|A securities market is fundamental to the expansion, improvement and vigor of a nation’s economy. It supports commercial initiatives, funds the use of new thoughts, and assists the management of financial risk.|
Since retail investors are placing an ever-increasing amount of their cash in reciprocated finances and other combined asset schemes, it is therefore understandable that securities markets would evolve to such a state that it has become indispensible to individual wealth and retirement planning.
But confidence and integrity in this process must be maintained at all times and it is here we see the need for the securities council.
Such a council exists in Guyana. This autonomous body was established through the Securities Industry Act 1998. This piece of legislation provides for the registration of securities brokers and dealers, self regulatory organizations, and issuers of securities.
It also paves the way for the regulation of securities issuances; with the purpose of encouraging capital formation and the growth of efficient securities markets, while protecting purchasers of securities and promoting ethical behavior in the securities industry.
The functions of the Council in Guyana are many. They include advising the Minister of Finance on all matters relating to securities; maintaining surveillance over the securities market and ensuring orderly, fair and equitable dealings in securities.
The Council also has a secondary mandate as a Supervisory Authority under the Anti-money Laundering and Countering the Financing of Terrorism (AML.CFT) Act 2009.
Section 22 (c) of the AML/CFT Act 2009 gives the Council the responsibility as a Supervisory Authority for reporting entities which perform the business activities specified in the Fourth Schedule of the Act, which include trading for own account or for account of customers in money market instruments (such as cheques, bills, certificates of deposit), foreign exchange, financial futures and options, exchange and interest rate instruments, and transferable securities.
Guyana Inc. understands that the Council conducts annual training sessions for its Market Participants under the Securities Industry Act and its reporting entities under the AML/CFT Act annually.
These training programs are highly beneficial to the stakeholders involved, as they increase the awareness of the requirements to ensure compliance with the various pieces of legislation, as well as to identify any risks that maybe existing in their operations, and how they can mitigate those risks.
The agencies which benefit from the Council’s training are all the stakeholders of the Securities Industry, including all Market Participants. The Reporting Issuers are also invited to attend. Other agencies that are invited are the Bank of Guyana, Guyana Police Force, Special Organised Crime Unit and the State Asset Recovery Unit.
The Council is also a member of several organizations within the region, namely the Caribbean Group of Securities Regulators (CGSR), the Council of Securities Regulators of the Americas (COSRA) and the Caribbean Regional Technical Assistance Centre (CARTAC).
These organizations host several meetings and workshops annually which the Council is required to participate in. Among the issues being discussed at this point is the Regional Choice of Law and Rule of Law Guidelines.
Additionally, the Council in September 2005, applied to become a member of the International Organization of Securities Commissions (IOSCO). The IOSCO Multilateral Memorandum of Understanding on Cooperation and Consultation and the Exchange of Information (the MMoU), provides a global framework for enforcement co-operation between securities regulators, thereby helping to ensure effective global regulation and to preserve the strength of securities markets.
It is a critical IOSCO work-stream, and is rightly regarded as the benchmark for international co-operation in enforcement matters.
The main impediments preventing Guyana from becoming a signatory to the MMoU are as follows: The Council does not have direct access to bank records. Additionally, Guyana’s legislation is not specific with respect to how to acquire information from banks. The Bank of Guyana is also limited in its sharing information, depending on the Finance Minister or any lawful order of Court for obtaining the information.
The MMoU envisages that signatories will provide to each other comprehensive assistance in the investigation and prosecution of securities-related crime and misconduct. 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.
That recognition may inform the perceptions of international organisations involved in global regulation. For example, the Financial Stability Board and other standard-setters use the MMoU as a benchmark when conducting their own assessments.
Moreover, whether or not a jurisdiction is a signatory to the MMoU may influence the perceptions of international investors as to market credibility. There are now 91 signatories to the MMoU, representing approximately 94% of the world’s securities markets, and IOSCO is determined to ensuring 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.
Currently, becoming an ordinary IOSCO member is conditional upon signing the MMoU, a pre-requisite of which is the ability to obtain, and disclose to other regulators, certain specific information that may be critical to enforcement cases.
Very often, acquiring that ability may require significant legislative change within an applicant’s jurisdiction. However, the benefits of becoming an IOSCO member are numerous. There are reputational advantages and, for example, other international organisations such as the IMF and the World Bank refer not only to the IOSCO MMoU, but to the IOSCO Objectives and Principles of Securities Regulation and the IOSCO Assessment Methodology when conducting their own jurisdictional assessments. Domestic markets may experience more tangible benefits, such as increased capital flows, which will derive from increased investor confidence.
In addition, there are hugely significant benefits in terms of the IOSCO Education and Training Program, and other IOSCO capacity building initiatives. All Securities Commissions were required to be IOSCO compliant, however, this benchmark has been shifted to Country compliance.
This condition should be satisfied by the re-write of the Securities Industry legislation, and the possible amendments to the Financial Institutions Act to allow for the sharing of information.