New Legislation To Modernise Securities Industry

New legislation to modernise the securities industry was presented to parliamentarians on Wednesday.

“This will not only signify our compliance with global standards but also provide a competitive advantage for our jurisdiction,” said Philip B Stubbs, Securities Commission chairman and acting executive director.

State Minister in the Ministry of Finance Zhivargo Laing underscored the importance of regulations “that require practitioners to provide full and fair disclosure to the investing public so that they can make reasonably informed investment decisions.

“The aim is not so much to give the government this information but to ensure that the public has it.”

The new Securities Industry Bill will be debated in Parliament April 18.

The presentation also heard from the Commission’s legal counsel and secretary Michelle P Martinborough, and Bahamas Financial Services Board executive director Wendy Warren.

Those attending included members of Parliament, senators, and financial services and government officials.

It is the aim of the Commission to “effectively oversee and regulate” the activities of the securities and capital markets, and to protect investors while strengthening public and institutional confidence in the integrity of those markets, said Mr Stubbs.

The Commission is a statutory body mandated to administer the current Securities Industries Act; the Investment Funds Act; and act as inspector of the Financial and Corporate Service Providers Act.

The Securities Act 1999 provides the Commission with specific powers to regulate the securities market, he said.

Issuers making offerings to the public of shares, bonds and most other financial instruments are required to file a prospectus with the Commission.

Additionally, all industry participants including stock exchanges, brokers, broker-dealers, and securities investment advisors operating in or from The Bahamas are required to register with or be licensed by the Commission.

Also, the Investment Funds Act empowers the Commission to regulate investment funds and to licence investment fund administrators that operate within or from The Bahamas.

In its role as inspector, the Commission provides for the supervision and regulation of financial services providers and financial institutions not otherwise regulated under securities, banking, and insurance laws.

“Although not explicit in its mandate,” said Mr Stubbs, “one of the primary responsibilities of the Commission is to protect the interest of the investing public, domestic and international.

“Protecting the investing public is based on a simple premise. If investors have confidence that they will be treated fairly in the capital markets, they will be willing to invest.

“The same holds for users of financial and corporate service providers. They must be satisfied that those services are provided in a sound regulatory environment.”  Because of increasing international activity in the securities and derivatives markets, the International Organisation of Securities Commission (IOSCO) in 2002 adopted the Multilateral Memorandum of Understanding (MMU).

IOSCO is the body recognised as the leading international policy forum for securities regulators. It identified 30 principles of securities regulations based on protecting investors; ensuring that markets are fair, efficient and transparent; and reducing systemic risk.

At IOSCO’s 2005 annual general meeting a timetable was agreed for all member regulators not already signatories to the MMU to apply by January 1, 2010.

Applicants who did not meet the standards for full compliance, signatory ‘A’, were approved as signatory ‘B’ provided they committed to make the necessary legislative changes to fully comply with the terms of the MMU. The Bahamas was approved as a signatory ‘B’.

“We are not able to have full signatory ‘A’ status until certain provisions of our laws relating to information-sharing are improved,” said Mr Stubbs.

“(The proposed legislation) is expected to allow The Bahamas to attain signatory ‘A’ status. This will not only signify our compliance with global standards but also provide a competitive advantage for our jurisdiction.”

By Gladstone Thurston
Bahamas Information Services