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Cutting edge Securities Act set for Dec. 30

After much anticipation, the Securities Industry Act, 2011 (SIA, 2011) is poised to come into effect before the end of the year as legal counsel for the Securities Commission of The Bahamas (SCB) says the cutting edge legislation makes the Bahamas a regional leader.

As a part of its Investor Education Week 2011, the SCB brought in local news media to introduce some of the changes and the implementation plan for the new act yesterday.  SCB Legal Counsel, Mechelle Martinborough, said the SIA, 2011 will be among the first “up-to-date” pieces of securities legislation in force in the region once implemented.

“We are now just waiting on an appointed day notice and we anticipate that notice being passed anytime for bringing the act into effect December 30th this year,” Martinborough said.

Many in the securities industry know the SIA, 2011’s significance to the jurisdiction achieving “A” signatory status to the International Organization of Securities Commissions’ (IOSCO) Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and Exchange of Information (MMOU).  That status is an important signal to the world that the securities industry in The Bahamas is using best practices and standards.  Investment funds advisors, for example, hope that new markets such as Brazil will be opened once that “A” signatory status is in place.

There are other key provisions that will help to modernize the securities industry as well, currently functioning under the Securities Industry Act, 1999.  The Commission will, for example, be able to set fees under the new act.   The ability to set fees is one measure that may help to increase the independence of the regulator – a key concern for financial services providers and customers across the globe.

Exactly what those fees are will be defined under legally binding rules to be issued by the commission.  The authority for the Commission to issue such rules is actually another new feature of the SIA, 2011.   A white paper on the new fees rule has been issued to the industry for consultation with a December 2nd, 2011 deadline for input.  The new fee regime will be effective for new registrants once the rules are finalized, with existing registrants likely not having to meet the new requirements for another year.

Feedback on the fees has already been mixed, according to the Hinds-Jordan, with cases being put for higher and lower charges.  According to Denise Hinds-Jordan, Executive Consultant at the SCB, its fees had not changed in over ten years, and needed to be updated.

While Hinds-Jordan said the new fees should increase revenue to the Commission, it by no means will negate the need for government subvention.  According to its 2010 annual report, total fee income was $2.5 million while government subvention was $1.2 million, or approximately 31 percent of total income for that fiscal year.    She said the pricing is designed to be competitive, and also serves to help define the market that the jurisdiction is pursuing for securities business.

There are other provisions to increase autonomy at the Commission.  Ministers will find their ability to terminate commission members restricted under the new act, for example.

“The minister’s authority to terminate members of the commission has been restricted to terminating for cause, so that whereas under the existing provisions, the 1999 legislation, members served at the pleasure of the minister, they can now only be terminated for reasons such as unjustifiable absences, bankruptcy or if they are unfit to serve.   Misconduct and conviction of relevant criminal offenses are also grounds for termination,” Martinborough told the media.

The function of the commission are expanded under SIA, 2011, moving from an ‘overly broad’ generic mandate.

“The proposed provisions are extensive, they meet international standards, and they include fostering disclosure, promoting orderly development of capital markets, authorizing conduct of the business and monitoring solvency of regulated persons,” Martinborough said.

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