision.
A key process prior to, and throughout, the DMP is what is referred to as “Maxwellisation” to ensure fairness and transparency to the entity and individuals concerned. The process is adopted when a person - the subject of potential criticism within a draft report that, when finalised, may be made public, or that may be relied upon in reaching a decision - is provided with a copy of the draft report, or those parts that relate to him/her, and is given the opportunity to respond on the factual accuracy and reliability of the statements and criticisms of him or her made.
Finalising Investigation Reports
Prior to the finalisation of an investigation report, a draft must be issued to the board of the entity concerned for comment on the factual accuracy and criticisms made and, where criticisms are made of individuals, those parts containing the criticism put to the individuals concerned. It can be a laborious process but is essential in the context of the DMP that may be launched by the JFSC upon receipt of the final report.
During the DMP
At each stage of the DMP, disclosure is made to the entity or individual under consideration of all papers before the committee or Board at that stage and submissions invited. This transparent process ensures that all information, on which the JFSC may rely in making its decision, is reliable and complete. At Stage 4 of the DMP, oral submissions are also invited prior to the Board’s final decision being arrived at.
Francis v JFSC
In the landmark decision of Francis v JFSC, the Royal Court criticised the JFSC’s adopted approach in two ways:
- including an executive summary in the final report when not issued to the entity concerned for comment; and
- not allowing sufficient time for the entity and individuals to respond. The DMP provides for a minimum of 21 days being allowed, but this is dependent on various factors, not least the volume of documents concerned. The Royal Court specifically pointed to the balance required between “the need to press on with reasonable dispatch and the need to give individuals a fair opportunity to consider matters which they might not have thought about for a while.”
The importance of taking the opportunity and the time required to comment fully on key documents, which may go on to form the basis of a decision under the DMP, cannot be underestimated. Upon receipt of documents, extremely careful consideration should be given to all responses made to the JFSC to ensure the correct messages and impressions are communicated.
In this firm’s experience, open engagement with the JFSC at the early stages is crucial to ensure, not only the accuracy of fundamental documents before they might continue through the DMP, but also a continued working relationship with the JFSC. It is recommended that experienced legal advice is taken to guide you.