FSC Maintains Strict Monitoring of Securities Sector

The Financial Services Commission (FSC) continued to regulate the securities sector during the 2006/07 fiscal period, with emphasis on monitoring the solvency and market conduct of licensed entities. This was done through a programme of routine and special examinations, as well as stock market surveillance. Executive Director of the FSC, Brian Wynter on May 16 gave details of the activities of the Commission at a media luncheon at the Hilton Kingston Hotel.
“Findings from these examinations sometimes identify areas of potential risk exposure and when these deficiencies are identified, the licencee is required by the FSC to put in place effective corrective measures,” Mr. Wynter said.
He added that the growth of the capital base of securities dealers is indicative of the improving financial health of the sector. “At the end of 2006 the capital base had increased by 63 per cent compared to the level two years earlier and the ratio of capital to total assets has improved by 1.9 percentage points,” he informed.
Other priorities as it relates to regulation of the sector involved a recently completed project to review and strengthen the framework for issuer registration and prospectus disclosure. “Draft regulatory provisions are in circulation for further comment, because we would like to bring this new regime in later this year,” Mr. Wynter said.
One feature of the new prospectus regulation is the proposal to establish an “accredited investor” category. The FSC head explained that, “this category covers sophisticated or wealthy investors to whom investment products can be sold, which do not meet the more stringent issuer registration requirements. Under the accredited investor concept, investment products can be more flexibly tailored to meet the needs of a more select clientele that has the capacity to obtain their own highly skilled professional advice and has sufficient surplus wealth to be able to sustain the loss of their investment.”
This concept was initially introduced to the local market in November 2004 in a paper entitled, ‘The concept of qualified investor and its importance to Jamaica’s capital markets’.
Another activity carried out during the review period in the area of securities regulation was the FSC’s programme of investigation and enforcement. “It is well known that the FSC has been seeking to enforce the requirements of the Securities Act in relation to entities that are perceived to be conducting securities business without a licence or issuing unregistered securities to the public. Both of those are against the law. We maintain a vigorous interest in detecting and investigating these operations as they arise,” Mr. Wynter said.
He reiterated that the FSC’s interest in the activities of unregulated schemes arose from its statutory obligation to ensure that the law designed for the protection of investors is observed.
Mr. Wynter pointed out that the licensing and registration process gave the FSC the authority to monitor promoters of investment schemes to see that they met their statutory obligations to make full disclosures to investors, so that, “they can make informed decisions before investing.”