MORE than three years after the Stocks and Securities Limited (SSL) scandal put Jamaica’s financial oversight under international scrutiny, records showed that the cost of supervising the securities industry was already more than twice the fees collected from the sector — even before the Financial Services Commission (FSC) added the next layer of costs for new technology, market-conduct supervision and consumer-protection functions.

The securities sector, where clients, including sprint legend Usain Bolt, reported that millions of US dollars were missing from investment accounts, carried the largest identified regulatory funding gap.

The FSC projected that supervising the industry would cost $678.3 million in 2023/24 but that its existing fees would recover only $323.4 million — a shortfall of $354.9 million.

Insurance supervision was also projected to cost more than the sector paid. The FSC estimated recoverable costs at $702.3 million against $523 million under the existing fee structure, leaving a further $179.4-million gap.

Those funding gaps emerged before the commission fully accounted for the technology and institutional capacity needed for market-conduct supervision, complaints resolution and consumer protection under Jamaica’s planned Twin Peaks structure.

The findings, from a Jamaica Observer examination of FSC consultation papers, annual reports, gazetted fee changes and Government public-body estimates, show that Jamaica is not merely increasing regulatory charges. It is trying to finance a much larger watchdog after a scandal that damaged confidence at home and carried the country’s name into headlines around the world.

The resulting question is not simply whether financial firms should pay more. It is what those higher fees will buy, whether they will produce measurable improvements in supervision and how much of the bill will ultimately reach investors, policyholders, pension contributors and businesses seeking capital.

The FSC says the higher charges are not sudden levies imposed in response to SSL. In a September 2023 consultation paper sent to licensees and registrants, the commission said its fee structure had not been revised since 2008, even as the cost and complexity of financial regulation continued to grow.

The regulator also noted that it receives no funding from the Government and finances its operations mainly through registration, renewal and licensing fees paid by the entities it supervises.

That funding model means the cost of regulation must be recovered largely from securities dealers, insurers, pension entities, issuers, fund managers, intermediaries and other regulated firms. But the regulated entity receiving the bill is not necessarily the final payer. Firms may absorb some of the additional expense, but they may also recover it through higher account charges, management fees, insurance premiums, pension costs, commissions, product prices or capital-raising expenses.

The FSC says its mandate and operating costs have expanded substantially since the existing fees were introduced. Its September 2023 consultation paper projected a total funding requirement of $2.095 billion for 2024/25. Within that, the annual funding requirement was projected to rise by $314.5 million, or 23.7 per cent.

The increase was attributed to new policy responsibilities, risk-based regulation, a larger staff complement and investment in data analysis and technology.

In a justification brief, the regulator said the fee adjustment was intended to achieve “sustainable cost recovery” rather than generate a surplus. It warned that an under-resourced regulator ultimately creates risks for the financial sector it is expected to protect.

The commission’s remit now extends beyond securities, insurance and private pensions to new types of regulated entities, while requiring greater capacity in market conduct, cross-border supervision, cyber risk, emerging technology and increasingly complex financial products.

Private pensions were the exception to the funding shortfalls identified in securities and insurance. The FSC estimated that pension fees would exceed the projected cost of regulating that sector by approximately $117 million.

That uneven picture raises another question: whether each industry is being asked to carry its proper share of the regulatory burden, or whether some sectors are being charged more than their supervision costs while others remain below full recovery.

The Financial Services Commission offices in Kingston. The regulator says higher fees are needed to help fund stronger supervision, new technology and expanded consumer-protection functions after the 2023 SSL scandal.

Fees begin to climb

The issue is coming to a head as revised charges take effect across regulated industries and the latest Government estimates show the FSC expecting hundreds of millions of dollars more in fee income while continuing to record deficits.

Gazetted amendments to the Securities Regulations in 2025 changed the annual fee for a securities dealer to the greater of $1.5 million or three basis points of its total assets.

The amendments also introduced an $800,000 fee for filing a take-over bid circular, another $800,000 fee for a directors’ circular and a $200,000 charge for amended filings.

Insurers have also publicly challenged the revised fee structure, warning that sharp increases in regulatory costs could eventually be passed on to policyholders.

Government estimates show the scale of the additional fee income the FSC now expects.

Securities fees are projected to climb from $472.42 million in 2025/26 to $977.96 million in 2026/27 — an increase of more than $505 million in a single year.

Insurance fees are projected to rise from $534.74 million to $836.01 million over the same period, while pension fee income is also expected to increase. The estimates also introduce projected revenue from virtual asset service providers.

The FSC’s 2023 consultation projected securities fee revenue of $1.032 billion for 2024/25. Later Government estimates put securities fee income at $472.42 million for 2025/26 and $977.96 million for 2026/27.

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Because the figures relate to different years and may reflect different implementation and accounting assumptions, the published records do not permit a direct comparison. They nevertheless show that securities fee income is expected to rise substantially as the FSC attempts to improve cost recovery.

The increases would significantly raise the amount recovered from the securities and insurance sectors. But because the FSC’s own costs are also rising, the published projections do not establish whether the new fees will fully cover the current cost of supervising those industries.

What they do show is that the changes are not modest adjustments. They represent a fundamental resetting of what financial regulation will cost.

Deficits persist

The projected rise in fee income is expected to help narrow the FSC’s deficits, but not immediately eliminate them.

The 2026/27 Public Bodies Estimates show that the commission’s 2024/25 financial outturn was worse than earlier projections. Revenue stood at $1.77 billion, while expenses reached $2.27 billion, producing a net deficit of $502.36 million.

Salaries and related expenses were the FSC’s largest cost. The Public Bodies Estimates show the line item rising from $1.25 billion in 2023/24 to $1.76 billion in 2024/25 — an increase of approximately $506 million, or 40.5 per cent. It is estimated at $1.8 billion in 2025/26 and projected to reach $2 billion in 2026/27.

The latest estimates also project the FSC’s staff complement increasing from 170 in 2025/26 to 176 in 2026/27. Over the same period, salaries and related expenses are expected to rise by approximately $200 million, or 11.1 per cent. The records reviewed by the Business Observer do not show how much of that increase reflects the six additional posts and how much relates to compensation adjustments, specialist recruitment, benefits, secondments, statutory employment costs or organisational changes made after SSL, if any.

The commission’s net deficit is estimated to have declined from $502.36 million in 2024/25 to $407.29 million in 2025/26 and is projected to narrow further to $186.24 million in 2026/27.

For 2026/27, the regulator expects revenue of $2.76 billion against expenses of $2.95 billion. Investment income is projected to fall from $177.46 million in 2024/25 to $96.01 million in 2025/26 and $81.8 million in 2026/27, making the commission increasingly dependent on fees paid by the industries it regulates.

The figures lend support to the FSC’s argument that its previous revenues were no longer sufficient to cover its operating costs. But the persistent deficits, growth in salary-related expenses and sharp increase in projected fee income also make greater disclosure necessary.

The records also do not provide a public breakdown showing how the additional fee income will be allocated across staffing, examinations, enforcement, technology, market conduct, complaints resolution and consumer protection.

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Without that information, regulated firms can see how much more they are expected to pay, but not precisely how the additional money will be spent or which parts of the promised reform it will finance.

The $500-million question

The funding debate is further complicated by a $500-million transfer from the FSC to the Government at a time when the regulator says fees from securities and insurance were not covering the stated cost of supervision.

The amount appeared in the Public Bodies Estimates as part of the FSC’s estimated 2024/25 outturn under “Transfers to Government — Dividend”. The FSC has said the money came from retained earnings accumulated from surpluses in previous years.

Finance Minister Fayval Williams has defended the transfer, saying the FSC and the Ministry of Finance reached a joint understanding after reviewing the regulator’s balance sheet and projected financing requirements. She said the payment would not compromise the FSC’s viability and that the Government had given the commission a written commitment to provide financial support if it later required assistance.

The Opposition has challenged that explanation, arguing that the withdrawal is difficult to reconcile with the FSC’s deficits and its attempt to collect more money from regulated firms.

The records reviewed by the Business Observer do not establish that the transfer caused the FSC’s deficits or that retaining the $500 million would have removed the need for higher fees. But the payment remains relevant because it was made while the regulator was recovering less than the stated cost of supervising securities and insurance and preparing to finance a more expensive regulatory mandate.

FSC annual reports describe the commission as a not-for-profit organisation that does not pay dividends, while also stating that it is required to transfer between five and 10 per cent of any surplus to the Consolidated Fund.

That leaves an important distinction unresolved publicly: whether the $500 million represented an ordinary statutory transfer of surplus, a distribution of accumulated reserves or a special payment agreed with the Government — and whether retaining any portion of it could have reduced the amount now being sought from regulated industries.

The issue is not whether the transfer by itself created the FSC’s funding problem. The unresolved question is whether moving $500 million from a cost-recovery regulator was consistent with the needs of an agency undertaking a costly overhaul of supervision after one of the most damaging securities scandals in Jamaica’s recent history.

After SSL, the case for adequately funding Jamaica’s financial watchdog is difficult to dispute.

The test is whether the new bill is being clearly explained, fairly allocated and imposed with enough transparency for firms and their customers to understand precisely what they are financing.