The proposed Finance Business Bill was passed by the Parliament on September 21, 2011. This new Act will repeal and replace the Finance Companies Act No. 78 of 1988, the current law relating to finance business.

Several features have been introduced in the new Act for the effective regulation and supervision of finance business, stated the Central Bank.

Several provisions are introduced in the new Act to curb unauthorized deposit taking businesses, the Bank said. To name a few, advertising and publications soliciting for deposits without authority and publication of advertisements soliciting deposits without authority are made offences and provisions are made to obtain a court order to compel a person to provide information and books relating to illegal deposit taking institutions, the Bank added.

In order to make it easier for the public to identify whether a company is a licensed finance company by its name, provisions are introduced in the new Act requiring every licensed finance company to use one of the words “finance”, “financing” and “financial” in its name. Use of those words is prohibited without the prior written approval of the Monetary Board.

Further, the use of name, abbreviated name or acronym of a licensed finance company by any other company are prohibited in order to prevent fraudulent companies from misrepresenting and misleading the public.

In order to strengthen the supervisory role with regard to licensed finance companies, new powers are given to the Monetary Board among which are restraining of any director, manager or controller of a finance company from carrying out any function in or in relation to the finance company, reorganizing a finance company, by arranging for the increase of its capital or reconstituting its board of directors or both such measures. Further, the disqualifications of directors and key management personnel of licensed finance companies are also specified to ensure the fitness and propriety of directors and managers and good governance.

In order to enable the public to take informed investment decisions and to improve their awareness on unauthorized deposit taking businesses, the Monetary Board is empowered to publish the names of finance companies specifying a supervisory rating for those companies, to publish the name of a finance company regarding which the Board has serious supervisory concerns stating so and to publish the name and address of a person or institution determined by the Board as carrying on finance business or accepting deposits without authority.

Penalties are enhanced under the new Act and aiding and abetting to commit an offence is also made an offence. Further, carrying on finance business without authority and accepting deposits without authority are made indictable offences by the Attorney General in the High Court. These provisions would enable more effective litigation action and be a deterrent to those who contravene the law, the Central Bank said.