Securities Council wants revamp of legislation to better protect investors

The Guyana Securities Council (GSC) is depending on a re-write of the 1998 Securities Industry Act and amendments to the Financial Institutions Act to allow it to better protect investors and provide tangible benefits to the domestic financial market.

According to the 2016 Annual Report of the council, the amendments would allow it to become an ordinary member of the International Organisation of Securities Commissions (IOSCO) which would aid in its work.

An application to join the IOSCO was first made in 2005, however becoming an ordinary IOSCO member is conditional upon signing its Multilateral Memorandum of Understanding on Cooperation and Consultation and the Exchange of Information (the MMoU).

The report, which was laid in Parliament last month explains that a prerequisite of signing this MMoU is the ability to obtain, and disclose to other regulators, certain specific information that may be critical to enforcement cases. This prerequisite cannot be met by the GSC without significant legislative changes.

It is for this reason that a rewrite of the Act which will address the deficiencies therein and as a result strengthen the legislative structure of the securities industry is being proposed.

The main impediments preventing Guyana from becoming a signatory to the MMoU are that the GSC does not have direct access to bank records. The council currently depends on the Bank of Guyana to obtain such information when a bank is not a market participant or a reporting issuer.

Additionally, Guyana’s legislation is not specific with respect to how to acquire information from banks while the Bank of Guyana is limited in its sharing of information, depending on the Finance Minister or any lawful order of Court for obtaining the information.

These shortcomings clash with the vision of the MMoU, which is that signatories will provide to each other comprehensive assistance in the investigation and prosecution of securities-related crime and misconduct.

According to the report, in increasingly globalised markets, the ability to obtain information and exchange it with overseas counterparts, as facilitated by the MMoU, is critical to Regulators’ success in this field.

“MMoU signatories, and the markets to which they belong, benefit from international recognition in that they adhere to robust standards in the investigation of cross-border crime, and that they are participants in a global enforcement regime, which contributes to maintaining fair and efficient markets,” it explained, noting that such recognition may inform the perceptions of international organisations involved in global regulation.

Examples provided include the Financial Stability Board and other standard-setters which use the MMoU as a benchmark when conducting their own assessments as well as international investors. The perceptions of market credibility can be influenced by whether or not a jurisdiction is a signatory to the MMoU.

The report also states that international organisations such as the IMF and the World Bank refer to not only the IOSCO MMoU but to the IOSCO objectives and principles of securities regulation and the ISOCO assessment methodology when conducting their own jurisdictional assessments and says that domestic markets may experience more tangible benefits such as increased capital flows which will derive from

increased investor confidence. Additional benefits include ISOCO education and training programmes and other IOSCO capacity building initiatives.

“There are now 91 signatories to the MMoU, representing approximately 94% of the world’s securities markets, and IOSCO is determined to ensure global coverage. It is therefore becoming essential for all regulators to sign the MMoU, not only to ensure effective international enforcement, but for their reputation, and the economic health of the jurisdictions to which they belong,” the GSC report noted

It is with this reality in mind the council is supporting a rewrite of the principal legislation as well as the codifying of its corporate governance guidelines as regulations. Also proposed is the review and implementation of the collective investment schemes bill

Current chair of the council’s Board of Directors Rawle Lucas told Stabroek News recently that a draft of the new act has already been crafted. He noted that a consultant visited Guyana in May and worked with the council to prepare this draft which is currently being reviewed.

“The intent is to increase the ability of the council to enforce and protect investors.

The current act doesn’t provide enough scope on the part of the council,” he said.

The Guyana Securities Council is an independent autonomous body established by Section 4 of the Securities Industry Act of 1998. Its mission is to ensure the orderly growth and development of the securities market, with a dynamic regulatory framework that facilitates the mobilization of capital in the national interest. Its mission statement notes that this is to be achieved in a transparent, efficient, fair and competitive manner.

A security is a tradable, negotiable financial instrument that holds monetary value.

The GSC is financed through a government subvention as well as registration fees for new market participants and reporting issuers.

The 2016 report notes that these fees are nominal and are only paid once on registration and notes that in the proposed rewrite of its legislative framework the fee structure can be reworked to facilitate annual registration fees for all registrants and issuers including all market participants reporting issuers and government agencies which issue securities.

Agencies and individuals regulated by the GSC include brokers, dealers, traders, underwriters, investment advisers, securities intermediaries and securities companies, and also self-regulatory organizations (securities exchanges, clearing agencies and associations of securities companies and intermediaries).