Prudence N. Barnes, Contributor
From left, Roy Johnson, executive chairman of the Jamaica Stock Exchange (JSE), Lady Patricia Golding and Ed McKie, council member of the Jamaica Stock Exchange, talk with Sean Morris, a resident of the Sir John Golding Rehabilitation Centre. The occasion was a presentation of a letter of commitment by the JSE for J$3.8 million for the repair of the roof and ceiling of the Physiotherapy and Occupational Therapy Department at the Centre recently. - RICARDO MAKYN/STAFF PHOTOGRAPHER
IN 1990, Ed McKie and a group of partners formed M/VL Stockbrokers Limited and made his debut on the floor of the Jamaica Stock Exchange. Armed with approximately six orders from friends and former business contacts, he started a new career as a stockbroker and has not looked back.
Fifteen years later, M/VL is one of Jamaica's most solid and successful independent stock brokerage firms; one of the few firms to survive the stock market slump of the mid-90s.
In the interest of privacy, Mr. McKie, the chairman and managing director of M/VL, declined to give details on the average daily volume of his trading, but pointed out that the company had a high client retention rate and is constantly gaining new clients through word of mouth as a result of its reputation.
"We have our fair share of orders and we are satisfied with our share of the market," he said, adding that several of the clients they now have are clients who have been with them for all of their 15 years.
Having grown with the Jamaica Stock Exchange for 15 of the over 35 years of the JSE's existence, and living through some of the more 'turbulent' times for Jamaica's relatively young equities market, Mr. McKie said the market is now a more professional and better regulated sector than 15 years ago.
The move to become a stockbroker was a natural transition for Ed Mckie who had developed a solid reputation in the financial sector. He was manager of pension fund investment at the Alcan Pension Fund, one of the most lucrative and efficiently managed pension funds in the island; Trade Administrator of Jamaica from 1981-1985 and director, Agro 21 Corporation Limited from 1985-1989, the National Investment Bank of Jamaica from 1986-1989 and the Bank of Jamaica 1988-1989. Mr. McKie has also held the position of chairman of the Agricultural Credit Bank, Agricultural Credit Board and the Mandeville Area Hospital.
"The opportunity presented itself for us (in 1990) to get a seat on the stock exchange. I had just left the ACB and the company was just being formed and they needed the expertise and I came in," Mr. McKie said of MV/L, which is largely a family owned and operated company.
MEMBERSHIP
A stockbroker is an agent who acts on behalf of persons who wish to buy and sell shares in companies. In order to become a broker, a company has to be admitted to the membership of the Council of the Jamaica Stock Exchange. The JSE and the Financial Services Commission require "that senior executives, shareholders and employees dealing with the public pass a 'Fit and Proper' test and the firm has to meet certain basic financial requirements on an on-going basis."
M/VL trades in equities on the stock exchange on behalf of its clients, but also plays the role of financial advisor, offering a mix of investment options to clients including financial instruments such as mutual funds and bonds, "based on what best serves the needs of the client".
"Every client has a peculiar need. Some have a short-term perspective because they must. Some have a long term goal because they can," he said, adding that for longer term investment he recommended the equities market. Some persons also carried out short-term investment in equities.
Noting that the most important objective of MV/L is to serve its clients, Mr. McKie stated that "the critical thing is sensitivity to the client's needs and a total commitment to ensuring that those needs are met".
CAPITAL MARKET
Commenting on the importance of the capital market to the national economy, Mr. McKie said that "the capital market is the best way to bring together people who want to invest and those who want money for business, manufacturing, exports, tourism and other areas of the economy. "You can't have development without the capital market, Mr. McKie, a McGill University graduate with a background in commerce stated.
Investing in securities is a good way of ensuring that "what you have worked for in the past will be valuable in the future; ensuring that it is not diminished by inflation," he said.
Asked about risk, he noted that every investment involves some element of risk. While the stock market is riskier (in the sense that you never know what the return will be) than other financial instruments such as bonds and government paper which are offered at fixed rates, the reward from the stock market is greater.
"The market induces you to take the risk by giving you more reward," Mr. Mckie stated, adding that the market for equities always out-performs financial instruments over the long term.
When someone invests in equities, they purchase shares in a company and they receive dividends from the company's profits. Mr. Mckie pointed out that another reward is the likelihood that the company will grow, sparking more confidence in the stock.
"The public will get more confidence in the stock, they will buy and therefore there will be an increase in the value of the stock" he said.
One way to moderate risk is to spread investment over a range of different types of securities and offsetting one investment with another.
INDEPENDENT BROKER
Highlighting the strengths of MV/L, Mr. Mckie noted that the fact that MV/L is an independent broker is an asset in that it is not a part of a group of any company and therefore its clients do not have to compete with its affiliates.
In addition, the company has had an enduring and stable presence on the stock exchange. In the mid-1990s when the stock market experienced massive decline, M/VL stood its ground, building its reputation as a solid company even as other brokers were forced to leave the market.
"We had a strong back office operation," Mr. Mckie stated, noting that it was their internal systems and best practices that enabled M/VL to not only survive but able to trade on behalf of some of its fellow stockbrokers who were hit hard by the downturn and lost their license to trade on the exchange.
In recalling the scenario of the day, Mr. Mckie said because of the lack of management and lax regulatory framework which existed, some persons were able to perform dishonest trades on the exchange - selling stocks and not handing over the certificates, and as such were able to sell the same stock multiple times to different persons.
"In the current environment there are far greater regulations which require better prudential management," he observed, adding that with the current level of regulation of the system, it is not likely that what occurred back in the mid 1990s could happen today.
SECURITIES COMMISSION
Coming out of the crisis of the mid 1990s, the Government of Jamaica established the Securities Commission, later renamed the Financial Services Commission (FSC) to monitor and regulate the securities market. The FSC licenses securities dealers and has oversight responsibility for the JSE. The JSE has also implemented tougher criteria and higher standards for trading in the markets and carries out more vigilant monitoring activities.
One measure which is having a significant impact on the credibility and integrity of the equities market, Mr. Mckie noted, is the Jamaica Central Securities Depository (JCSD). The JCSD was established in 1998 as a wholly-owned subsidiary of the Jamaica Stock Exchange. It is a facility for the holding of securities which enables share transactions to be processed by book entry. A book entry system is an accounting system which allows for the change of ownership of securities electronically between parties without the need for movement of physical documents.
Observing that it is the role of the regulator to ensure that persons do not use their position to take advantage of information that is not shared, the elder statesman of the stock market said he is satisfied with the current monitoring structures of the market. While there is always room for improvement, the system works, he said.
"The JSE encourages all its listed companies to follow the best practices of governance, Mr. Mckie noted, pointing out that it was the JSE which first moved to suspend trading of Dyoll stocks.
"The stock exchange is a marketplace put together by the brokers to be used by investors. So the individual stock broker has an over-riding interest in ensuring the efficiency and integrity of the market," Mr. Mckie further stated.
He noted that the fact that Jamaica has a "young market" may be a distinct advantage. "The fact that we are a young market means that we can start with the appropriate regulations and can put in place proper standards. There are many older markets (in the world) that do not have the standards that our market has," he opined.
Globalisation is also engendering trading across markets with several Jamaican companies listed on multiple exchanges as well as foreign companies investing in Jamaican securities.
In terms of further development plans for M/VL, Mr. Mckie said the company is in the process of exploring new technological options, adding that M/VL is currently shopping around for the best fit for its organisation.
"M/VL is striving to live up to the ideal of constantly giving superb service to clients" Mr. Mckie said.
