By Dennise Williams, Staff ReporterREGULATOR OF the financial services sector, Financial Services Commission (FSC) in a published statement responded to the Jamaica Stock Exchange 's (JSE) call for a reduction of regulatory fees. In 2003 the JSE paid over $20 million in fees to the FSC.
On June 24, Roy Johnson, executive director of the JSE stated, ""The JSE cannot continue to carry out its regulatory role with its present cost structure. Of each dollar that the JSE collects in revenue on transaction, the FSC charges a 25 per cent cess."
However, the FSC refutes this.
According to the regulator, "The FSC fee from the JSE has remained unchanged since 1996. The fee is 0.08 per cent of the value of every transaction on the JSE, or $8 for every $10,000 that is paid by investors."
PROPER CONTEXT
Bryan Wynter, executive director of the FSC, believes that the fee issue has not been looked at in its proper context. "One should not judge a good year in terms of fee collection and base decisions on that."
In recent years, the fees paid to the FSC have been:
1999 $1,793,236
2000 $2,688,631
2001 $4,746,875
2002 $6,109,502
2003 $20,117,378
States the FSC, "Changes in the amount of the fee reflect changes in the levels of daily trading on the JSE. When more volume is traded at higher prices, the fee paid to the FSC is higher and vice versa when poor market conditions prevail."
Yet, Mr. Johnson has stated that the JSE is continuing to seek dialogue with the FSC in respect to lowering the fees, and believes there is a "listening ear" at the regulatory agency. Replies Mr. Wynter, "Is there a listening ear at the FSC? Absolutely. We always listen and consult with the industry before we take any decisions. In fact, the current fee structure is a result of consultations. However, we do consult with the industry on a cyclical basis and we are open to fee changes." While that statement leaves open the possibility of an increase in fees, Mr. Wynter did speak of a way for the JSE to lower their regulatory costs. "If the value and volume of transactions on the JSE were to increase substantially, then it would justify a lowering of fees. However, if we cut our fee, let's not assume the JSE would get the difference. It would be passed on to the public in the form of lower transaction costs. We are not taxing the revenue of the JSE, we are merely charging for the costs of regulating their activities."
REGULATED
Mr. Wynter explained that while listed companies are subject to the rules of the JSE, many business practices are not regulated by the JSE and so the FSC must step in. Additionally, the regulator must scrutinise activities that occur at the JSE such as rule changes, mergers and new listings. And this is done without the financial support of the taxpayers.
Mr. Wynter stressed that the most important principle is cost recovery. "Since February of 2003, the FSC has been off of the national budget. We get no governmental support." And regulating companies is not cheap. The FSC's annual budget is $212.4 million.
Direct staffing costs for FSC employees performing supervisory and regulatory activities total $120.6 million or 58 per cent of the budget. Direct staffing costs for FSC employees performing a support function (accounting function, personnel function, IT function), total $41.6 million or 19 per cent of the budget. Overhead costs including maintenance, utilities, travel and other costs, total $50.1 million or 23 per cent of the total FSC budget.
Another factor Mr. Wynter stressed was that, "Time is money. Our charges are based on regulatory effect."
The FSC spends $71.5 million to regulate the securities sector, $65.2 million to regulate the life insurance sector and $28.8 million for the pension industry.
Mr. Wynter believes, "Making fees less is not the answer. Our job is to ensure transparency and help build good business practices. While the JSE is self-regulating, it is a private company. It is not accountable to the public. Our job is to protect the public."
