Regulatory Framework

A guide to financial services regulation in the Bailiwick

A guide to financial services regulation

in the BailiwickThe GFSC is the regulatory body for the

finance sector in the Bailiwick of Guernsey.

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Contents1 Introduction 04

1.1 Aboutthisdocument 041.2 Servingthepublicinterest 051.3 Transparencyandaccountability 051.4 Frameworkforstrategicdecisions 051.5 Reasoningbehindourwork 051.6 Thetoolsweusetodoit 05

2 TheAimsofRegulation 06

2.1 Whyregulateatall? 062.2 PromotingconfidenceinthefinancialservicesmarketsintheBailiwick 082.3 Preventingfinancialcrime 082.4 Protectionofcustomerswherenormalmarketconditionscannotapply 092.5 Protectingfinancialstability 092.6 Creatingincentives(anddisincentives)topromotedesiredmarketbehaviours 09

3 TheLimitsandConstraintstoSuccessfulRegulation 10

3.1 Regulationisnotfree 103.2 Hiddencosts 103.3 Non-zerofailureregime 113.4 Limitofawareness 113.5 Therisktoinnovation 113.6 Internationaloverview 11

4 HowWeMakeRegulatoryDecisions 12

4.1 Prioritisation 124.2 Consistencyandoversight 134.3 Identificationofneed 134.4 Diagnosticassessment 134.5 Remediation 144.6 Post-implementationreview 14

5 Conclusion 15

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1.1 Aboutthisdocument

Regulators such as the GFSC are necessarily creatures of statute. Without statute law to back them there could be little certainty that any market participants would take notice of what they said. Other market participants would worry legitimately that they bore the costs of compliance when their competitors might not. Their customers and potential customers could have no confidence that the protection apparently offered by regulation was effective.

Onedrawbackofstatutorybackingisthatthelawisnotexpressedineasytounderstandform.Itcreatesinstitutions,powers,rightsandobligationsbutthereisneitherthelegislativeresourcenortimetoexplainwhytheregulatoryregimehasbeencreated,howitisintendedtooperateandwhatitsscopeandlimitsare.

Thisdocumentseekstohelpfillthatgap.Itisintendedtoclarifyandexplainregulationinanon-legalway.Itdoesnotoverridethelaw.Itisnotsetinstone.Itisalivingdocumentthatmaybeexpectedtoevolveovertime.Itsauthorscertainlyhavenotthoughtofeverything.Theinnovativenatureofthemarketswesetouttoregulateneverceasetosurprise.TheCommissionwouldwelcomefeedbackatanytimeonitscontent.

1 Introduction

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1.2 Servingthepublicinterest

TheProjetdeLoicontainingthelaw1thatcreatestheCommissionandgivesititspowersandobjectivesspeaksoftheCommissionhavingregardtothepublicinterestintheexerciseofthosepowersinpursuitofthoseobjectives.TheCommissionservesthepublicinterestbyimprovingthewaythefinancialmarketsworkintheBailiwickbyinterveninginthemwiththerulesitcreatesandthesupervisionoflicenseesoperatinginthosemarkets.Itseekstoactinaproportionateandtargetedway.Itrecognisesthatthepublicinterestcallsforabalancetobestruckbetweenprotectionfromunfairpracticesandoutcomesandtheunduerestrictionofchoiceandaffordability.

1.3 Transparencyandaccountability

Publicbodiesarerequiredtobetransparentandaccountable.TheCommissionissubjecttolegaltransparencyandaccountabilityrequirementssetoutintheProjectdeLoi.ThisdocumentseekstoenhancethestatutoryrequirementsbymakingmoreaccessiblewhattheCommissionistryingtodoandhowitistryingtodoit.TheCommissionmaythenbejudgedagainstacleareryardstick.Nevertheless,therearepracticallimitstotheamountoftransparencythatcanbeachieved.Licenseesrequireconfidentialitytoprotecttheircommercialandintellectualpropertyfromtheircompetitors.SomostoftheCommission’sdealingswithlicenseesmustbekeptprivate.Theprincipalexceptioniswhereitisinthepublicinteresttonamefirmsandindividualswhohavebeenfoundtohavedonewronginenforcementproceedings.

1.4 Frameworkforstrategicdecisions

Regulatorscanoperateatseverallevelswhentheyinterveneinfinancialmarkets.Theymayoperateattheleveloftheindividualpractitioner,forexampletoauthorisethem,atthelevelofthelicensee,atsectorallevelandtheymayoperateinternationally.Thisdocumentseekstoprovideatleastbackgroundandsomeoftheframeworkformakingstrategicdecisions,typicallythoseaffectingwholesectorsorinternationallyaffectingallfinancialservicesintheBailiwick.

1.5 Reasoningbehindourwork

Atwhateverleveladecisionneedstobetakenthereneedstobethereasonsrecordedforthatdecisiontoprovidepartofwhatistermedthe“audittrail”.Manydecisionsarenecessarilytakenundervaryingdegreesofuncertainty.Moretimetakenwilloftenmakeapositionclearerbutattheexpenseofactiontakentoolate.Regulatorsdonothavetheluxuryofinfinitetimetotakethecorrectdecision.TheCommissionreliesontheexperienceandexpertiseofitsstafftogetasmanydecisionsrightaspossible.Italsohasanescalationprocessforthetougherandbiggerdecisions.Thisdocumentisintendedtoprovidesomegeneralunderstandingabouthowandwhydecisionswillbemadethewaythattheyare.

1.6 Thetoolsweusetodoit

SetoutatSection4aresomeofthetoolsweusetotakeoperationalandstrategicdecisions.

1TheFinancialServicesCommission(BailiwickofGuernsey)Law,1989(asamended).

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2 The Aims of Regulation2.1 Whyregulateatall?

Some free spirits may wonder why there should be any regulation of financial services. First, it should be recognised that regulation pervades much of our lives in the public interest. We want to know the aircraft we fly in is airworthy and the pilot competent. Likewise that the ferry is seaworthy. We want nuclear power to be safe and the food we eat to be wholesome. These are obvious. Financial services is less obvious. Some of the same reasoning applies but there is additional reasoning for financial markets.

Anoverarchingreasonissocalled“informationasymmetry”.Fewofusareknowledgeablenuclearorfoodscientists,wemustrelyonregulation.Equally,fewofuscantellwhetherthebankatwhichwedepositoursavingsissolventnowandislikelytobeinthefuture.Manyrisksinotherregulatedindustriesareindependentofoneanother.Apilotmakesanerrorbutitdoesnotfollowthatallpilotswill.Infinancialservices,risksmaybesystemic:thatisafailureinoneplacecanleadtofailureinanother.Thebankingcrisisof2008wellillustratesthepoint.Financialregulationaddressessystemicaswellasidiosyncraticrisk.

Afurthercharacteristicoffinancialservicesistheirpotentialduration.Alongtermsavingsorinvestmentproductmayhavealongperiodoflatency.Itmaybemanyyearsbeforeitisdiscoveredthataseriousproblemexists.Financialservicesarealsoabstract.Manyareeffectivelyapromisetopayatsomefuturedate.Thetermsareexpressedinacontract,theenforceabilityofwhichwilldependonthestandingofthecounterpartypossiblymanyyearsinthefuture.Economistsseethisasanaspectofso-called“powerasymmetry”.Inshortthisreferstothefinancialinstitutionbeingbigwithstrongknowledgeofitsproductswhileits(retail)customerissmallandwithlessknowledge.(Itfollowsthatinwholesalemarketswherethecounterpartymaybesimilarinsizethatregulationwillbesomewhatdifferentwithabiastowardssystemicriskratherthanonepartysufferingatthehandsofanother.)

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Thereisalsoaquitedifferentpointtoconsider.Publicbodiescandosomethingsmoreefficientlythanmarketparticipantscanundertakeindividually.Eithertheywouldbetooexpensiveorlegallyimpossible.Theseeconomiesofscalecanreducetransactioncosts.Attainingcommonstandards,enforcingmarketdisciplineandkeepingoutpeopleintentoncompetingunfairlyarebestachievedcentrally.

Whilstregulationcanhelptoaddressissuessuchasinformationasymmetryitisnotasolutiontoallconcernswithinfinancialservices.Regulationwillnothelpfurtherpeople’seducationanditcannot,alone,addresstheissuesofconsumeraccessandfinancialinclusion.AsaregulatorwemaynottakeactionbecauseitisnotwithintheobjectivesgiventousbytheStatesofGuernseyorbecausetheissuetobeaddressedisamatterofbroaderpublicpolicy,ofwhichfinancialregulationmayonlybeasmallpart.

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2.2 PromotingconfidenceinthefinancialservicesmarketsintheBailiwick

Marketsdependonconfidencetoworkattheirbest.Economicprosperitydependsonmarketconfidence.RegulatingfinancialmarketseffectivelyandproportionatelyenablesnotjusttheBailiwick’sowninhabitantsbutbusinessesandindividualsinternationallytohaveconfidenceintheBailiwick.Whereprojectsareinternationallymobileoneaspectofthefinallocationchoicewillbeconfidencethatitwillbestableandpredictable.Proportionate,well-considered,regulationcontributessignificantlytothestabilityandpredictabilitythatcreatesconfidence.

Liberaldemocracieshaveadoptedtheapproachthatfreemarketsworkinthebestinterestsofsociety.However,freemarketsdonotalwaysachievetheseaims.Theremaybetoofewplayerswhobecomedominantandreducethebenefitsofcompetition.Equally,theremaybetoomanyresultingininadequaterevenuesandcornersbeingcuttocontrolcosts.TheCommissionconsiderstheconsequencesofcompetitiveforcesinaction.ItinterveneswhereitseesthoseconsequencesdrivinginappropriateconductthatwilleitherdoharmtocustomersortothereputationoftheBailiwickmoregenerally.

2.3 Preventingfinancialcrime

Internationaleffortstodetectandpreventfinancialcrimehavegrownconsiderablyinrecentyearsasthethreatlevelhasgrown.Asaninternationalfinancialcentreingoodstanding,theBailiwickisexpectedtoplayitsfullpartinthoseinternationalefforts.Itdoessobyembracingtheinternationalstandardssetandcontributingtointernationaleffortstocountermoneylaundering,terroristfinancingandthefinancingofweaponsofmassdestruction.Itdoessoinco-operationwithotheragenciesintheBailiwick.

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2.4 Protectionofcustomerswherenormalmarketconditionscannotapply

TheCommissionexpectscustomerstoplaytheirproperroleinthemarketbyactingdiligentlywhentheycometomakedecisionsaboutfinancialservices.Thisisnottodiscountthewiderpublicpolicyissuesoffinancialinclusionandeducationbutourexpectationisthatinactingdiligentlyindividualcustomersusetheirknowledgeandunderstandingoffinanceandriskwhenidentifyingwhatproductstheyshoulduseorinvestin.Nevertheless,comparedwithtangiblegoods,financialservicesarehardertojudgeandcompare.Judgingthepriceandqualityoffreshfood,forexample,isrelativelyeasy

comparedwith,say,retirementsavingsproducts.Aretirementsavingsproductwillrequiremoredecisionsoveralongnumberofyearscomparedwithasinglepurchaseoffreshfood.Customersmaybecomevulnerableduringtheirlifetimes,forexamplebecauseoflearningdifficulties,oldageorinfirmity.WherefinancialmarketsdisplaytheseasymmetriestheCommissionwillintervenetocreaterequirementstypicallytofacilitatecustomerdecisionmakingortocontroltheoutcomesfromthedecisionstheyactuallymake.

2.5 Protectingfinancialstability

Thefinancialcrisesof1929and2008illustratestarklywhatcanhappenwhenmarketforces,abettedbylaxpublicpolicy,arelefttoruntheircourse.Thereductioninprosperityandthehardshipcausedlastwellintothefollowingdecade.AsocietythesizeoftheBailiwickwouldappeartohavelittlechoicebuttotaketheconsequencesofwhatthebiggesteconomiesdo,orrather,failtodo.Moreover,aspartoftheSterlingareaitsfortunesappearinextricablytiedtothoseoftheUnitedKingdom.Whilstthisissubstantiallytrueitdoesnotmeanthat

theBailiwickshouldsimplyignoreeventselsewhereandsimplywaitforthemtounfold.Indeed,theBailiwickoftenactsasahostforsomepartsofmultinationalgroupsandisthereforeveryconnectedwithexternaleconomicevents.TheCommissionwillplayafullpartinrelevantinternationalforabothtoinfluenceoutcomeswhereitcanandgainthebestandearliestunderstandingofeventsonthehorizonsothatanymitigatingmeasuresavailablemaybetakeningoodtime.

2.6 Creatingincentives(anddisincentives)topromotedesiredmarketbehaviours

Muchregulationisaboutensuringthatonlypeopleandinstitutionswiththerightbehavioursareallowedtooperateinregulatedmarkets.Thekeytoolsregulatorsusearebarrierstoentry,suchasa“fitandproper”testforindividuals,andmonitoringthroughthesupervisionprocessesthatthestandardssetinrulesaremet.Thosetoolswillnotalwayswork,notleastbecausethepublicinterestisnotbestservedbya“zerofailureregime”whichwouldeliminateallriskattheexpenseofallelse.Inconsequence,theCommission

hasenforcementpowersandexercisesthemwherethereisevidencethatbehaviourscontrarytotherulesareoccurring.Enforcementinvestigationdoesnotinevitablyleadtosanctioning.Investigationmayuncoverdifferentevidenceorrevealasituationthatfallsshortoftheneedtopunish.Suchcaseswillreverttosupervisionforasolution.Suchjudgementswillbebasedonexperience,expertiseandanapplicationoftheproportionalityconcept.

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3.1 Regulationisnotfree

The Commission is acutely conscious that regulation is a cost. Licensees pay fees which are set by a transparent process. However, the cost of those fees is likely to be passed on to customers through higher prices and it is legitimate that this should happen. In consequence the Commission, along with other stakeholders, must consider whether the benefits of regulation outweigh its costs to those who ultimately bear them.

3.2 Hiddencosts

Thecostsofregulationarenotsimplythedirectandtransparentones.Itisgenerallyacknowledgedthattherearevaryingdegreesofindirectcosts.Licenseesinitiallybearthecostsofcompliancealthoughthesetoowilltendtobeborneultimatelybycustomers.Therearealsofrictionalcostssincelicenseesandmarketentrantsbeartheextraburdenofconsideringregulatoryimplicationswhencontemplatingmarketentry,newproductsandchangestotheirbusinessmodels.Therearealso

priceandchoiceimplicationsforcustomerscausedbyrestrictingentrytothemarketofbusinessesthatdonotmeettheauthorisationstandardsapplied.

Thereisnohardandfastwayofreachinganoptimaljudgementaboutthecostsandbenefitsofanyaspectofregulation.Regulationmustbeaffordableandachieveareasonablebalancebetweencostandrisk.

3 The Limits and Constraints to Successful Regulation

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3.3 Non-zerofailureregime

Financialservicesregulationintheliberaldemocraciesdoesnotseektoproduceanoutcomewherenoinstitutionseverfail.Thisisbecausetodosowouldresultinsuchintenseregulation,bothintermsofstandardsandsupervisionthatthecosttothecustomerwouldbeunacceptablebothindirectcosttermsandthroughreductioninchoiceandavailability.Inconsequence,marketparticipants,includingcustomers,mustacceptthatthereissomeriskoffailure.Theyshouldexerciseprudenceaccordingly.Ifanofferistoogoodtobetrueitprobablyis.Foritspart,theCommissionwillendeavourtostriketherightbalance,givenprevailingmarketconditions,betweenthecustomerdetrimentarisingfromlossandthatarisingfromlackorlossofchoiceandaffordability.Thismaymeanthatlicenseesfindregulatoryrequirementsriseintimesofgreaterrisk.TheCommissionwillalsopublishinformationwhereitispracticaltodosotowarncustomersofheightenedrisk.

3.4 Limitofawareness

Aregulatorwillreceiveawiderangeofinformationonthefirmsandindividualswhoareauthorisedbyit,however,asinanyindustrythereareindividualswhoknowinglyorunknowinglyavoidregulation.Thiscanleadtofirmsorindividualscarryingoutactivitiesillegallywithoutanycontrolsorprotectionforcustomers.Bytheirverynaturearegulatormayhavelimitedawarenessofthesefirmsorindividualsbutwhenwedoidentifythatillegalbusinessisoccurring,througheitherournormalregulatoryprocesses,intelligencegathering,thirdpartynotificationsorwhistleblowingwewilllooktotakeeffectiveaction.

3.5 Therisktoinnovation

Regulationbyitsnaturewillsometimesfrustrateinnovation.Newproductsandnewwaysofservicingcustomersmaynothavebeenenvisagedwhenthecurrentruleswereintroduced.NotgettinginthewayofgoodinnovationsservesthepublicinterestandtheCommissionhasnowishtostandbetweenthepublicandgoodinnovation.Butequally,aninnovationmaynotbeintendedtobegood.Itmayevenhavegoodintentionbutitsauthorsfailedtospotwhatwrongdoerscoulddowithit.Regulatorshavethedifficulttaskofseeingwhatothershavefailedtoseeeithertoblockaninnovationwithbadintentoronelikelytobemisused.TheCommissionwillendeavourtomaketherightcallswhenpresentedwithinnovations.Itencouragesinnovatorstocontactitearlyintheirplanning.Itwilldoitsbesttoallowinthegoodandrootoutthebadbutovertimeitislikelytobecomeapparentthatithasmademistakesinbothdirections.Thisisafairandinevitablepricetopayforservingthepublicinterest.

3.6 Internationaloverview

AsaninternationalfinancialcentretheBailiwickmusthaveregardtotherulesofotherjurisdictionsifitwantstotradeopenlywiththem.ThereisalsogrowingmomentumtowardthesettingofstandardsatthegloballevelthroughtheworkoftheBaselCommitteeonBankingSupervision,theInternationalOrganisationofSecuritiesCommissions(IOSCO),theInternationalAssociationofInsuranceSupervisors(IAIS),theGroupofInternationalFinanceCentreSupervisors(GIFCS),theInternationalOrganisationofPensionSupervisors(IOPS)andtheFinancialActionTaskForce(FATF).TheCommissionmakesasubstantialinvestmentofstafftimetounderstandthesedevelopmentsandmakerepresentationsonbehalfoftheBailiwick.Inlarge-scalemulti-lateraldiscussionstheBailiwick’svoicewillnotoftenprevail.TheconsequenttaskoftheCommissionistoestablishthecostsandbenefitsofadoptinginternationalstandardsorthoseofamajorblocsuchastheEuropeanUnionorUnitedStates.Sometimes,thepricetobepaidforinternationalaccesstomarketswillbeadoptingstandardstheBailiwickinisolationwouldnotneed.ThemeritswillbedecidedineachcasefollowingconsultationwiththerelevantstakeholdersintheBailiwick.

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4.1 Prioritisation

The Commission supervises over 2,000 licensees of varying scale and complexity. They present a wide range of risks to the public interest and their impact will vary from severe to negligible. Clearly, a systematic approach is required to allocate resources to the management and mitigation of these risks and the International Monetary Fund expects jurisdictions to have such an approach. Once authorised the Commission uses a system called the Probability Risk and Impact System (PRISM) which is also used by the European Central Bank and the Central Bank of Ireland to supervise licensees. (For a fuller explanation of how PRISM works and is used see the document Risk Based Supervision in Guernsey available on our website.)

PRISMaccordseachlicenseeanimpactratingandresourcesareallocatedinproportiontothatrating.InadditionPRISMcanidentifygeneralorsectoraltrendsandthemes.Thesecanprovideearlywarningofpotentialforthcomingdifficulty.Thatmaycauseprioritiestochangedirectlyanditcanalsocausespecificsectoralinformationgatheringbymeansofathematicreview.Indeterminingitsactivities,theCommissionwillmakeuseofthedataitreceivestoensurethatfirmsexhibitinghigherriskcharacteristicscanbetargeted.Whateverthesourceofnewinformation,theriskratingcanbevariedtotakethatinformationintoaccount.

4 How We Make Regulatory Decisions

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4.2 Consistencyandoversight

AllapplicationsmadetotheCommissiontocarryoutregulatedactivitieswithintheBailiwickareassessedagainsttheminimumcriteriaforlicensingsetoutwithintheindividualsectorlaws.Whereanapplicationiscomplexorotherwisechallenginganassessmentpanelmaybeheldtoassesstheinformationprovidedandmakearecommendationonauthorisation.

PRISMisanaidtodecisionmaking:itdoesnottakethedecisions.Individualsupervisorsmakedecisionseitheractingaloneorinconjunctionwithcolleagues.PRISMitselfintroduces

asignificantdegreeofconsistencybutfurthermeasuresaretakentoimprovedecisionmaking.AspartofthesupervisionprocessRiskGovernancePanelsareconvenedtovalidatesupervisorydecisions.Theseareessentiallymeetingswhichassemblemoreseniorstafftoscrutinisedecisionstoensureconsistencyacrosslicenseesand,wherenecessary,sectors.

TheBoardoftheCommissionalsokeepsa“heatmap”producedbyPRISMunderregularreviewandcanexaminetheriskratingsofthelicenseesassessedaspresentingthehighestrisk.

4.3 Identificationofneed

Identificationoftheissuesinvolvedisthefirststepinthedecisionmakingprocess.WherethesecomefromwithinthelicenseetheywillbefedintoPRISMeitherdirectlythroughthereportingportalsorbythesupervisorfollowingengagementwiththefirm.Nevertheless,thebusinessenvironmentofthelicenseescanbeasignificantfactorandisnotgenerallyareportingmatter.TheCommissionoperatesamulti-lateralreviewsystemtoensuresuchfactorsareidentified.Thesupervisorydivisionheadsprovideperiodicenvironmental

assessmentsfortheirsectorstotheBoard.TheCommission’sDirectorofFinancialStabilityproducesregularassessmentsofglobalfinancialtrendsastheyaffecttheBailiwick.ThoseCommissionstaffservingonthecommitteesofinternationalbodiesreportinformationgatheredatthosemeetings.Therearevariousregulatorygatewaysinexistencebasedonmemorandaofunderstandingwhichcanprovidetheconduitforrelevantinformationfromotherregulatoryauthorities.

4.4 Diagnosticassessment

Allthesesourcesareweighedandfactoredintotheoveralljudgementsabouttheneedforaction.

Thereareanumberofstepswecantakewhereweconsideractionmayberequired.Wecanworkwithindividuallicenseestounderstandhowanissueaffectsthem.Wemayengagewithanentiresectoreitherattradebodylevel,bymeansof

publishingadiscussionpaperorthroughthematicreviewstogatherinformationmoredirectlyrelevanttolicenseesintheBailiwick.PRISMcanbeusedtoproducediagnosticdataandindicatorsaboutsectors.Wemayalsouseinvestigationpowerstoascertainwhatindividuallicenseesmaybedoingornotdoing.

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4.5 Remediation

Wheretheassessmentleadstotheconclusionthatsomeformofinterventionisrequiredmulti-lateralinterventionsareavailabletotheCommission.Mosttypically,theCommissionwillengagewithanindividuallicenseeusingariskmitigationprogrammetolistriskstoberemediedormitigatedwhichthelicenseewillworktowardsimplementing.Butaremedymaytakemanyotherforms.ItmaysimplyrequirecommunicationwithlicenseesandtheCommissioncandothatthroughitswebsiteora“DearCEO”letter.Moreformalguidancemightbeappropriate,typicallytoexplainwhatcompliancewiththerulesrequires.Ortherulesthemselvesmayneedtobechangedinwhichcase,exceptinseriouscasesclearlyrequiringurgentaction,therewillbeconsultationonproposedchanges.WheremoreseriouscasesofrulebreacheshaveoccurredtheCommissionmayuseinterventionpowerstorequirealicenseetoceasetrading.

Incertaincaseswhereitisbelievedjustified,i.e.toadministerjusticeandcreatealevelplayingfieldforthelawabidingortoprotectinvestorsandconsumers,enforcementpowersbecomeexercisablebytheCommission.TheCommissionmayalsorefercasesforcriminalinvestigation.

Inrelationtoenforcementmatters,CaseReviewPanelsareusedtoanalyseandmakerecommendationsbasedontheevidenceprovided.Incaseswhereasettlementcouldnotbeagreeduponorisnotapracticaloption,decisionsinrelationtotheimpositionofsanctionsaregenerallymadebyaSeniorDecisionMaker(whoisaQCappointedtotheCommissioner’sSeniorDecisionMakingPanel)oraCommissionersDecisionCommittee.

4.6 Post-implementationreview

Thelastlimbofourregulatorydecisionmakingistoreviewretrospectivelyhowwehaveperformed.ThereisstatutoryprovisionforannualreportingtotheStatesofDeliberationbutthisisnecessarilyatahighlevel.Atamoregranularlevel,theBoardconsidersthebroadthrustofregulatorydecisionmakingatleastonceayear.Theexecutivereviewindividualjudgementsbothaspartofsupervisoryandenforcementcasereviewpanelsandintheperformanceappraisalanddevelopmentplanningofindividualsupervisors.

Atindividuallicenseelevel,PRISMensuresthatthereisacyclicalreviewofhowdecisionshaveaffectedtheconductofindividuallicensees.Licenseesmayalsoexpresstheirownviewsindialoguewiththeirsupervisorwherenecessary.

TheCommissionwillalsoperiodicallyturntoexternalfacilitationtoreviewitsoperations.Thismaytakevariousforms.Thegovernanceofdecisionmakingwillbecoveredinaboardeffectivenessreview.Aregulatoryexpertmaybeaskedtoreviewourperformancetobenchmarkitagainstinternationalstandardsandpeers.AprogrammeofexternallycommissionedinternalauditsallowstheBoardtoreceiveexternaljudgementsonaspectsoftheCommission’sperformance.

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We hope that this explanation of how and why we regulate along with how we think about complex regulatory issues is helpful to residents of the Bailiwick, our regulated entities and other interested stakeholders. We remain committed to clear communication in order to explain how we approach our duties.

5 Conclusion

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