KINGSTON – Executive Director of the Financial Services Commission (FSC), Rohan Barnett is imploring investors to be selective in choosing where they invest their money.
He also pointed out that long term investments tend to be less volatile and more growth oriented.
“If you are being promised a guarantee with extremely high short term returns that sound too good to be true, they probably are,” Mr. Barnett said.
The Executive Director was speaking at the FSC’s 10th anniversary investor briefing, held on March 23 at the Terra Nova Hotel, in Kingston.
Mr. Barnett explained that a regulatory framework impacts the attractiveness of the financial market.
“The action of a regulator can either stimulate or dampen the demand and supply of financial services. Enhancing public confidence and understanding of financial markets can increase the demand for financial products, but our function cannot replace the responsibility of the prudent institution or individual investor,” he said.
Meanwhile, Managing Director, National Commercial Bank (NCB), Patrick Hylton noted that there is need for corporate governance reform to reduce the likelihood of a financial crisis or systemic institutional failures.
“Institutions, industry associations and regulators must collaborate to ensure effective and strong corporate governance regimes,” he argued.
Mr. Hylton said characteristics of corporate governance include the appointment of independent Directors and Audit Committees.
“The establishment of appropriate business practice for corporate governance by our regulators is something that I think is very useful, as it sets the tone and outlines the principles on which these corporate governance rules should be based,” he added.
The Managing Director said that the adoption of proper corporate governance facilitates early recognition and response to emerging problems, which can stem institution specific and systemic industrial wide failure.
“Within the context of developed capital markets, it had been found that good corporate governance translates into higher institutional valuations. So, this should serve as an incentive for institutions to implement robust corporate governance regimes,” Mr. Hylton said.
He also emphasised that there is a need to push towards increased transparency and global standardisation of accounting best practices.
The Managing Director stressed that institutions must abide by accounting reforms and best practices, and that credit rating agencies and independent analysts should raise the red flag on questionable accounting practices and insufficient transparency in the financial sector.
“Auditors themselves must abide by best practices, and understand industry changes, so that institutions themselves are not driving the decision regarding accounting treatment of new products or services,” Mr. Hylton said.
The Managing Director said that the government, regulators and institutions have a role to play in capital market development, adding that a good capital market is a complement to the banking sector, as it helps to remove some of the risk, provide liquidity support and long term effective capital to facilitate business growth.
The investor briefing was held under the theme: 'Does financial regulation prevent institutional failure?'
By LATONYA LINTON, JIS Reporter