FINANCIAL INSTITUTIONS ACT, 2004

PART V-CONTROL OVER MANAGEMENT OF FINANCIAL INSTITUTIONS

43. (1) A financial institution shall obtain the written approval of the Central Bank before appointing or electing an administrator.

(2) No person shall be appointed or elected as an administrator of a financial institution if –

(a) he or she has been adjudged to be bankrupt, has suspended payment or has entered into a composition with his or her creditors; or

(b) he or she has been convicted in a court of law of a felony or any offence involving fraud or dishonesty.

(3) No person who has been an administrator of a financial institution which has been wound up by the court or the licence of which has been revoked shall act as an administrator of any financial institution:

Provided that in exceptional circumstances, having been satisfied as to the qualifications, professional experience and conduct of a person, the Central Bank may exempt such person from the foregoing provisions of this subsection no earlier than 6 years following the relevant winding-up or licence revocation.

(4) An administrator of a financial institution shall cease to hold office on –

(a) becoming subject to any disqualification mentioned in subsection (1);

(b) becoming permanently incapable of performing his or her duties; or

(c) having been convicted of any offence if the Central Bank has determined that such conviction is inconsistent with holding such an office.

44. (1) Every administrator of a financial institution who is directly or indirectly interested in any credits from that institution shall as soon as possible declare the nature of his or her interest to the directors of the institution or to the head office, as the case may be.

(2) For the purpose of subsection (1) a declaration by an administrator to the effect that he or she is to be regarded as interested in any credits, which may, after the date of the notice, be extended by that institution is deemed to be a sufficient declaration of interest in relation to any credits so extended if –

(a) it specifies the nature and extent of the interest; and

(b) the interest is not different in nature from, or greater in extent than, the nature and extent so specified in the declaration at the time the credit is extended.

(3) Where a declaration is made under subsection (1) to a local financial institution the administrator concerned shall cause it to be brought up and read at the next meeting of the directors after it is made and the directors shall cause the declaration to be recorded in the minutes of the meeting at which it is brought up and read.

(4) Where an administrator of a local financial institution holds any office or possesses any property whereby, whether directly or indirectly, duties or interests might be created in conflict with his duties or interests as an administrator, the administrator shall, in accordance with subsection (5), make a full declaration to the directors of the institution of the fact, nature, character and extent of the conflict or potential conflict.

(5) A declaration under subsection (4) shall be made by the time the first meeting of the directors is held –

(a) after he or she becomes an administrator of the financial institution; or

(b) if already an administrator, after the conflict or potential conflict has become apparent,

and shall be recorded in the minutes of that meeting.

(6) An administrator directly or indirectly interested in any credits from that financial institution shall not take part in any decision regarding such credits.

45. No administrator, officer, employee or agent of a financial institution shall ask for or receive, consent or agree to receive, any gift, commission, emolument, service, gratuity, money, property or thing in value, for his or her own personal benefit or advantage or that of any of his or her close relations, for permitting or procuring or endeavoring to permit or procure for any person any credits from the institution.

46. (1) Any person, acting directly or indirectly or through or in concert with other persons, who proposes to acquire a substantial interest in a financial institution shall give at least 30 days’ prior notice to the Central Bank and obtain prior approval of the Central Bank.

(2) The notice of the proposed acquisition shall include–

(a) the name, nationality, residence, and business or profession of each proposed person holding a substantial interest or its ultimate beneficial owner, together with at least two references verifying the good financial standing of such person;

(b) for each proposed person holding a substantial interest or its beneficial owner, an affidavit in accordance with section 5(l)(f);

(c) in case a proposed person holding a substantial interest or its ultimate beneficial owner is a body corporate, copies of the latest three audited annual balance sheets and profit and loss accounts where applicable;

(d) the terms and conditions of the proposed acquisition and the manner in which the acquisition is to be made;

(e) the identity, source and amount of the funds to be used in making the acquisition;

(f) any plans or proposals regarding a major change in the financial institution’s business, corporate structure or management; and

(g) such other information as the Central Bank may require.

(3) The Central Bank shall assess the expected effects on the financial stability of the financial institution and be satisfied as to the identity and character of the proposed owners, in particular persons holding a substantial interest. The Central Bank shall not approve a proposed acquisition referred to in subsection (l) if it would substantially lessen competition, jeopardise the financial stability of the financial institution or prejudice the interests of its depositors.

(4) Any financial institution becoming aware of a proposed acquisition of a substantial interest in the financial institution shall give at least 30 days’ prior notice to the Central Bank, or once it becomes aware of such proposal, whichever is earlier.

47. (1) No financial institution shall merge or consolidate with any other financial institution or acquire, either directly or indirectly, the assets of, or assume liability to pay any deposits made in, any other financial institution except with the prior approval of the Central Bank.

(2) Any financial institution which intends to engage in any merger, consolidation, acquisition or assumption of liability under subsection (1) shall give at least 30 days’ prior notice to the Central Bank, and provide the Central Bank with such information as the Central Bank may require.

(3) The Central Bank shall assess the financial and managerial resources and future prospects of the existing and proposed financial institutions. The Central Bank shall not approve a proposed transaction referred to in subsection (2) which would substantially lessen competition unless any anti-competitive effects are clearly outweighed by its expected positive effects.

48. (1) No bank shall receive any deposit while it is insolvent or apparently insolvent.

(2) No administrator, officer, employee or agent of a bank who knows, or in the proper performance of his duty should know, that the bank is insolvent or apparently insolvent shall receive or authorise the acceptance of any deposit while the institution is insolvent or apparently insolvent.

49. (1) No person who has acquired knowledge in a capacity as –

(a) administrator, officer, employee or agent of a financial institution; or

(b) auditor, member of the audit committee, reorganising agent, liquidator or supervising agent of a financial institution,

shall disclose to any person or governmental authority the identity, assets, liabilities, transactions or other information in respect of a customer except –

(i) with the written authorisation of the customer or other beneficiary, or of his or her heir or legal representative;

(ii) for the purpose of the performance of his or her duties within the scope of employment or appointment in compliance with this Act;

(iii) in the case of a foreign financial institution, to its head office;

(iv) when required to make disclosure by any court of competent jurisdiction in Seychelles;

(v) to the Central Bank;

(vi) to a police officer when authorised under the Evidence (Bankers’ Books) Act;

(vii) pursuant to the provisions of the Anti-Money Laundering Act;

(viii) pursuant to section 51; or

(ix) notwithstanding anything in the Business Tax Act or the Social Security Act, to the Commissioner of Taxes or the Director of Social Security when authorised by a judge on proof on oath to the satisfaction of the judge that the information is required for any investigation under the Business Tax Act or the Social Security Act, as the case may be.

(2) Nothing in subsection (1) prevents a financial institution from providing to a person on a legitimate business request a general credit rating.

(3) Subject to any express requirement of this Act, every administrator, officer, employee or agent of a financial institution shall preserve and aid in preserving confidentiality with regard to all matters relating to the affairs of the financial institution and of every customer of the institution that may come to his or her knowledge in the performance of his or her duties.

(4) Every administrator, officer, employee or agent of a financial institution shall, before entering on his or her duties, sign a declaration pledging himself or herself to observe strict confidentiality in respect of the matters specified in subsection (3) and not to reveal those matters except as otherwise permitted or required under subsection (l).

50. (1) The Central Bank and every officer or employee of the Central Bank shall deal with all documents, records of bank accounts, statements and other information in the possession or under the control of the Central Bank, its officers or employees and relating to the business of financial institutions conducted under this Act as confidential.

(2) Except where ordered by the Supreme Court under subsection (3), the Central Bank, its officers and employees shall not be required to produce or disclose to any court, tribunal, committee of inquiry or other authority in Seychelles or elsewhere any information required to be dealt with as confidential under subsection (1).

(3) The Supreme Court shall not make an order for the production or disclosure of any information referred to in subsection (1) except on the application of the Attorney General and on proof to the satisfaction of the Court that the information is bona fide required for the purposes of any inquiry or trial into or relating to the trafficking of narcotics and dangerous drugs, arms trafficking, money laundering or terrorist financing.

(4) This section shall be without prejudice to –

(a) the obligations of Seychelles under any international treaty, convention, agreement or the Mutual Assistance in Criminal Matters Act, 1995;

(b) the obligations of the Central Bank under any agreement with a Central Bank or any other monetary authority or supervisory authority of a foreign country.

51. (1) The Central Bank may, on a reciprocal basis, exchange information on supervisory matters, whether based on a Memorandum of Understanding or not, with supervisory authorities in other countries. The exchange of such information may include confidential information, provided that the Central Bank has satisfied itself that the information submitted shall remain confidential at the foreign supervisory authority. In this subsection, "supervisory matters" includes matters relating to money laundering and terrorist financing.

(2) The Central Bank may enter into Memoranda of Understanding with foreign supervisory authorities setting out the scope, procedures and further details for the exchange of information on a reciprocal basis.

52. The Central Bank may publish in whole or in part at such time as it may determine any information or data furnished under this Act, except that no information or data shall be published which might disclose the individual affairs of a financial institution or of a person whose interests are protected under section 49 unless the consent of every such person has been obtained in writing prior to that publication or the data is already in the public domain.

53. (1) Where the Central Bank determines that a financial institution or any of its owners or administrators has –

(i) violated a provision of this Act or of any regulation, direction or order of the Central Bank;

(ii) violated a provision of any agreement between the Central Bank and the financial institution on remedial measures to be taken by the financial institution;

(iii) violated any term or condition attached to the licence of the financial institution or to an authorisation issued to the financial institution by the Central Bank; or

(iv) conducted an unsafe or unsound operation of the financial institution,

it may take the following actions with respect to the financial institution–

(a) issue written warnings;

(b) call a meeting of the shareholders or other owners and the administrators of the financial institution to discuss and to agree on remedial measures to be taken;

(c) issue written orders to cease and desist from such infractions and to undertake remedial action, or written orders to impose special prudential requirements that differ from those normally applicable to such financial institution;

(d) issue written orders concerning the rate of interest, maturity or other conditions applicable to any financing extended or received (including deposits) by a bank, or to contingent liabilities of the bank;

(e) issue written orders to the financial institution to suspend the payment of dividends or the distribution of profits in any other form;

(f) appoint an adviser for the financial institution;

(g) appoint an external auditor at the expense of the financial institution to perform a financial or operational audit under terms of reference determined by the Central Bank;

(h) suspend temporarily or permanently one or more administrators from performing duties in the financial institution;

(i) issue written orders that one or more persons holding a substantial interest in the financial institution sell or otherwise dispose of such interest in accordance with the law and within 30 days immediately following the receipt of the order;

(j) attach conditions to the licence of the financial institution to the extent required to remedy such infraction;

(k) appoint a reorganising agent in accordance with the provisions of section 66 of this Act;

(1) revoke the licence of the financial institution in accordance with the provisions of section 13 of this Act.

(2) The remedial actions described in this section shall be determined in particular cases by the Central Bank. Remedial actions shall be applied in proportion to the seriousness of the infraction and the impact of the infraction on the financial institution’s assets.

(3) An order under subsection (1) becomes effective as specified in the order, and remains effective unless and to the extent that the Central Bank informs the financial institution that it is not so effective, and the Central Bank may so inform the financial institution either before or after the effective date of the order.

(4) Before the expiry of 30 days after the issue of an order under subsection (1), the financial institution may appeal to the Central Bank to reconsider the order and the Central Bank shall give a final decision within 15 days after the appeal.

54. The filing of an appeal under section 53 (4) shall not effect a suspension of any measures imposed by the Central Bank.

55. (1) No financial institution shall extend credits against the security of –

(a) its own shares;

(b) shares of companies which hold a substantial interest in it;

(c) shares of companies in which the companies specified in paragraph (b) have a substantial interest; or

(d) shares of companies in which any of its administrators has a substantial interest.

(2) Without prejudice to section 44 (Administrator to declare personal interest), no credit or any part of a credit extended to a person specified in section 30(1) or (3) shall be written-off without the prior approval of the Central Bank.

(3) Any write-off of any credits which contravenes subsection (2) is void.

56. (1) Notwithstanding any other written law or any contract, no financial institution shall directly or indirectly –

(a) deal in the buying or selling or bartering of goods, except in the course of conducting licensed activities under this Act or in connection with the realisation of security given to or held by it;

(b) engage in any trade; or

(c) buy, sell or barter goods for others except in the course of conducting licensed activities under this Act.

(2) Subject to subsection (3), no financial institution shall own, to an aggregate value exceeding 25 percent of the sum of the paid-up or assigned capital and reserves of that institution, the share capital of any company, firm or other undertaking except such shareholding as the financial institution may acquire in the course of satisfaction of debts due to it.

(3) Subsection (2) does not apply to any shareholding approved in writing by the Central Bank pursuant to section 4(3) in a subsidiary company, firm, or other undertaking formed by a financial institution for the execution of leasing, nominee, executor, fiduciary or trustee functions or other functions incidental to the financial institution’s business or to conduct offshore banking business, provided that the Central Bank shall carry out supervision of the financial institution on a consolidated basis.

(4) Where a shareholding acquired by a financial institution in satisfaction of debts due to it exceeds the maximum specified in subsection (2), the institution shall dispose of that excess at the earliest suitable opportunity.

(5) No financial institution shall hold an interest in immovable property or any right therein other than for the purpose of conducting its operations, including offices or employee housing. This provision does not apply to immovable property or any right therein obtained in connection with the realisation of any security given in the course of its operations, provided that such immovable property or any right therein is disposed of without undue delay.

57. No financial institution shall –

(a) without the prior written approval of the Central Bank, sell, transfer, assign or dispose of any of its immovable assets below the market value of the assets; or

(b) increase the valuation of the assets as recorded in the books of the institution above the market value of the assets.

58. (1) In the conduct of its banking business under this Act, a bank licensed to solely conduct offshore banking business shall not transact any business, or deal, in rupees.

(2) For the purposes of subsection (1), a bank licensed to solely conduct offshore banking business shall not be treated as transacting banking business or dealing in rupees by reason only that –

(a) it opens or maintains accounts in rupees for the discharge of its liabilities in Seychelles with a bank other than itself;

(b) it makes or maintains professional contact with counsel and attorneys, accountants, bookkeepers, trust companies, management companies, investment advisers or other similar persons carrying on business within Seychelles;

(c) it holds a lease of property for use as an office from which to communicate with members or where books and records of the bank are prepared or maintained;

(d) it holds shares, debt obligations or other securities in a company incorporated or registered under the International Business Companies Act 1994 or under the Companies Act;

(e) it holds bonds, treasury bills and other securities issued by the Government of Seychelles or the Central Bank.

(3) A bank licensed to solely conduct offshore banking business under this Act shall not, in the conduct of its business operations, open an account for a person whose identity has not been properly established.