ACT

Supplement to the Sierra Leone Gazette Vol. CXXXII, No. 49 dated 18th October, 2001

THE OTHER FINANCIAL SERVICES ACT, 2001

ARRANGEMENT OF SECTIONS

Sections No

PART I—PRELIMINARY

1. Application.
2. Interpretation.

PART II—LICENSING

3. Obligation on financial institutions to be licensed.
4. Application for licences.
5. Eligibility for licences.
6. Grant or refusal of licences.
7. Existing financial institutions.
8. Exemptions.
9. Display of licences.
10. Revocation of licences.
11. Restriction of licences.
12. Notice of revocation or restriction of licences.
13. Mandatory revocation and restriction of licences.
14. Notification of principal place of business.
15. Opening, closure, merger or consolidation of branches of licensed financial institutions.

PART III—CAPITAL AND LIQUIDITY REQUIREMENTS

16. Minimum paid-up capital.
17. Capital adequacy.
18. Restriction on ownership of shares.
19. Restrictions on deposits.
20. Maintenance of reserve fund.
21. Local assets.
22. Foreign currency open position limit.
23. Publication of balance sheet.

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Sections No

24. Credit risk exposures.
25. Minimum liquidity requirements.
26. Restrictions on sale or transfer of shares.
27. Restrictions on payment of dividends.
28. Alteration of constitution of licensed financial institutions.

PART IV—RETURNS, ACCOUNTS AND APPOINTMENT OF AUDITORS

29. Institutions to submit returns.
30. Books of accounts.
31. Production of books of accounts.
32. Appointment and duties of auditors.
33. Auditors’ report.

PART V—POWERS OF CENTRAL BANK

34. Examination of licensed financial institutions.
35. Powers of Central Bank.
36. Emergencies and liquidations.
37. Power to remove directors or other managerial persons from office.
38. Assumption of control of deposit-taking business by Central Bank.

PART VI—GENERAL

39. Right of appeal.
40. Constitution of tribunals.
41. Determination of appeals.
42. Costs, procedure and evidence.
43. Licensed financial institutions to conduct business in prudent manner.
44. Further appeals on points of law.
45. Disqualification of directors etc.
46. Abandoned property.
47. Protection of individual accounts from investigation.
48. Maintenance of secrecy.
49. Central Bank to give directions generally.
50. Supervisory authority of Central Bank.
51. Offences.
52. Protection for actions taken under Act.
53. Regulations.

SCHEDULE

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SIGNED this 30th day of September, 2001.

ALHAJI AHMAD TEJAN KABBAH,
President.

No. 7
Sierra Leone
2001

The Other Financial Services Act, 2001

Being an Act to make provision for the licensing, regulation and supervision of institutions carrying on financial activities other than banking and for related matters.

ENACTED by the President and Members of Parliament in this present Parliament assembled.

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PART I—PRELIMINARY

Application

1. This Act shall apply to the whole of the Republic of Sierra Leone and the overseas operations of financial institutions licensed under this Act.

Interpretation

2. In this Act, unless the context otherwise requires—

“acceptance” means confirming or assenting to liability under a bill of exchange or other negotiable instrument;

“affiliate” means a firm associated with another generally as its subsidiary;

“Central Bank” means the Bank of Sierra Leone;

“close relation” has the meaning assigned to it in the Banking Act, 2000;

“company” has the meaning assigned to it in the Companies Act;

“credit services” includes—

(a) the giving of any advance, loan or any other facility, such as discounting of bills with or without security and whether in connection with the sale of goods or not whereby the person to whom the same is given has access directly or indirectly to the funds of the person giving the same;

(b) the giving of a guarantee in relation to the obligations of any person; and

(c) the giving of an underwriting commitment or indemnity to the effect that upon the happening of an event in relation to a person a certain sum of money would be paid or certain obligations would arise;

“deposit” has the meaning assigned to it in the Banking Act, 2000;

“deposit-taking” has the meaning assigned to it in the Banking Act, 2000;

“development banking” includes carrying on the business of—

(a) providing capital, loans and other credit facilities to be utilized for agricultural, industrial, commercial or other economic development purposes, in particular the acquisition of productive assets, such as land, buildings and equipment;

(b) refinancing development loans provided by other lending institutions; and

(c) accepting time deposits;

“director” in relation to a licensed financial institution, includes any person by whatever name he may be referred to, carrying out or empowered to carry out substantially the same functions in relation to the direction of a licensed financial institution as those carried out by a director of a company registered under the Companies Act, or a director of a co-operative society registered under the Co-operative Societies Act, 1977;

“discount” means the purchase or sale of a bill of exchange or other negotiable instrument prior to maturity;

“exposure” includes equity, debentures, bonds and credit facilities;

“factoring” means the business of acquiring debts due to any person;

“financial activity” means engaging in any of the following—

(a) deposit taking;

(b) provision of credit services;

(c) leasing;

(d) supplying of goods by way of hire-purchase;

(e) factoring or debt administration;

(f) dealing in, acceptance or discounting of, bills of exchange or promissory notes;

(g) purchase of government or other securities;

(h) development banking;

(i) buying and selling of foreign currencies;

(j) any other type of financial intermediation.

“financial intermediation” includes the receipt of deposits for the purpose of lending money or discounting negotiable instruments or acquisition of assets for leasing or on hire purchase basis;

“Governor” means the Governor of the Central Bank;

“group” in relation to a body corporate, means that body corporate, any other body corporate which is its holding company or subsidiary and any other body corporate which is a subsidiary of that holding company;

“hire-purchase” includes bailment of moveable assets to another person with the understanding that the bailee becomes the absolute owner on completing the payments;

“leasing” includes letting or sub-letting moveable assets on hire for agricultural, industrial or commercial use, where the lessor is the owner of the property, regardless whether the letting is with or without an option to purchase the property but does not include the business of hire-purchase;

“licence” means an authorisation granted under sections 6 and 7;

“licensed financial institution” means a financial institution holding a valid licence issued by the Central Bank to carry on wholly or partly any one or more financial activities; and all the offices and branches in Sierra Leone of such institution shall be deemed to be one institution and in the case of an institution incorporated abroad it shall be deemed to be an institution separate from its head office and other branches or offices abroad;

“merchant banking” means the receiving of deposits on deposit account, the provision of finance, consultancy or other advisory services relating to corporate and investment matters, making or managing of investments on behalf of any person and accepting and discounting bills of exchange;

“Minister” means the Minister responsible for finance;

“owned funds” means shareholders’ funds including paid-up capital and all reserves as well as capital surplus from revaluation of assets less any accumulated or unprovided-for losses of a licensed financial institution;

“person” includes any individual, association or body of individuals, firm or company and any juridical person;

“place of business” means any branch, agency, office or booth of a licensed financial institution including a mobile office open to the public;

“principal shareholder” means a person owning more than twenty percent of the paid-up capital of the entity concerned.

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PART II—LICENSING

Obligation on financial institutions to be licensed

3. (1) Subject to section 8, no person shall carry on any financial activity unless that person holds a valid licence issued by the Central Bank.

(2) Any person who, not holding a valid licence under this Act, solicits deposits commits an offence and is liable on conviction to a fine of not less than three million leones.

(3) Any person who contravenes subsection (1) after having been convicted pursuant to subsection (2) commits a further offence and is liable to a fine of not less than five hundred thousand leones for every day on which the offence is continued.

(4) Where the Central Bank has reasonable grounds to believe a person has contravened subsection (1) or (2), it may, under a warrant issued by a magistrate, enter any premises and examine the books, accounts and records of such person.

(5) In the exercise of the powers in subsection (4), the Central Bank may take copies of or extracts from any documents or records examined under that subsection.

(6) Any person who intentionally obstructs the Central Bank in its exercise of the powers conferred by subsection (4) or (5) commits an offence and is liable on conviction to a fine of not less than one million leones or imprisonment for a term of not less than one year or to both.

Application for licences

4. (1) Any registered company or registered co-operative society or other statutory body wishing to carry on any financial activity shall apply to the Central Bank for a licence for that purpose.

(2) An application under subsection (1) shall be—

(a) in such form and manner as the Central Bank may prescribe;

(b) accompanied by a statement indicating the financial activity which the applicant intends to carry on and whether it intends to accept deposits from the public; and

(c) accompanied by such additional information as the Central Bank may reasonably require for the determination of the application.

Eligibility for licences

5. No person shall be eligible to apply for a licence under this Act unless that person is—

(a) a company whose name has not been struck off the register of companies under the Companies Act;

(b) a society registered under the Co-operative Societies Act, 1977 and whose name has not been struck off the Register of Co-operative Societies; or

(c) a statutory body.

Grant or refusal of licences

6. (1) The Central Bank shall, within ninety days of receipt of an application for a licence and all other relevant information and after consultation with the Minister, grant or refuse to grant a licence.

(2) In determining an application, the Central Bank shall take into account—

(a) the character and fitness of the promoters, directors and officers or proposed directors and officers of the applicant as stipulated in the Schedule;

(b) the feasibility and viability of the applicant’s business plan;

(c) the adequacy of the applicant’s capital structure in relation to the nature and scale of the proposed business;

(d) the financial position and financial history of the applicant; and

(e) the public interest.

(3) The Central Bank shall not grant a licence to an applicant whose principal place of business is in a country or territory outside Sierra Leone, unless in addition to the provisions of subsections (1) and (2)—

(a) the relevant supervisory authority in that country or territory issues a statement to the Central Bank that it is satisfied with respect to the prudential and overall management of the applicant; and

(b) the Central Bank is satisfied as to the nature and scope of the supervision exercised by that authority.

(4) Subject to this Act, where the Central Bank is satisfied with an application, it shall grant a licence to the applicant subject to such terms and conditions as it may specify.

(5) A licence issued under this Act shall indicate the type or types of financial activity for which an institution is licensed and in the case of an institution intending to accept deposits from the public, it shall be expressly stated in the licence.

(6) A licensed financial institution shall not carry on any financial activity for which it is not licensed.

(7) A licensed financial institution shall not carry on any other business which is detrimental to the financial activity for which it is licensed.

(8) Where the Central Bank refuses to grant a licence, it shall issue a written statement to the applicant stating the reasons for its decision.

Existing financial institutions

7. (1) Notwithstanding the provisions of this Act or any other law, any registered company, co-operative society or other statutory body in existence before or at the commencement of this Act carrying on any financial activity shall, within a period of ninety days after the commencement of this Act, apply to the Central Bank for a licence to operate as a licensed financial institution.

(2) Pending the determination by the Central Bank of an application under subsection (1), the applicant may continue to carry on the financial activities in which it had been engaged immediately before the commencement of this Act.

(3) Where the Central Bank intends to refuse to grant a licence to an applicant under subsection (1), it shall serve notice of intent on the financial institution which shall have a period of thirty days from the receipt of the notice to make such representations as it considers appropriate to the Central Bank.

(4) Where the Central Bank refuses to grant a licence to an applicant, it shall notify the applicant accordingly.

(5) Subject to subsection (8), where the Central Bank has served a notice of intent to refuse an application on an applicant, the applicant shall, from the date of receipt of the notice—

(a) cease every financial activity;

(b) submit to the Central Bank a time-bound program for the completion, winding-up or transfer of its existing obligations in respect of any financial activity being carried on.

(6) Where at the commencement of this Act a financial institution does not meet the requirements for eligibility for a licence under this Act, that institution shall—

(a) cease all financial activities;

(b) submit to the Central Bank a time-bound program to discharge its existing obligations.

(7) The Central Bank may modify any programme submitted to it by a licensed financial institution pursuant to subsections (5) and (6) and issue such direction as it thinks fit and the institution shall comply.

(8) Where the licensed financial institution fails to comply with any direction issued by the Central Bank under subsection (7), the institution and every director, executive, partner, manager or other officer of that institution who fails to take all steps necessary to secure compliance by the institution with those directions shall be liable to pay to the Central Bank a penalty of not less than five million leones and two million leones, respectively.

(9) Without prejudice to subsection (3), where a notice of intent to refuse an application is served under this section, the applicant shall have a right of appeal to a tribunal to be constituted in accordance with section 40 for that purpose.

(10) An appeal under subsection (9) shall be made within a period of 28 days after the service of the notice and conducted in accordance with such procedures as may be prescribed under section 42.

(11) An applicant shall have a further right of appeal to the High Court on any point of law.

Exemptions

8. (1) The prohibition in section 3 shall not apply to institutions licensed under the Banking Act, 2000.

(2) Notwithstanding anything contained in this Act, the Governor may by statutory instrument exempt any particular financial institution or groups of financial institutions from any of the requirements of this Act as to licensing.

(3) For the purpose of this Act “licensed financial institution” includes all offices and branches in Sierra Leone of such institution and in the case of an institution incorporated abroad it shall be deemed to be an institution separate from its head office and other branches or offices abroad.

Display of licence

9. Every licensed financial institution shall at all times conspicuously display its licence at its place of business.

Revocation of licence

10. (1) The Central Bank shall revoke the licence of a licensed financial institution if it appears to the Central Bank that—

(a) the licensed financial institution has failed to comply with an obligation imposed on it by or under this Act;

(b) it has been provided with false, misleading or inaccurate information by or on behalf of the licensed financial institution, in connection with an application for a licence, or by or on behalf of a person who is or is to be a director or other officer of the licensed financial institution;

(c) the interests of the licensed financial institution’s depositors or potential depositors are in any way threatened, whether by the manner in which the institution is conducting or proposes to conduct its affairs or for any other reason;

(d) the licensed financial institution has insufficient assets to cover its liabilities to the public;

(e) the licensed financial institution has ceased to carry on deposit-taking business in Sierra Leone; or

(f) the licensed financial institution has failed at any time to comply with any requirements under sections 16 and 17.

(2) For the purposes of paragraph (e) of subsection (1), a licensed financial institution shall be deemed to have ceased to carry on deposit-taking business in Sierra Leone if it appears to the Central Bank that the institution—

(a) has not accepted a deposit in Sierra Leone in the course of carrying on deposit-taking business within a period of twelve months beginning with the day on which the licence was granted; or

(b) having accepted a deposit or deposits, has subsequently not done so for a continuous period of more than six months.

(3) In the case of a licensed financial institution whose principal place of business is in a country or territory outside Sierra Leone, if it appears to the Central Bank that the relevant supervisory authority in that country or territory has withdrawn from that institution an authorization corresponding to the licence granted by the Central Bank under this Act, the Central Bank shall revoke the institution’s licence.

(4) Where it appears to the Central Bank that—

(a) a winding-up order has been made against a licensed financial institution; or

(b) a resolution for the voluntary winding-up of a licensed financial institution has been passed, whether in Sierra Leone or in any other country or territory, the Central Bank shall revoke the licence of that licensed financial institution.

Restriction of licences

11. (1) Where it appears to the Central Bank—

(a) that there are grounds on which its power to revoke an institution’s licence is exercisable; but

(b) the circumstances are not such as to justify revocation,

the Central Bank may restrict the licence instead of revoking it.

(2) A licence may be restricted—

(a) by imposing such limit on its duration as the Central Bank thinks fit;

(b) by imposing such additional conditions as the Central Bank thinks desirable for the protection of the licensed financial institution’s depositors or potential depositors.

(3) A limit on the duration of a licence shall not be such as to allow the licence to continue in force for more than two years from the date on which it is imposed; and such a limit may, in particular be imposed in a case in which the Central Bank considers that the licensed financial institution should be allowed time to repay its depositors in an orderly manner.

(4) The conditions imposed under this section may in particular—

(a) require the licensed financial institution to take certain steps or refrain from adopting or pursuing a particular course of action or to restrict the scope of its business in a particular way;

(b) include limitations on the acceptance of deposits, the granting of credit or the making of investments;

(c) prohibit the licensed financial institution from soliciting deposits, either generally or from persons who are not already depositors;

(d) prohibit the licensed financial institution from entering into any other transaction or class of transactions;

(e) require the removal of any director, manager or other officer of the licensed financial institution;

(f) specify requirements to be fulfilled otherwise than by action taken by the licensed financial institution.

(5) Any condition imposed under this section may be varied or withdrawn by the Central Bank; and any limit imposed on the duration of a licence may be varied but not so as to allow the licence to continue in force for more than two years from the date on which the limit was first imposed.

(6) A licensed financial institution which fails to comply with any requirement or contravenes any prohibition imposed on it under this section shall be liable to pay to the Central Bank a penalty of not less than three million leones.

(7) The fact that a condition imposed under this section has not been complied with shall be a ground for the revocation of the licence in question but shall not invalidate any transaction entered into during the period of restriction.

(8) Where a licensed financial institution’s licence is restricted by the imposition of a limit on its duration, that institution may apply under section 4 for a new licence and if the licence is granted, the restricted licence shall cease to have effect.

Notice of revocation or restriction of licences

12. (1) Subject to section 13, where the Central Bank proposes to—

(a) revoke a licence;

(b) restrict a licence; or

(c) vary any restriction imposed on a licence otherwise than with the agreement of the licensed financial institution,

the Bank shall give to the institution concerned written notice of its intention to do so.

(2) If the proposed action is to restrict or vary any restriction imposed, the notice shall specify the proposed restrictions or as the case may be, the proposed variation.

(3) A notice under subsection (1) shall state the grounds on which the Central Bank proposes to act and give particulars of the licensed financial institution’s rights under subsection (5).

(4) Where—

(a) the ground or a ground for a proposed revocation or for a proposal to impose or vary a restriction is that it appears to the Central Bank that a criterion in the Schedule is not or has not been fulfilled, or may not be or may not have been fulfilled in the case of any person; or

(b) a proposed restriction consists of or includes a condition requiring the removal of any person as director, manager or other officer,

the Central Bank shall give that person a copy of the notice mentioned in subsection (1) together with a statement of his rights under subsection (5).

(5) An institution given notice under subsection (1) and a person given a copy of the notice under subsection (4) may, within a period of fourteen days commencing with the day on which the notice was given, make representations to the Central Bank.

(6) After giving a notice under subsection (1) and taking into account any representations made under subsection (5), the Central Bank shall decide whether—

(a) to proceed with the action proposed in the notice;

(b) to take no further action;

(c) if the proposed action was to revoke the institution’s licence, to restrict its licence instead;

(d) if the proposed action was to restrict the institution’s licence, or to vary the restrictions on a licence, to restrict it or to vary the restrictions on a licence in a different manner.

(7) The Central Bank shall give the financial institution and the person mentioned in subsection (4) written notice of its decision and, except where the decision is to take no further action, the notice shall state the reasons for the decision and particulars of the rights conferred by subsection (9) and section 39.

(8) A notice under subsection (7) of a decision to revoke or restrict a licence or to vary the restrictions on a licence shall, subject to subsection (3) of section 39 have the effect of revoking the licence, restricting the licence or varying the restrictions in the manner specified in the notice, as the case may be.

(9) Where the decision notified under subsection (7) is to restrict the licence or to vary the restrictions on a licence otherwise than as stated in the notice given under subsection (1), the licensed financial institution may, within a period of seven days commencing on the day on which the notice was given under subsection (7), make written representations to the Central Bank with respect to the restrictions and the Bank may, after taking these representations into account, alter the restrictions.

(10) A notice under subsection (7) shall be given within a period of 28 days commencing on the day on which the notice under subsection (1) was given; and if no notice is given within that period, the Central Bank shall be treated as having at the end of that period given a notice under subsection (7) to the effect that no further action is to be taken.

Mandatory revocation and restriction of licences

13. (1) No notice shall be given under section 12 in respect of—

(a) the revocation of a licensed financial institution’s licence in any case in which revocation is mandatory under subsections (3) and (4) of section 10; or

(b) the imposition or variation of a licensed financial institution’s licence in any case in which the Central Bank considers that the restriction should be imposed or varied as a matter of urgency.

(2) In any case as in subsection (1), the Central Bank may by written notice to the licensed financial institution revoke the licence or impose or vary the restriction.

(3) The notice shall state the reasons for which the Central Bank has acted and, in the case of a notice imposing or varying a restriction, particulars of the rights conferred by subsection (5) and section 39.

(4) Subsection (4) of section 12 shall apply to a notice under subsection (2) imposing or varying a restriction as it applies to a notice under subsection (1) of that section in respect of a proposal to impose or vary a restriction; but the Central Bank may omit from a copy given to a person by virtue of this subsection any matter which does not relate to him.

(5) A licensed financial institution to which a notice is given for imposition or variation of a restriction and a person to whom a copy of the notice is given by virtue of subsection (4) may, within a period of fourteen days commencing on the day on which the notice was given, make representations to the Central Bank.

(6) After giving a notice under subsection (2) imposing or varying a restriction and taking into account any representations made in accordance with subsection (5), the Central Bank shall decide whether—

(a) to confirm or rescind its original decision; or

(b) to impose a different restriction or to vary the restriction in a different manner.

(7) The Central Bank shall, within a period of twenty-eight days commencing on the day on which the notice was given under subsection (2), give the licensed financial institution concerned written notice of its decision under subsection (6); and except where the decision is to rescind the original decision, the notice shall state reasons for the decision.

(8) Where a notice of the proposed revocation of a licensed financial institution’s licence under section 10 is followed by a notice revoking its licence under this section, the latter notice shall have the effect of terminating any right to make representations in respect of the proposed revocation and any pending appeal proceedings in respect of a decision implementing the proposal.

Notification of principal place of business, etc.

14. Every licensed financial institution shall notify the Central Bank of the location of its principal place of business, branch or agency in Sierra Leone.

Opening, closure, merger or consolidation of branches of licensed financial institutions

15. (1) Subject to prior written notification to the Central Bank, a licensed financial institution may—

(a) open a branch, office, sub-office, booth, agency or mobile unit in Sierra Leone and in the case of a licensed financial institution registered or incorporated in Sierra Leone may open a representative office, agency or branch office outside Sierra Leone;

(b) close or change the location of an existing branch, office, sub-office, booth, agency or mobile unit.

(2) Before the closure or change of location of a place of business of a licensed financial institution, the Central Bank shall ensure that the institution provides opportunity to depositors who do not want their accounts transferred to another branch or office or the branch relocated, to withdraw their funds.

(3) Subject to prior written application to and approval of the Central Bank—

(a) a licensed financial institution may, other than in the ordinary course of its business, sell the whole or part of its assets in Sierra Leone to another licensed financial institution;

(b) one or more licensed financial institutions may merge or consolidate with each other or with other licensed financial institutions, as the case may be;

(c) a licensed financial institution may, where its principal place of business is in a country or territory outside Sierra Leone, convert itself into a company incorporated in Sierra Leone.

(4) Upon receipt of a written application for approval of one of the matters enumerated in subsection (3), the Governor shall cause an investigation to be made to determine whether or not the public interest will be served by approval of that application.

(5) On the basis of the investigation and after consultation with the Minister, the Central Bank shall notify the applicant of its decision within ninety days after receipt of the application.

(6) An approval may be subject to such conditions as the Central Bank may think fit; and if the application is refused, the Central Bank shall issue a written statement of the reasons for its decision.

(7) If an application involving any matter enumerated in subsection (3) is approved by the Central Bank, then the assets, liabilities, rights and obligations of the licensed financial institution or institutions submitting the application, to the extent that those