SOME dealers in the financial sector are breaking the law governing the issuing of financial instruments, states the Financial Services Commission (FSC).The FSC has found what it says are a number of breaches related to the disclosure of interest in the issuance of commercial paper. It also reported that the 'blind' Certificates of Participation (COPs) and contract notes on the market also contravene the law, which requires dealers to provide investors "a detailed description of the security - (that) includes the amount invested, rate of return, maturity date, and type of investment."
This is being interpreted as coming from ignorance of the financial regulations rather than a deliberate attempt to break the law, says Glenford McLeish, the FSC's senior director for securities. He said the regulatory body has decided to introduce a public awareness campaign before getting tough.
The FSC has the power to fine, suspend and revoke licenses, depending on the severity of the breach.
Where there are breaches, "we seek immediate retraction," Mr. McLeish said. Some of the cases identified were significant enough for the financial regulator to issue public notices about the practices.
In the case of commercial paper it has 'strongly recommended' that companies issuing the security, take the time to familiarise themselves with the 'Disclosure of Interest' requirements in the law which include filing annual audited financial statements with the FSC, and monthly statements of outstanding financial liabilities.
Mr. McLeish says there will be more advertisements and consultations to ensure that securities dealers are made fully aware of the laws. For now it communicates with dealers in writing as well as through meetings and regular inspections.
Dealers in the market say most of their members are aware of the laws, adding that it might be the newer players who are not as up-to-date.
Since the collapse of the financial sector in the 1990s, the Government has been taking steps to tighten the regulatory environment, spawning the one-year-old FSC in the process.
The regulator now monitors roughly 80 licensed dealers, not all of which are practising.
Unlicensed players make up a small portion of the market. "Where you find even one, that is cause for concern," said Mr. McLeish.
"We glean our information from a variety of sources," he said. They scan the media, searching for advertisements, articles, and pronouncements to gauge whether dealers are operating in accordance with the law. They also investigate complaints.
Just recently, the FSC detected a local advertisement from a company called Quest Investment Limited which it tracked to a "little PO Box in Florida with someone there who did not know a thing about Quest", he said. It was subsequently tracked to the Bahamas. Quest is possibly "a legitimate company in the States, with registered offices out of the Bahamas, but they're not licensed to do securities business in Jamaica," he said. The law requires that anyone offering investment advice and trading in securities be registered in Jamaica.
Dealers are also required to disclose when they are 'dealing as a principal'. In that case they must advise their clients when they are buying and selling financial instruments "for their own account and risk."
A fledgling securities dealers association is soon to be formalised at an upcoming meeting likely to be held in October that will elect a slate of officers. For now the association is being overseen by a working committee.
