The Jersey Financial Services Commission (JFSC) has today issued a Public Statement in relation to Equity Trust (Jersey) Limited (Equity) concerning  its role as trustee to two Jersey non-charitable purpose trusts (FSTs) and as former trustee of three collective investment funds (Funds) investing in undeveloped property in Bulgaria, Croatia and Montenegro.

Following the JFSC’s Application to the Royal Court, in December 2007, two new companies (New Co.s) were appointed; one to act as the trustee to the Funds and one as manager.

In 2008, investors voted for a reconstruction of the Funds subsequent to the JFSC’s unsuccessful Court Application to have them wound up in 2007.

Then in late 2010, the New Co.s commenced legal action against Equity with respect to its previous roles in relation to the Funds.

During 2011, the JFSC appointed independent Inspectors having received numerous complaints containing serious allegations from investors in the FSTs and Funds.

The investigation which concluded in early 2014 revealed Equity had breached the JFSC’s Codes of Practice for Trust Company Business by failing to:

• Have the highest regard for the interests of customers
• Organise and control its affairs effectively for the proper performance of its business activities and demonstrate the existence of adequate risk management systems
• Deal with the JFSC in an open and co-operative manner

Following the appointment of a new Managing Director in early 2014, Equity made changes to its board of directors and commissioned an independent ‘Regulatory Healthcheck’ on the current state of the business.

In October 2014, Equity acting in an open and co-operative manner, advised the JFSC of the results. A number of serious issues were identified; including similar issues to those identified by the JFSC. As a responsible entity, Equity openly acknowledged its failings and supported by its parent TMF Group, initiated a significant remediation exercise. Equity has committed to work with the JFSC to resolve all outstanding matters within agreed timeframes.

In addition, as a result of discussions with the JFSC, Equity made a settlement offer to New Co.s as current manager and trustee of the Funds and to investors in the FSTs and “side-car” vehicles.

The JFSC considers the actions by Equity in 2014 demonstrate a positive change in its relationship with the JFSC. This change is welcomed as previously, since 2006, Equity had generally adopted an adversarial approach in dealing with the JFSC. This detrimental stance has now been superseded by the current board’s candid, accountable and collaborative attitude.

The JFSC has devoted significant resources in pursuing its investigation and dealing with numerous investor complaints over the previous eight years in relation to the Funds, FSTs and related entities. In recognition of this, Equity has made a significant contribution towards the JFSC’s costs.

John Harris, Director-General commented:

“The Jersey Financial Services Commission is committed to working with regulated entities to resolve issues whenever possible and appropriate. The actions taken by the JFSC since 2006 in relation to Equity support our regulatory objectives. In our view the issues highlighted in this public statement could have been resolved much sooner had Equity historically sought to work with the JFSC rather than against it, but the conduct of Equity more recently has been very constructive and instrumental in bringing about a degree of resolution to the long running and regrettable matter.”

The Public Statement may be accessed at the JFSC website by clicking here.