The Legislative Reform Package: What the Twin Peaks Statutes Must Deliver

 

 

The legislative architecture decision

The first and most consequential drafting choice is the legislative architecture itself. Article 6 of this series identified the South African Financial Sector Regulation Act of 2017 as a model — a single comprehensive statute that sets out the entire Twin Peaks framework, both peaks, the coordination mechanisms, the licensing and supervisory frameworks, the enforcement powers, and the resolution architecture. The alternative is the United Kingdom approach — building Twin Peaks through amendments to existing statutes plus the Financial Services Act 2012. The single-statute approach produces clearer institutional boundaries, easier interpretation, and stronger statutory anchors for cross-cutting issues. The amendment approach produces a more fragmented regulatory framework that requires institutions to assemble their understanding of the regime from multiple sources.

Jamaica’s Twin Peaks legislation should follow the South African model. A single Financial Sector Regulation Act covering both peaks — rather than amendments scattered across the Bank of Jamaica Act, the Financial Services Commission Act, the Securities Act, the Insurance Act, and the Pension Funds Act — would produce a more coherent regulatory framework and reduce the risk of statutory gaps that the post-implementation period inevitably reveals. The drafting effort to consolidate is real but the operational benefits over the next decade compound substantially. Where the existing statutes need to be retained for reasons specific to the supervised sectors, the consolidating statute can incorporate them by reference and override them where the Twin Peaks framework requires.

The consolidated statute should be organised around a clear structural logic. Part I establishes the regulators — the Bank of Jamaica’s prudential supervisory function and the new Financial Services Commission’s conduct supervisory function — with their respective mandates, powers, governance arrangements and accountability mechanisms. Part II establishes the coordination architecture — the Financial Stability Council, the cross-regulator information sharing arrangements, the supervisory cooperation protocols and the joint examination authorities. Part III establishes the licensing framework covering all regulated entities. Part IV sets out the supervisory powers including inspection, investigation and enforcement. Part V establishes the resolution architecture for failing institutions. Part VI establishes investor and consumer protection arrangements including the statutory complaints authority and the compensation scheme of last resort. Part VII establishes the international cooperation architecture. The resulting statute would be longer than any existing financial services legislation in Jamaica, but its operational coherence would compound for decades.

Penalty calibration: the most consequential single drafting choice

Article 8 of this series identified penalty calibration as the most consequential single drafting question in the entire Twin Peaks legislative package. The existing maximum civil penalties under the existing framework are well below international benchmarks. A regime with maximum penalties that signal seriousness without producing actual deterrence is, in operational terms, a regime where misconduct continues to occur because the expected cost of misconduct is low relative to the expected benefit.

The legislative drafting should calibrate maximum civil penalties to international benchmarks. For institutional misconduct, the maximum penalty should be the higher of a defined dollar amount calibrated to the FCA, ASIC, FSCA and AFM benchmarks, a multiple of the institution’s revenue or balance sheet, or a multiple of the harm caused by the misconduct. Repeat offences should be subject to multipliers. Senior individuals should be subject to personal penalties calibrated to a meaningful percentage of their compensation. The structure should align with the international architecture so that comparable misconduct produces comparable consequence regardless of the jurisdiction in which it occurs.

This is not an academic point. The Caribbean financial sector competes for international capital, regional listings, and cross-border investment flows on multiple dimensions. Regulatory credibility is one of those dimensions. A jurisdiction with penalty calibration well below international benchmarks signals to international institutional investors that the regulatory framework is unable to produce credible deterrence, which translates directly into the cost of capital differential the jurisdiction faces. The penalty calibration question is therefore not only an enforcement question. It is a competitive positioning question.

Individual accountability: the SMCR question

Article 5 of this series examined the United Kingdom Senior Managers and Certification Regime in operational depth. The SMCR responds to the post-2008 diagnosis that responsibility for conduct failures inside large financial institutions had become so diffuse that no individual could be held personally accountable for outcomes within their scope. The regime requires regulated firms to identify, by name, the senior individual responsible for each defined business function, with written Statements of Responsibilities and personal accountability for outcomes in their areas. The SMCR is now international best practice and is being progressively adopted across mature regulatory jurisdictions.

Jamaica’s Twin Peaks legislation should include SMCR-equivalent provisions. The drafting question is not whether to include them — the international direction of travel makes that question increasingly settled — but how to scope them. The minimum scope should be banks, securities dealers and insurance companies above defined size thresholds. The optimal scope is broader, covering all licensed financial institutions with proportionate calibration based on size, complexity and customer impact. Statutory provisions should establish: the requirement for senior management functions to be approved by the regulator before appointment; the requirement for written Statements of Responsibilities; the Duty of Responsibility under which senior managers can be held personally accountable; the certification regime for the layer below senior managers; and the Conduct Rules applicable across the regulated population. The provisions should be calibrated to the Caribbean institutional landscape rather than transplanted directly from the FCA rulebook, but the structural elements should align with the international architecture.

Including SMCR-equivalent provisions in the original 2026 framework places Jamaica at the leading edge of Caribbean regulatory practice. Excluding them and adding them later through subsequent amendment places Jamaica in the position of catching up to the standard that the international peer group has established. The cost difference between these two trajectories is real, both in regulatory capacity build and in supervisory credibility.

The investor protection package

Article 9 of this series identified five instruments of credible investor protection: a statutory complaints authority, a compensation scheme of last resort, statutory remediation powers, a vulnerable customer regulatory framework, and supervisory data on customer outcomes. Each should feature in the Twin Peaks legislation rather than being deferred to subsequent regulations or industry self-regulation.

On the statutory complaints authority, the legislation should establish the body directly with prescribed jurisdiction over complaints against regulated firms, decision-making powers including binding decisions where mediation fails, a defined funding model based on industry levies, operational independence from the conduct regulator, and timelines that ensure resolution at speeds matching the AFCA and FOS benchmarks. The body should be operational from the day of cutover rather than being established at some unspecified future date. The Australian and United Kingdom evidence demonstrates that establishing this kind of body takes deliberate work, and deferring the establishment to post-cutover regulations creates the practical risk that other priorities crowd out the work indefinitely.

On the compensation scheme of last resort, the legislation should establish industry funding arrangements, eligibility criteria for affected consumers, decision-making procedures, payout calibration, and operational arrangements. The Australian Compensation Scheme of Last Resort, legislated in 2024 to address gaps that had been identified by the Hayne Royal Commission five years earlier, demonstrates the cost of deferring this instrument. Establishing it in the original framework rather than adding it later under remedial pressure is materially preferable.

On statutory remediation powers, the legislation should grant the conduct regulator authority to require firms to identify, contact and compensate affected consumers in defined circumstances and on defined timelines. The FCA’s section 404 powers and ASIC’s remediation framework provide the international template. The drafting should ensure that the powers can be exercised without requiring full enforcement proceedings, that compensation calculations can be standardised across affected populations, and that timelines compel firms to remediate rather than negotiate indefinitely.

On the vulnerable customer regulatory framework, the legislation should require regulated firms to identify vulnerable customers proactively, provide additional support proportionate to vulnerability identified, and monitor outcomes for vulnerable customer segments. The detailed operational requirements can be set out in regulator rulebooks rather than primary legislation, but the statutory foundation should be clear so that the rulebook provisions have unambiguous statutory authority.

On supervisory data on customer outcomes, the legislation should grant the conduct regulator powers to require regulated firms to collect, maintain and produce customer outcomes data at the granularity and frequency necessary for outcomes-based supervision. The detailed data requirements will evolve over time, but the statutory authority to require the data should be clear from the start. Without this authority, the conduct regulator’s ability to operate outcomes-based supervision will be constrained from the outset.

The capital market provisions

Article 7 of this series identified the four structural questions about the JSE that the Twin Peaks transition makes unavoidable: market surveillance, listing rule administration, the SRO oversight regime, and the JSE’s own commercial governance. The legislative drafting should engage with each of these questions explicitly rather than carrying forward the existing arrangements by default.

On market surveillance, the legislation should establish whether real-time market surveillance is conducted by the conduct FSC directly, by an independent market surveillance utility, or by the JSE under structural ring-fencing arrangements that meet international independence standards. The choice has cost, capability and credibility implications that need to be examined explicitly. The international direction of travel has converged toward independent market surveillance, but the Caribbean operating environment may justify a hybrid arrangement provided the independence standards are properly met.

On listing rule administration, the legislation should establish the supervisory regime for listing rule enforcement. The options include maintaining the existing arrangement with enhanced FSC oversight, transferring listing rule enforcement to the FSC while retaining administration with the JSE, transferring both functions to the FSC, or establishing a separate listing authority. Each option has implications for market efficiency, capital formation costs and supervisory rigour. The legislative choice should be made explicitly rather than left to evolve.

On the SRO oversight regime, the legislation should align Jamaica’s arrangements with the IOSCO Principles for SROs, including the regulator’s right to inspect SRO operations, the requirement for SRO independence from member firms, the requirement for SRO governance arrangements that prevent commercial considerations from influencing regulatory decisions, and the requirement for SRO accountability to the supervising regulator.

On the JSE’s own commercial governance, the legislation should set out statutory governance requirements for entities exercising regulatory functions while operating as listed for-profit companies. The current internal governance arrangements should be tested under the new regime, and the elements that need statutory rather than internal governance authority should be elevated.

The prudential peak design

Article 6 of this series examined the New Zealand experience with housing the prudential peak inside the central bank. The model works but requires deliberate institutional safeguards: a separate prudential decision-making body inside the central bank, distinct senior leadership for prudential matters with statutory protection, enhanced parliamentary oversight of the prudential function, clear institutional boundaries between monetary policy decisions and prudential supervisory decisions, and structural protection against subordination of prudential concerns to monetary policy concerns.

Jamaica’s Twin Peaks legislation should design these safeguards into the original statute rather than retrofitting them after operational stress reveals their necessity. The legislation should establish a Prudential Council within the BOJ with statutory authority over prudential supervisory decisions, distinct senior leadership for the prudential function with statutorily protected appointment processes, clear separation between monetary policy committees and prudential supervisory decision-making, parliamentary scrutiny mechanisms specific to the prudential function, and explicit statutory provisions preventing subordination of prudential concerns to monetary policy concerns.

The drafting should also ensure that the prudential function has access to appropriate resources independent of the central bank’s broader resourcing. The Dutch and New Zealand experiences both demonstrate that prudential supervision inside a central bank can be under-resourced relative to the scope of its mandate when the central bank’s broader priorities compete for the same resource pool. Statutory protection for prudential resourcing — through ring-fenced funding mechanisms, dedicated supervisory budgets, and protected headcount allocations — should feature in the original framework.

The conduct peak design

The new conduct FSC’s design is the other architectural pillar of the Twin Peaks regime. The legislation should establish: a statutorily protected funding model based primarily on industry levies with transparent calibration mechanisms; an independent senior leadership team with parliamentary scrutiny over senior appointments; clear statutory powers calibrated to international benchmarks across licensing, supervision, enforcement and consumer protection; a governance structure with appropriate board composition, independence requirements and accountability mechanisms; and a clear statutory mandate that prioritises consumer outcomes alongside market integrity and prudential coordination.

The legislation should also address the institutional development trajectory of the new conduct regulator. The South African experience examined in Article 6 demonstrated that the institutional credibility of a new conduct regulator builds over approximately five years of operating experience. The Jamaican FSC will follow a similar trajectory. Statutory provisions for skills development, international cooperation engagement, supervisory methodology development and public reporting should support this trajectory rather than assume the regulator arrives at full institutional credibility on the day of cutover.

The coordination architecture

Twin Peaks regimes function only when the two peaks coordinate effectively. The legislative drafting should establish coordination mechanisms with statutory authority rather than relying on memoranda of understanding between the two regulators. The coordination architecture should include: a Financial Stability Council with cross-regulator membership and statutory mandate to identify and address systemic risk; mandatory information sharing arrangements between the two regulators with defined scope and timelines; joint examination authorities for entities subject to both peaks; cross-regulator escalation procedures for matters where the two regulators reach divergent conclusions; and accountability arrangements that ensure the coordination architecture itself is subject to oversight.

The international evidence is clear that coordination architecture quality is one of the principal differentiators between Twin Peaks regimes that function smoothly and those that produce inter-regulator friction. The Australian, UK and Netherlands experiences all demonstrate that coordination architecture established through statute and operating routines built systematically over time produces better outcomes than coordination established through ad hoc arrangements that evolve under pressure. Jamaica should design the coordination architecture deliberately.

The implementation timeline

The legislative drafting should also address the implementation timeline. Article 6 of this series noted that the South African Twin Peaks transition took six years from the 2011 policy paper to the 2018 cutover, plus a further period of phased implementation extending into 2019 and beyond. Jamaica’s compressed three-year timeline from the January 2023 policy decision to the expected 2026 cutover is achievable through the structured Practice Period innovation but produces post-cutover challenges that should be anticipated.

The legislation should include explicit transitional provisions: a defined period during which legacy supervisory arrangements continue to operate alongside the new arrangements; clear cut-over mechanics for transferring licences, supervisory data and ongoing examinations from the existing FSC to the BOJ and the new FSC; treatment of pending enforcement actions and ongoing investigations; arrangements for institutions whose licences will need to be re-issued under the new framework; and review mechanisms that ensure the post-implementation refinement process has statutory authority. The Australian and South African experiences both demonstrate that transitional provisions designed into the original statute work materially better than transitional arrangements addressed through subsequent regulations.

What the package should look like as a whole

Drawing the elements together, the Twin Peaks legislative reform package should comprise: a single consolidated Financial Sector Regulation Act establishing both peaks; calibrated penalty provisions aligned to international benchmarks; SMCR-equivalent provisions covering senior management accountability; the five investor protection instruments examined in Article 9; explicit provisions on market surveillance, listing rule administration, SRO oversight and capital market governance; safeguards on the central-bank prudential peak design; statutory funding, governance and powers for the new conduct FSC; coordination architecture between the two peaks; and transitional provisions managing the cutover. The package should be drafted as a coherent whole, with cross-references that make the regime intelligible to regulated institutions, supervisory staff, courts and the public.

The drafting effort to produce this package is materially larger than the drafting effort to produce a more minimalist Twin Peaks framework. The temptation will be to produce the minimum statutory framework that delivers structural separation, with the substantive provisions deferred to subsequent regulations. The international evidence is unambiguous that this approach produces a Twin Peaks regime that requires multiple subsequent legislative interventions over the following decade to add the elements that the original framework should have contained. The Australian Hayne Royal Commission ten years after the original Twin Peaks framework, the UK SMCR extension five years after the original framework, the New Zealand Conduct of Institutions Amendment Act eleven years after the original framework — each of these is a case where elements that should have been in the original legislation were added under subsequent remedial pressure.

Jamaica has the opportunity to design the package right the first time. The opportunity is finite. The legislative drafting work currently underway is the moment when the choices are made.

Closing this article, and what comes next

The legislative reform package examined in this article translates the analysis of nine prior articles into specific recommendations for the legislative drafters. The architectural decision, the penalty calibration, the individual accountability provisions, the investor protection instruments, the capital market provisions, the prudential peak safeguards, the conduct peak design, the coordination architecture, and the transitional arrangements all require deliberate drafting attention. The choices made in 2026 will shape the experience of every Caribbean financial institution and every Caribbean retail investor for the next generation.

Article 11 turns from the legislative drafting work to the boardroom readiness work that the run-up to the cutover requires. Whatever shape the legislation finally takes, boards of Caribbean financial institutions need to prepare their organisations for the post-cutover regime. Article 12 closes the series by examining the longer view — what a Caribbean capital market worthy of international capital should look like over the decade following the cutover, and what the Twin Peaks transition can position the Caribbean to achieve.

 

PARTNER WITH DAWGEN GLOBAL Building the Statutes That Last a Generation The Twin Peaks legislative reform package being drafted in 2026 will shape the Caribbean financial sector for a generation. The international evidence base is clear on the architectural choices, the penalty calibration, the individual accountability provisions, the investor protection instruments, and the coordination architecture that distinguish credible regimes from frameworks that fail to deliver. Dawgen Global brings audit, assurance, capital market regulatory and legislative advisory expertise to support policy-makers, regulators and industry associations engaging with the drafting work — Big Firm capabilities, with Caribbean understanding. Six advisory engagements designed for this moment: ▸  Legislative Drafting Advisory — for policy-makers, regulators and industry associations engaging with the Twin Peaks legislative drafting process, comparative analysis of single-statute versus scattered-amendment approaches drawing on South African, UK, Australian and Dutch models. ▸  Penalty Calibration Benchmarking — quantitative benchmarking of proposed civil penalty calibration against FCA, ASIC, FSCA and AFM regimes, with structured drafting recommendations for institutional and individual penalty regimes. ▸  SMCR-Equivalent Implementation Strategy — for institutions preparing for individual accountability provisions in the new legislation, structured implementation programmes covering Statement of Responsibilities documentation, certification regime design and Conduct Rules cascading. ▸  Investor Protection Architecture Review — design support for the statutory complaints authority, compensation scheme of last resort, statutory remediation powers and vulnerable customer framework provisions. ▸  Coordination Architecture Design — for regulators and policy-makers engaging with the inter-peak coordination mechanisms, comparative analysis of statutory coordination architectures and operational routine design. ▸  Transitional Provisions Advisory — structured analysis of transitional arrangements covering licence transfer mechanics, supervisory data migration, pending enforcement treatment and post-implementation refinement procedures. Begin the conversation today. Email: [email protected]

 

COMING NEXT IN THIS SERIES

Article 11  —  Boardroom Readiness for Twin Peaks

Whatever shape the Twin Peaks legislation ultimately takes, boards of Caribbean financial institutions need to prepare their organisations for the post-cutover regime. The next article translates the legislative analysis into operational readiness — the board governance arrangements, supervisory engagement strategies, control function maturation, and management information systems that the new regime will require. The work is substantive, and the time available to complete it before the cutover is finite.

ABOUT THE AUTHOR

Dr. Dawkins Brown is the Executive Chairman and Founder of Dawgen Global, an independent, integrated multidisciplinary professional services firm headquartered in New Kingston, Jamaica, operating across more than fifteen Caribbean territories. With Big Four heritage and over twenty-three years of professional experience, Dr. Brown writes regularly on Caribbean financial regulation, capital markets, governance and strategy through the LinkedIn newsletter Caribbean Boardroom Perspectives.