An amendment before the House of Assembly would bring the territory one step closer to setting up a long-promised system of deposit insurance in the territory.
The amendment to the Financial Services Commission Act would enable the FSC to issue disqualification orders against directors and senior officers of companies, and it would streamline the relationship between the commission and the planned Virgin Islands Deposit Insurance Corporation in order to deal with banks in financial distress.
The bill was introduced for its first reading on Sept. 26 alongside an amendment to the Banks and Trust Companies Act. Both bills aim to help set a framework for the long-delayed coming into force of the VIDIC Act of 2016.
The FSC Act amendment would establish a “cooperation regime with other domestic competent authorities” such as the VIDIC, similar to the one currently in place for foreign authorities, according to an explanation of the bill provided by the Ministry of Finance.
“Such a regime is considered important as a mechanism to foster and strengthen not only the commission’s regulatory, supervisory, compliance and international cooperation obligations,” but also to aid other authorities and law enforcement, the explanation noted.
The bill also contains other provisions related to struggling banks, as well as new rules dealing with misbehaviour and fraud by licensed entities.
Additionally, it would empower the FSC to conduct resolution proceedings against banks or other institutions in financial distress, and it specifies the factors the regulator might take into account when doing so, including determining which institutions are “systemically important to the financial stability of the territory.”
The bill also introduces the concept of a “rehabilitator:” a person appointed by the FSC in cooperation with the VIDIC to take over and direct the affairs of a bank or other licensee in financial distress as part of “amid-way solution” to rescue a struggling institution.
Additionally, the bill addresses issues of malfeasance and fraud carried out by licensees, requiring the commission to establish a register of directors and senior officers of companies.
It would also give the FSC the power to disqualify bad actors for “misbehaviour considered not to be compatible with the conduct of financial services business” — and to keep a register on everyone it has disqualified.
Institutions also would be required to notify the commission and its customers of any fraud that may have been committed by employees and to advise them on the steps being taken to address the fraud and prevent it from happening again.
Another section of the bill repeals provisions relating to custodians of bearer shares, a regime already set to be abolished by the coming into force of an August amendment to the BVI Business Companies Act.
Bearer shares are owned by anyone who holds the physical stock certificate, and they are not registered with any central authority that can track their ownership or transfer. Since 2010, VI companies have not been allowed to issue them, and the new legislation provides additional framework for the abolition of the regime as of Jan. 1.
“Custodians do not find itto be a viable revenue-generating regime,” the ministry wrotein the text of the Sept. 26 bill.“The view has been formedthat it is in the best interest ofthe territory to bring theregime to an end.”