Mauritian Law – The regulatory body of the non-banking financial sector

October 18, 2017 Law

Chapter Two: The Regulatory Body of the Non-Banking Financial Sector

1.1

The Mauritanian fiscal sector has progressed during the last decennary and it has, as such, created the possible to go a prima growing sector in footings of income, employment or value-added. Regulations have been revolutionalised through Acts of the Apostless introduced and amendments accommodating to current state of affairss in Mauritius. Indeed modulating the Non-Banking Financial Sector is no piece of bar but it has to be taken in consideration that no market can work on its ain and it has to be regulated through statute law and proper supervisory legal power. The non-bank fiscal sector includes establishments involved in Insurance & A ; Pensions, Capital Market operations, Leasing & A ; Credit Finance every bit good as Global Business activities.

In order to convey construction to the fiscal services industry in London, the Financial Services Act 1986 was enacted. It besides served as a agency to advance public assurance in the regulative model. The Financial Services Development Act 2001 was enacted by the Mauritanian Legislator to supply for the constitution and direction of the Financial Services Commission which had the duty to modulate the non-bank fiscal services. Prior to the Financial Services Development Act, there were four different organic structures to modulate the fiscal sectors. The Bank of Mauritius had the duty to modulate the banking sector, the Controller of Insurance commanding the insurance sector, the Stock Exchange Commission modulating the Stock Exchange and eventually the Mauritius Offshore Business Activities Authority commanding the non-bank offshore sector. Despite holding all these governments at the vertex, there were turning concerns for the deficiency of supervising of a certain figure of companies such as the leasing companies, the venture capital financess, pension financess or plus direction companies.

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It would be seen that the Mauritian legislator has, consciously or unconsciously, incorporated in its statutory model, assorted sine qua non factors deemed of import by the international fiscal services market.

The manner might hold been a long one but it managed to turn out to be a fruitful 1. The assorted legal establishments that existed or have been created were likely to be those that were the cardinal histrions or accelerators of the non-banking sector. It is believed that there should be a watch-dog in anything that person does and in this instance the legal establishments were at that place to guarantee conformity and attachment of the assorted Torahs or regulations and ordinances.

Mauritanian legislators made it a must to integrate sine qua non factors in its supervisory model. Indeed this will turn out to be good to the economic system and will guarantee that it is in line with the international fiscal services market.

2.1 The development of the Non-Banking Financial Institution

The Mauritius Offshore Business Activities Authority was enacted in July 1992 and was assigned to oversee and modulate the offshore concern. When Mauritius started with offshore banking in 1988/89, the purpose was to be a platform to Africa and in 1992, Mauritius emerged in the Non-Banking Offshore sector and it came out that Mauritius became the route to India with the advantage of the dual revenue enhancement pact and the pact with India is a really good one.

Before the execution of FSC as the regulative organic structure for the Non-Banking Financial Institution, the Mauritius Offshore Business Activities Authority ( MOBAA ) was the regulator of the sector which at that clip was called the offshore sector. The MOBAA was besides responsible for the publicity of the offshore sector. With the abrogation of the Mauritius Offshore Business Activities Act, the FSC was established to replace MOBAA to modulate and oversee all non-banking fiscal services and the Financial Services Promotion Authority was instituted to advance the Non-Banking fiscal services sector.

One the chief Institution regulation this sector is the Financial Service Commission ( FSC ) , which was established as the regulator for the non-bank fiscal services sector under the Financial Services Development Act 2001 ( FSDA ) . The Commission therefore licenses, regulates and supervises non-bank fiscal establishments in Mauritius.

2.1.1 The Invisible manus of political will

Sweeney-Baird [ 1 ] remarked since many states regulate their fiscal services industry through their authorities sections, altering the whole regulative system would intend drastic reform through the passing of appropriate statute law. Behind such an inspection and repair, lies to force frontward each statute law. This is where the political relations plays the devil’s advocator.

2.1.2 The passage from FSDA to FSA ( Unified Regulatory Body )

The thought of a individual regulative authorization to organize the activities of assorted non-bank regulators was foremost mooted in the 1994/95 Budget Speech [ 2 ] .

The Mauritian legislator has enacted theFiscal Services Development Act 2001in order to supply for the constitution and direction of a FSC which was empowered to modulate the bon-banking fiscal services. Prior to the FSDA, there were four different organic structures responsible for the ordinance of the fiscal sectors.

The publication of a study in 2001 brought about the possibilities of puting up a new regulative model for the fiscal services sector in Mauritius. Following parliamentary arguments, three options for this puting up were considered:

The first option was the big-bang attack option whereby a organic structure would be given with an all-incorporating power endorsed with the ordinance of both the banking and non-banking fiscal services. As a affair of fact, the Bank of Mauritius which stands at the vertex of these was to be incorporated under the model to be adopted by the freshly set up supervisory organic structure.

The 2nd option was to pull a limit line between the fiscal sector into banking and the non-banking. Thus the banking would still stay under the auspices of the Bank of Mauritius. Consequently the non-banking sector would be under the government of a freshly set supervisory organic structure which would be at its recreational phase. This option besides ignores the fact that certain fiscal services are provided by both sections of the fiscal sector.

None of the above options was chosen by the Mauritanian legislator. In fact the Mauritanian legislator was in hunt of a strong and theoretical account regulative model. An incorporate fiscal regulative model was to be developed. This could turn out to be a existent advantage for the little economic system that we hold. As a affair of fact, Bankss moved from the traditional banking system to a more diversified system offering a basket of services ; more fiscal merchandises were being introduced. This theoretical account would certainly convey approximately more investings from the portion of investors be it local investors or foreign investors. It would move as an effectual and efficient organic structure which would certainly coerce the regulated population a conformity civilization when it comes to ordinances.

2.1.3 Puting the right aims:

The chief aim of the individual regulative authorization should be to guarantee that the investor receives acceptable protection in his traffics with suppliers of fiscal services that at the macro degree soundness and stableness of the country’s fiscal system has to be ensured by the individual regulator and a dependable model has to be provided to unwrap equal information by the suppliers of fiscal services and those companies who trade on the stock market that is securities that are traded publically to guarantee people have adequate clip to confer with those information to do investing determinations.

Furthermore a speedy difference colony system should be provided at the degree of the consumer of fiscal services. A fiscal ombudsman should be to vouch that clients receive a just, sensible and just intervention from suppliers of fiscal services every bit good as expeditious declaration of differences.

2.1.4 Functions of the Single Regulatory Authority

The individual regulative authorization will hold the undermentioned chief maps whereby it has to guarantee that the proper regulative model does be in order to advance the development of the fiscal services industry and a universe category fiscal Centre in Mauritius. Furthermore it will be responsible to licence and oversee all concern activities that are related to fiscal service activities. Integration of the assorted sectors of the fiscal service industry into one harmonized, efficient and competitory industry will besides be one of the maps of the incorporate regulator. It has to move in expectancy of developments so as to place Mauritius to react to new challenges and take full advantage of new chances in footings of economic development and occupation creative activity and supply advices on any issue originating sing affair to the fiscal services sector.

There was the BOM modulating the Banking sector, the accountant of Insurance commanding the Insurance sector, The Stock Exchange Commission modulating the Stock Exchange and eventually the Mauritius Offshore Business Activities Authority commanding the non-bank offshore sector. As such there was a turning concern for the deficiency of supervising of a certain figure of companies such as the leasing companies, the venture of capital financess, pension financess or plus direction companies.

Over the old ages, Mauritius has forged itself a repute as a taking offshore fiscal Centre and a impersonal, trusted and safe legal power. Indeed, Mauritius is recognised by the OECD as a white-listed legal power with attachment to rules set by international organic structures. For all its repute as a taking fiscal Centre, there is, nevertheless, really small in the imperativeness about Mauritius when it comes to confined insurance, despite the legislative model for prisoners being in topographic point since 2001. The Financial Services Development Act 2001 ( FSDA ) provided for the foundation of the confined insurance concern and the Financial Services Development Regulations made under the Act laid out the model to ease the constitution of prisoners in Mauritius. The FSDA was so replaced by the Financial Services Act 2007 and the Insurance Act 2007 was besides introduced [ 3 ] .

To this consequence, members of the Steering Committee [ 4 ] set up made some recommendations that a Financial Services Commission ( FSC ) be created, through a Financial Services Development Act, to convey the Insurance Division, the Stock Exchange Commission, the MOBAA and all such activities which may be declared as fiscal sector activities will fall under one regulative umbrella, hence will be more organized and in this context, the FSC will, after the appropriate legislative alterations and in a first stage, take over the responsibilities and maps of the Stock Exchange Commission, the Insurance Division and the MOBAA every bit good as the ordinance of all soon unregulated activities in the fiscal sector.This will therefore bring forth proper control over the non-banking sector and at the same clip provide for proper ordinances for the unregulated activities.

2.1.5 FSC puting the gait

The MOBAA had for chief aims to supply for the formation of the Mauritius Offshore Business Activities Authority to modulate offshore concern activities from within Mauritius and for the issue of seaward certifications and to supply for other accessory affairs. The Financial Services Commission ( FSC ) is a production of the Financial Services Development Act ( FSDA ) 2001 which was repealed and replaced by the Financial Services Act ( FSA ) 2007.The former came into operation after the Mauritius Offshore Business Activities Act ( MOBAA ) 1992 was repealed. The FSA has amended and consolidated the jurisprudence modulating fiscal services, other than banking, and planetary concern and to supply for related affairs.

The first portion of the FSDA makes proviso for the reading of the FSDA while 2nd portion provides for the establishment of the FSC. The FSC is said to be a organic structure corporate managed by a Board made up of a Chairperson, experienced and qualified in the field of concern, finance or jurisprudence and is appointed by the Prime Minister. However, it should be noted that at the Parliamentary Debate for the passing of the FSDA, it was originally argued that the Chairperson was to be the Managing Director of the BOM. This was meant to make a strong nexus between the two regulative organic structures, so that this could take to the eventual integrating of the BOM into a individual incorporate regulator organic structure. It was besides due to the fact that the BOM had proved itself to be a sound regulative organic structure for the banking sector. Undoubtedly, the Managing Director could non be expected to take a limited sum of clip from his busy agenda to look after another subdivision that is the non-bank fiscal services supervising. Indeed, since the FSC was to be the regulator of an emerging industry, the individual busying the most important function in it should be person of first-class competency chosen by the Honourable Prime Minister. The Chairperson was to be attended by a Vice Chairperson and non more than five other members every bit qualified in the same field. The fiscal services market was a practical industry covering with hard fiscal services and could non hold been handled if proper cognition and experience in the field were non acquired. As per subdivision 28 of the FSDA provides for the impermanent poster of staff of the BOM to the FSC. The FSC, being a new regulative organic structure, could non be left to run on its ain right from the beginning. The Mauritanian legislator, in its wisdom, provided for the FSC to work in close coaction with the Bank of Mauritius to guarantee the safety and stableness of the Mauritian fiscal system. The demand for quality ordinance was intensely felt, particularly when the economic system severely needed to pull foreign investor to put through the new concern vehicles created by the FSDA. Since the Bank of Mauritius was already a mature regulative organic structure, it was best placed to supply the necessary support, substructure, know-how and other installations for the FSC to develop into a mature regulative authorization.

The FSC ensures the orderly disposal of the fiscal services and planetary concern activities and ensures the equity, efficiency and transparence of fiscal and capital markets in Mauritius. All licenses for Securities Exchanges ; for sedimentation, uncluttering or colony of securities minutess ; merchandising Securities Systems, are issued by the FSC after determining that the standards imposed are to the full satisfied.

2.2 The functions of Mediators

2.2.1 Investment trader

No physical individual can move as an investing trader ; it should be a organic structure corporate. All investing traders must take a licence from the FSC to move as such. That licence will allow them the right to move and keep themselves out as an mediator in the executing of securities minutess on behalf of other individuals. They can merchandise or keep themselves out to merchandise in securities as principal for their ain history with the purpose of selling them to the populace. They can subvention or administer or keep themselves out to subvention or administer securities on behalf of an issuer or a holder of securities. Any fiscal establishment wishing to move as investing trader will be capable to the regulations of the FSC.

2.2.2 Investment Adviser

The investing advisor may be a organic structure corporate or a physical individual and after being punctually licensed by the FSC, he can rede, steer or urge other individuals, or keep himself out to rede, steer or urge other individuals, whether personally or through printed stuffs or by other agencies, to come in into securities minutess ; or pull off or keep himself out to pull off, under a authorization, whether discretional or non, a portfolio of securities.

So there’s no local instance jurisprudence at manus which has tested the system governed by our securities Torahs and we can reason that our securities environment is safe and believable for both local and foreign investors.

2.2.3 Role of Financial Intelligence Unit ( FIU )

The Financial Intelligence Unit is the chief Mauritanian bureau involved in the petition, reception, analysis and besides airing of fiscal information when being suspected in activities taking to money laundering offenses and besides to the funding of the terrorist act activities or minutess. After its constitution in August 2002 under the Section 9 of the Financial Intelligence and Anti-Money Laundering Act, it is today a member of the National Committee on AML/CFT and participates in AML/CFT issues. Furthermore, it provides guidelines to Bankss, fiscal establishments and besides to other relevant stakeholders.

FIAMLA 2002 defines fact-finding governments as including the Commissioner of Police, the Director of Customs, the Enforcement Authorityand the Independent Commission against Corruption. Financial information, refering suspected returns of offense, alleged money laundering offenses and/or funding of activities or minutess related to terrorist act, is disseminated by the FIU to relevant fact-finding governments for question. Both the FIAMLA and the FIU work in close coaction. In fact they should guarantee that money is being used right such that money laundering or terrorist act finance can be prevented. To describe any of the above issues the Leery Trading Report has to be filled and the signifier has to be in conformity by that set by the FIU. Thus it can be noted that FIAMLA act is an of import one set under the FIU to battle such jobs. Any affair arising has to be reported to the FIU to guarantee attachment of jurisprudence and to guarantee that everybody follows what has been set by jurisprudence. Cipher is above the jurisprudence. Any action that consequences to be a fraud, whereby money is being used in a incorrect manner shall be summon under the FIAMLA act 2002 and will be held apt for the errors caused.

2.2.4 FSC and FIU – The Duo

It is seen that in Mauritius we have two supervisory establishments set up to keep proper legal power in the non-banking fiscal sector. The FSC has the power to interchange information with public sector bureaus, international administrations, foreign supervisory establishments or jurisprudence enforcement bureaus.

In add-on, several Memoranda of Understanding ( MOUs ) were signed between the FSC and regulative organic structures to turn to the model for common apprehension and exchange of information. The chief aims of the MOUs are to, consolidate supervising of cross-border, operations of fiscal establishments, define mechanisms to portion information in conformity with international criterion and reinforce coaction amongst establishments in the battle against offense, Money Laundering and Financing of Terrorism.

Most significantly, the FSC signed a Memorandum of Understanding ( MOU ) with the Financial Intelligence Unit ( FIU ) which provides ways in which both establishments will collaborate in forestalling Money Laundering and the Financing of Terrorism. The FSC, in conformity with Section 22 of the Financial Intelligence and Anti-Money Laundering Act 2002, forwards any information on the possibility of a money washing offense or leery dealing to the FIU.

In this manner both establishment works jointly to keep proper regulative and supervisory legal power.

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