JIS News

Executive Director of the Financial Services Commission (FSC), Brian Wynter, has urged professionals in the securities market to protect investors by ensuring that unethical occurrences were kept at an absolute minimum.
Mr. Wynter was speaking about best practices in the industry at a market manipulation and insider trading conference held on June 29 at the Jamaica Pegasus Hotel, where he cited a number of manipulative acts such as marking the close or ramping, wash trades and prearranged trading, using false and misleading information, wharehousing and price manipulation.
Outlining tools for preventing market manipulation and insider trading, he said these included enforcement, which involved identifying the occurrence of the practice, catching the perpetrators, extracting compensation from them and penalization. Mr. Wynter told the gathering that, “as important and perhaps of far greater value is to prevent, by raising awareness of the practice and by the widespread adoption of proper standards of practice. This approach allows investors to protect themselves by shunning those with low standards”. He stressed that organisations whose members came into possession of insider information by virtue of their profession, such as members of the Jamaica Securities Dealers Association, the Institute of Chartered Accountants, or institutional investors such as insurance companies, pension funds, and mutuals, should play an active role in promoting ethical standards through the implementation of best practices.
“As agents, dealers have a clear responsibility to act in their customers best interest,” he said.Speaking to best practices for member brokers of recognized exchanges, Mr. Wynter pointed out that each brokerage house should: establish, maintain and enforce a system of supervision of activities of their registered representatives and connected persons in order to achieve compliance with the securities laws; establish written policies for conduct of trading operations including rules prohibiting unlawful and manipulative trading practices, and insider trading.
He also advised that brokers should establish “Chinese walls” (walls created by a procedure) between the trading arm and the investment banking arm of the organisation. “These walls include procedures to restrict the flow of information within the organisation and procedures for designating restricted securities and for monitoring the trading of officers in the securities companies for which the company is providing investment for corporate banking services,” he stated.
In addition, Mr. Wynter said, brokerage houses should establish policies to manage effectively, the conflicts of interests that arose when an analyst’s objectivity may be questioned, as he or she might be encouraged to provide positive recommendations for companies, which were also clients of the firm in some other guise.
Turning to best practices for listed companies, Mr. Wynter said these should observe all of the disclosure rules that they had signed on for and have systems to guard against insider trading in blackout periods. These systems should not be restricted to directors, he noted.
“It should cover senior management and any other person in the company who is likely to have insider trading. There is a tendency for us to look at directors and not to look at his or her secretary or to not consider the bearer who is privy quite often to significant market sensitive information. You need to consider everybody, who could be in possession of information that could affect the price of the security,” the Executive Director asserted.
He further pointed out that listed companies should have internal procedures governing the communication of information within the company, so that they could control the access to and handling of such sensitive information.
Mr. Wynter also used the opportunity to emphasize that the FSC, working closely with the Jamaica Stock Exchange and other agencies, would be playing a more aggressive role in policing the securities market, as it sought to enforce the law as it relates to market manipulation and insider trading.
“In order to ensue that market participants recognize the legal provisions enshrined in statute, the FSC will, without fear, favour, or equivocation enforce the law and where necessary or appropriate, and where there is sufficient evidence to carry a successful prosecution, the FSC will seek to have legal proceedings instituted against suspected offenders,” Mr. Wynter stated.