Enforcement as a Regulatory Tool

In the wake of constant threats of imminent financial misconduct, malpractices, scams and scandals, the implementation of an effective enforcement programme is increasingly an ongoing challenge for regulators across the world. Whilst, some regulators adopt an enforcement-led approach, which is characterized by the specific allotment of resources to enforcement activities, others are more geared towards work done in 'prevention' rather than ex-post enforcement actions.

As the integrated regulator for the financial services sector other than banking, and global business, the FSC's regulatory objectives as mandated under the Financial Services Act (FSA) are as follows:

  • protecting consumers;
  • maintaining confidence in the financial system;
  • financial stability; and
  • reducing financial crime.

In delivering its regulatory objectives, FSC champions a prevention model as it seeks to prevent and/or identify problematic issues early in the regulatory process.

The Prevention Model
  • frequent review processes;
  • periodic and exceptional reporting requirements;
  • on-site inspections, with greater emphasis on supervision; and
  • adopting a stringent licensing/authorisation framework.

 

As a risk-based regulator, throughout its work, the FSC prioritises its resources in the areas which pose the biggest threat to its regulatory objectives. The FSC considers that enforcement is a valuable tool in ensuring compliance by its licensees with the applicable legislations. The key objective of enforcement is to achieve credible deterrence by detecting and restraining unsound business conduct which may cause prejudice to the good repute of Mauritius as a centre for financial services.

The FSC is empowered to investigate on the potential breaches of the relevant laws, licensing conditions and AML/CFT legislation. In addition, the FSC is also vested with the ability to carry out special investigations and take actions against unlicensed / unauthorised persons engaged in licensable activities and those engaged in fraudulent activities and scams related to financial services.

Principles
  • The effectiveness of the regulatory regime depends to a significant extent on maintaining an open and co-operative relationship between the FSC and its licensees.
  • The FSC exercises its enforcement powers in a manner that is transparent, proportionate, responsive to the issue, and consistent with its policies.
  • The FSC ensures a fair treatment when exercising its enforcement powers.
  • Enforcement resources are mainly focused on behaviour and risks that pose the highest threat to preserve and maintain the good repute of Mauritius. The FSC aims to change the behaviour of the licensee/person who is the subject of its enforcement action, to deter future non-compliance by others, to eliminate any financial gain or benefit from non-compliance, and where appropriate, to remedy the harm caused by the non-compliance.
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