Dennise Williams, Staff Reporter
George Roper, senior director of securities at the Financial Service Commission. - WINSTON SILL/FREELANCE PHOTOGRAPHER
"THE WHOLE purpose of the Financial Services Commission (FSC) is to protect the customers of financial services, whether it be insurance, securities, pensions and mutual funds/unit trusts."
Senior director of securities at the FSC, George Roper, says that as the Jamaican financial services industry continues to grow and evolve, the FSC as a regulator, must also grow and evolve. Part of this evolution is the continued interaction between the regulator, finance students and members of the industry.
He was speaking on Wednesday at the Courtleigh Hotel as guest lecturer to the 14th cohort of Fitz Ritson and Associates portfolio management students.
FIFTY LICENSED DEALERS
"Let us look at where the financial service industry is right now. As at October 14, there are 50 dealers licensed as companies. This includes banks, insurance companies and pension funds that have subsidiaries that are dealers. There are 24 individuals that are licensed security dealers, which means they can do everything a licensed company can do.
There are 677 registered dealer representatives and two months ago we approved the first investment advisor. The investment advisor can only provide information about investments. The only money they are allowed to handle is their fee.
Currently, there are 18 overseas mutual funds registered for sale in Jamaica and there are eight local unit trusts held by four licensed unit trust managers."
He reminded students that the Bank of Jamaica (BoJ) regulates the deposit-taking institutions, namely commercial banks, building societies and merchant banks.
TRADITIONAL BANKING SET
However, the funds under management by the financial services industry eclipsed what is held by the traditional banking set.
"According to the BoJ, as at March 31st total customer deposits in commercial banks, building societies and merchant banks was $309.33 billion dollars.
However, funds under management for licensed securities dealers excluding unit trusts and mutual funds, as at June 30th was $418.8 billion. Unit trusts, at the same date, held $16.3 billion.
At the end of September 2005, the market capitalisation of the 39 listed companies on the Jamaica Stock Exchange was $828.9 billion or 166 per cent of the country's gross domestic product as at December 31, 2004.
PRIVATE PLACEMENTS
From January to September of this year, there were $2.6 billion of private placements done; one initial public offer of equity securities worth $6.06 billion and $1.96 billion of rights issues."
Of course, the driver of the growth, as pointed out by Mr. Roper is the fact that the returns offered by the financial services industry, outstrip what is offered by the traditional banking set.
And so investors put their money where the opportunity for return is the greatest. However, Mr. Roper pointed out, this is where the risk is the greatest as well.
He explained, "The FSC's mandate is to takes steps such as necessary to ensure that appropriate standards of conduct and performance."
Which lead him to discuss the resurgence of commercial paper.
"In the past there was a lot of activity in this segment of the market, but as we emerged from the post FINSAC era, this activity dried up.
Now, investors are looking at it again. To date, there have been 180 issues of commercial paper with a face value of $1.44 billion.
And investors need to realise that commercial paper can be secured or unsecured. This means that we had to step and ensure that this product is properly regulated."
REQUIREMENTS
Mr. Roper then outlined a few of the requirements to issue commercial paper.
"The issuer or guarantor of the commercial must maintain a net asset base which is not less than the greater of $5 million or two per cent of total outstanding liabilities.
This critical rule is backed up by supporting requirements. He said the FSC is intent on protecting individuals when they invest.
Of course, commercial paper regulation is just a small part of the complex day to day business of the regulators.
Mr. Roper concluded by advising the portfolio management students to consider a career in regulation. "It is a career that is demanding but very rewarding. Becoming a regulator allows you to participate in the development and strengthening of the financial services industry."
