JIS News

The Financial Services Commission (FSC) plans to move decisively this year to address glitches in the laws governing the Mutual Trust Fund and Unit Trust, as it seeks to stave off the havoc unleashed by the global economic meltdown.
Executive Director of the FSC, Rohan Barrett, asserted today (March 9), that the global financial crisis presents an opportunity to change the overall financial market structure in Jamaica.
“To this end, the FSC will, in 2009, be embarking on a number of initiatives,” Mr. Barrett revealed, during his address at a Rotary luncheon, held at the Jamaica Pegasus Hotel, in Kingston.
He emphasised that the initiatives being pursued by the FSC would serve to modernise the financial market and enhance public confidence. The FSC Head suggested that this would be accomplished by improving the knowledge and understanding of financial services operating in Jamaica.
Mr. Barnett said action would have to be taken to deal with the inconsistencies in the laws governing the Domestic Collective Investment Scheme Sector. This comprises the Unit Trust and Local Mutual Fund.
Mr. Barnett notes that in 1998, a moratorium was imposed on the registration of Unit Trust Schemes and the products of the Unit Trust Act. At the same time, he said the establishment of Local Directive Investment Schemes suffered a severe blow.
He pointed out that the creation of Mutual Funds registered under the Securities Regulations was effectively blocked, placing the Unit Trust at a distinct advantage.
The FSC Head attributes this to inconsistencies in some provisions of the Companies Act and the operational environment of Mutual Funds, including tax treatment. Accordingly, Mr. Barnett said the tax laws tend to treat the Unit Trust more favourably than Mutual Funds.
He argued that these disadvantages have effectively been major disincentives for the creation of new Investment Funds, adding that although measures have been put in place to address the problem, over the years, it has become apparent that effects of the inconsistencies will not be addressed in the short term.
However, he stressed that the FSC would immediately need to reconcile the combined effect of the the moratorium on the Unit Trust and the current inoperability of the Unit Trust.
Given the arguments he advanced in relation to more favourable tax benefits for the Unit Trust, among other things, Mr. Barnett asserts that the anomalies in the laws have made local offshore funds much more attractive than local funds. Accordingly, he said the FSC has examined, as an interim measure, the possibility of lifting the moratorium on the Unit Trust, while committing itself to addressing the legal inconsistencies in the shortest possible time.
Mr. Barnett emphasised that the FSC would not rest until the matter is completely resolved, and would continue lobbying relevant stakeholders and work hand in hand with its counterparts in the private sector, to achieve that objective.

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