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Information sharing to be clarified in new securities bill

New legislation governing the securities industry has completed the draft process, and suggests significant changes to the Securities Commission of The Bahamas’ability to gather and disclose information are on the way.

Industry experts have anticipated for some time that if passed into law the draft Securities Industry Act(2010)and securities industry regulations will make becoming an’A’signatory to the International Organization of Securities Commissions'(IOSCO)Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information(MMOU)imminent.

“All of the other competing jurisdictions have signed on and do the same thing,”Philip Stubbs, Chairman of the SCB toldGuardian Businessyesterday.”If we don’t have this information sharing, there’s a possibility of some kind of sanction being placed against us.”

For The Bahamas to be seen as using best practices and standards in our securities industry it is in the country’s interest to become an’A’signatory, according to the chairman.

“As part of being a member of[IOSCO], all of its members are required to sign onto the IOSCO MMOU by a particular date,”Stubbs said.

Increased access to information for securities-related criminal investigations would reciprocally be of great benefit to The Bahamas, in any investigations into securities crimes that it will conduct, according to the chairman.

“Bear in mind that in today’s world, with the technology and communications we have, a particular security transaction can be initiated in one jurisdiction or country, and the trail of the transaction can be in another country or countries in some other part of the world, because of the way funds are transferred and the way transactions are done.”

There is excitement in the financial services industry about barriers to business that becoming an’A’signatory to the MMOU should remove.

“A number of countries will allow their citizens to come to The Bahamas and do business here if they are satisfied that we meet their information sharing requirements,”Stubbs said. He used Brazil as an example, as the Bahamian mutual fund business is locked out of Brazil, pending at the very least the tabling of the new act before Parliament.

Mechelle Martinborough, legal counsel for the SCB toldGuardian Businessthat some of the key changes the new act represents include provisions to allow for information shared by the SCB with foreign regulators, to be used for securities-related criminal investigations, the authorization of the commission to gather information from non-SCB registrants, and an obligation of confidentiality imposed on the commission regarding information requests.

“In the present regulations we have interpreted that any international regulator who comes to The Bahamas for information cannot use that information for criminal matters in their jurisdictions without certain other steps being taken.[The new]legislation will give the commission the ability to consent to the use of that information in criminal matters so long as certain information is disclosed to us by the international regulator in its initial request.”

If passed the new legislation will call for such requests to be clear in terms of background facts, directions on where the applicants believe the information is, specific in regards to what information is requested, and must detail the anticipated breech of the applicant country’s legislation or the details of the criminal matter which has or may arise, according to Martinborough.

“We still have the same standards of confidentiality.[Foreign regulators]still have to sign an undertaking. The difference is that now we can say’yes’without going through another process,”Martinborough said.”Now, when we give[the applicant]this information, it’s not only limited to use for regulatory purposes, but can be passed onto[the applicant’s]criminal authorities for them to pursue criminal matters related to securities activities.”

The information can only be used for criminal securities investigations, according to Martinborough. She added that if the securities bill is passed, the same standards will apply to any country applying for information, whether the country is an MMOU’A’signatory or not, but the process will be easier for MMOU’A’signatories.

Speaking about the status of the bill, Zhivargo Laing, Minister of State in the Ministry of Finance, said,”We expect to table it in Parliament very shortly.”

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