Melhado THE PROPOSED new Financial Services Commission (FSC) will have the power to appoint an auditor to review a company's financial records and charge the bill for the work to the firm in question, it has emerged.
And investment dealers within $500,000 of failing to meet solvency requirements that demand a net worth or indemnity insurance of $5 million will have to inform the Commission in writing immediately or face possible penalties under tough new legislation expected to be brought to Parliament by the end of the year.
The powerful new FSC also plans to stop dealers who have worked for a failed investment firm acting again as investment dealers or advisers. The new draft guidelines also target offshore investment accounts demanding greater transparency from local financial players dealing, trading and advising people living here using overseas accounts.
"The Commission may, where the records and accounts are not kept to the satisfaction of the Commission, appoint an auditor at the licensee's expense to examine the records and accounts and report thereon to the Commission."
The new amendments to the Securities Act obtained by The Gleaner adds: "Where a dealer or investment adviser is in danger of failing to maintain the solvency and liquidity requirements by an amount of $500,000 he shall forthwith notify the Commission in writing of the fact".
The draft guidelines continue: "An individual shall not be eligible to be licensed or registered under these regulations if he (works or) has worked with a company whose licence has been (suspended) or cancelled under this Act".
Financial sector companies will also have to pay increased fees to the new regulator, with a portion of their revenue going to help finance oversight of the sector.
The extent of the jump in fees is still to be determined but companies will have to pay something in the region of 0.1 per cent of revenue.
On Friday the Financial Gleaner revealed details of the new legislation, which will be unveiled later this week to industry players.
Securities Commission executive director Earl Melhado said on Monday he wanted comments from the industry on the new regulations. He said the plan was to move closer to first world standards.
He said on Monday that the move to a new fee structure was not set in stone but that government should not have to pay to regulate the sector.
As well as broadening the definition of what constitutes a "fit and proper" executive to work in the sector, the new rules look to improve transparency and give more information to investors. Each licensee must identify a compliance officer responsible for meeting the regulations and establish audit and conduct review committees.
The Commission's 1998 annual report showed that income from fees for the 149 companies and individuals licensed as dealers was just over $11 million but the cost of running the Securities Commission was more than $37 million. The Government provided an $18 million grant, while interest on the Commission's $16.5 million of cash and short term investments yielded $3.6 million.
These figures suggest that the industry will have to find a way to finance the $20 million gap, assuming that the Commission's need for resources stays at a similar level.
Securities Commission chairman Dr. Owen Jefferson is currently heading a task force to lay the foundation for the setting up of the new FSC, which was announced by Finance Minister Dr. Omar Davies during his April Budget speech.
The organisation will incorporate the Securities Commission, the Office of the Superintendent of Insurance and the proposed Pensions Commission. Work on draft pensions regulations is far advanced, and the insurance body is being reshaped.
The FSC task force will be required to conclude its work in time for the entity to become operational by April 1, 2001. Dr. Davies told the International Monetary Fund recently that he expected to table legislation in Parliament by March 31 establishing the new Commission and its powers.
