2. The aim of this discussion is to provide an overview of the differences in members' legal structures, customs and practices and the implications/consequences that they have on the development of securities regulation. I will address the differences in regulatory approaches, issues of harmonization, regulatory collaboration, cooperation and exchange of ideas etc.

3. This topic is relevant in a forum such as this owing to two key factors-  Cross-border activities that are currently taking place in the region  Regional efforts towards the integration of financial markets

4. http://criti.info/sites/default/files/ma ps/camerica-caribbean-map.jpg

5. Article 14(2)(e) of the Revised Treaty of Chaguaramas states that it is an objective - “to promote the establishment and integration of capital markets in the Community”.

6.  The presence of financial conglomerates.  The operation of branches in neighboring territories  Cross-border securities trading/ cross- listing/Cross-border capital flows.  Take-overs

10.  Economies of scale  Expansion of markets and businesses  Risk diversification  Efficiency in capital allocation  Increased competition in the financial sector  Wider market participation  Investors have wider choices and access to the most profitable investment opportunities in the region  Better pricing  Increased market efficiency

11.  Contagion  Systemic risks  Vulnerability to fraud, market abuse, money laundering etc.  Barriers/challenges to effective supervision  Regulatory arbitrage  Inconsistent standards and protections

12. STEP 1 Solid internal Regulations STEP 2 Create legislative framework conducive to integration STEP 3 Active collaboration and cooperation

13. “Jurisdictions prescribe their own set of rules on the basis of sophistication of their markets and market participants as well as regulatory culture and risk perception. The emerging markets should take a similar approach. Every jurisdiction should consider its own corporate environment and extent of investor education and protection measures available before opening its shores to foreign intermediaries.” EMERGING MARKETS COMMITTEE OF THE INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS MARCH 2005

14.  Given the benefit to be derived from the integration of our markets the legal environment should promote and support integration  Guard against risks posed by opening borders

15. JAMAICA TIGHTENS LEGAL AND REGULATORY FRAMEWORK FOR ITS CAPITAL MARKETS

16. STEP 1 Solid internal Regulations STEP 2 Create legislative framework conducive to integration STEP 3 Active collaboration and cooperation

17. ·  The Securities Act was enacted in1993  The Securities (Licensing and Registration) Regulations – promulgated in 1996. These regulations provide for the licensing and registration of dealers, investment advisers, their representatives and responsible officers.  The Securities (Conduct of Business) Regulations – promulgated in 1999. These regulations deal with the dealer/client relationship and guidelines for filing of financial information by licensed dealers.  The Securities (Disclosure of Interest) Regulations – promulgated in 1999; these provide for the disclosure of information relating to public companies as well as issuers of commercial paper.  The Securities (Take-overs and Mergers) Regulations – promulgated in 1999; these regulations deal with take-overs of public companies.  The Securities (Central Securities Depository) Regulations – promulgated in 2000; these regulations deal with the operational procedures of a central securities depository.  Financial Services Commission Act – Enabling legislation for the FSC

18.  Modernized Securities Act  Modernized Collective Investment Schemes Regs.  New Prudential Regulations  Retail Repo Regulations  Relaxation of foreign asset limitations  New Insolvency Legislation  SIPP  Credit Reporting Act

19.  Expressly prohibits the schemes commonly known as “Ponzi” and “pyramid” schemes;  Enhances the enforcement and investigative powers of the FSC in relation to breaches of the Act or regulations made under the Act  Introduces additional remedial measures (such as restraint and production orders) that can be utilized by the FSC for the benefit of investors;  Facilitates the sharing of information between the FSC and overseas regulatory authorities in order to promote cooperation among these bodies.  Provide greater oversight of issuers  Provide access to group records  Ensure that new products are brought under the regulatory net ( e.g. derivatives and futures contracts )  Allow the FSC to respond more readily to changes in the market by increasing their regulation making powers

20. With the promulgation of the “Prudential Regulations”, the FSC has tightened its prudential standards for securities dealers to bring them in line with best international practices. The Securities (Prudential) Regulations, 2014 includes provisions for the following : -Leverage ratio; -Stress testing; -Minimum risk based capital adequacy ratio covering exposures to market, credit, foreign exchange and operational risks; -Large exposures; -Liquidity risk management; -Minimum transaction sizes for retail repos; and -Restrictions on the early encashment of retail repurchase agreement contracts

21. Retail repos must be transferred into a trust Adequate disclosures to investors Clarity of legal treatment in the event of insolvency Minimum requirements for trust deed and repurchase agreements

22.  Nature of product  Risks associated with product  The fees or penalties payable by the client in respect of the product (e.g. for early encashment penalties)  Material information  Fact of the trust/custodian/sub-custodian arrangements;  The rights of the client upon the insolvency of a dealer;  The process to determine and realize the clients’ interests in the repo assets on the insolvency of a dealer.  An explanation of the issues of conflict of law that may arise in relation to the custody of the assets with the overseas custodian;  Plain language requirement  Enough information to permit investors to make an informed decision about whether or not they should invest in the retail repo product.

23.  Comprehensive authority for the FSC to regulate all facets of the CIS industry in Jamaica, including full powers to authorize, examine, investigate funds and their service providers and the disclosures made by these funds;  A definition of CIS that does not limit the legal form in which the fund is established;  All CIS offered for sale in Jamaica must be registered under the SA and regulations or expressly exempt from registration.  The service providers to the CIS (custodian, operator, trustee and manager) should be independent of each other and the definition of what constitutes independence is stipulated;  The fund's portfolio of assets and cash must be held in a manner that makes it clear that the assets belong to the fund and its investors, not the entity acting as custodian (manager or operator). Assets must be segregated and the accounts clearly identified as belonging to the fund.  Filings  Minimum standards are set for the frequency of valuation of the assets of the CIS and the methods to be used to ensure that fair valuations take place.  Rules governing conflict of interest have been included which impose a general duty to identify, avoid, mitigate and manage conflicts of interest. might give rise to a conflict of interest must be made and all transactions must take place at arm's length.  As far as possible, the FSC has been given latitude to set detailed requirements, by notice or guideline.

24.  Risk based  Consolidated supervision  Prudential measures  Market conduct  AML  Special audits  Stress testing  Contingency planning  National Crisis Management Plan

25.  Reduction in size of retail repo market to systemically safe and prudentially manageable levels  Transfer of retail repo to trust  Growth of CIS  Embracing new products  Possible growth of hedge funds  Cross-listings continues  Jamaican firms and companies have presences in other jurisdictions across the region and vice versa  Movement towards becoming an offshore financial centre  Promoting financial inclusion  Venture capital

26. STEP 1 Solid internal Regulations STEP 2 Create legislative framework conducive to integration STEP 3 Active collaboration and cooperation

27. Looking outwards…

31.  Diverse entry or registration requirements  Dissimilar rules for exchanges disclosure requirements listing requirements reporting requirements reporting periods takeover rules  Different levels of investor protections (e.g deposit insurance, insolvency laws)  Progress in investor education  Exchange Controls  Foreign Asset Limits  Diverse Tax Policies  Differences in terminology (CIS vs. Mutual Fund, Accredited (Jamaica) vs sophisticated investor (Guyana), definition of public (ECSRC))  Cost of errors, legal advice could result in inefficiencies

32. Jamaica T&TBarbados Mandatory offer 50% 30% 25% Financial provisions Reg. 14(3) - Must be able to implement bid in full S.12 Acquires offer supported by bank letter Sec 7(i) of Regulations require info for arrangements for cash Disclosures in bid circular Required Board of directors to seek competent independent advice Competent advice N/ANo specific requirement Time for target’s directors to decide on bid 7 days from opening of offer 21 daysgenerally requires sending w/in 10 days, but in 7 days, if 10 days can’t be met and in any event sent not later than 7 days before termination of bid Withdrawal rights of target companies shareholders Shareholders may withdraw within 7 days Unlimited and 14 days after any variation R17 - At anytime prior to 2 days before close Samuel C. Thompson, Jr,2009

33. JamaicaECSRCGuyanaSuriname Licensing authority (LA) FSC ECSR Commission Guyana Securities Council Minister on non objection of Bank Jurisdiction Incorporated / registered in Jamaica or prescribed state in Caribbean Com. & owned controlled or supervised by habitual residents & citizens Established in member territory of ECSM Incorporated or registered in Guyana No restriction if LA approves establishment of branch, subsid. or agency in Suriname Fitness and propriety Yes Business description Yes. Organizational structure Yes - *Must have one licensed principal and rep. - Yes *Group structure---- *Compliance arrangement - - - - Adequacy of resources Yes Dispute resolution - - - - Risk management processes Yes - -

34. JAMAICAECSRCGUYANA IOSCO MOU√ - - CGSR MMOU√√ - OTHER√ UU Key U= Unverified

35. STEP 1 Solid internal Regulations STEP 2 Create legislative framework conducive to integration STEP 3 Active collaboration and cooperation

36. Efforts towards integration or deepening and widening of cross border activities in the region must be accompanied by an understanding of the regulatory frameworks and risks in connected jurisdictions across the region.

37.  Outdated regulations  Inadequate prudential rules  Inadequate framework for risk based supervision or slow implementation of existing processes  Weak framework for consolidated supervision of financial conglomerates  More room for cross- border cooperation and information sharing or slow implementation  inefficiency in the trading protocols and the lack of  transparency in the pricing mechanisms  The need for the creation of proper automation

38.  Contagion  Systemic risks  Barriers to effective cross –border supervision  Regulatory arbitrage  Region prone to natural disasters  Impropriety by players, fraud and market manipulation, money laundering  Lack of data and documents due to confidentiality restrictions  Understanding risk in other jurisdictions  Analysis of and understanding of interconnectedness and systemic risks in region  Coordinated approach to supervision (including consolidated supervision)  harmonizing standards and regulations  Contingency planning  Cooperation and information sharing in relation to surveillance and enforcement  Do customer due diligence and understand risk of correspondent intermediary and client

39.  Diverse policies regulatory Requirements  Different levels of investor protections ( e.g deposit insurance, insolvency laws)  Progress in investor education  Simultaneous release of price sensitive information  Harmonization / Minimum standards  Investor education  Equal treatment for investors  Communication and technology harmonization  Dispute resolution mechanism

40.  Legal and regulatory frameworks  Political and cultural  Economic development  Tax policies  Product offering  Would “one-size-fit –all” regulations be appropriate?  We should strive to establish minimum standards for the region

41.  Increased information sharing to promote understanding of risk profiles and business operation of conglomerates and foreign intermediaries. There should be appropriate due diligence on clients are to be understood  Understanding jurisdictional peculiarities and risks  Flexibility in law to address new products offered by overseas  Regional strategies for crisis intervention and crisis resolution.  Regional strategies for consolidated supervision. Cooperation between home and host supervisors  Ensure that there are adequate protections for investors region wide ( e.g. “deposit” insurance)  Investor education. Investors will determine for themselves suitably of products and make other wise investment decisions.  As far as prudent, remove barriers to cross-border activities, cross- border information flows and cross-border cooperation.  Build our research capacities  Minimum standards. All members should become IOSCO Compliant.  MOUs This will guard against negative shocks. This must be supported or enabled by legislation

42. “The securities market regulators in emerging markets, in order to effectively regulate cross-border activities, need to formulate efficient and consistent legal frameworks for the regulation, trading, and processing of cross-border trades. This can be achieved through the harmonization of listing regulations of the stock exchanges. Further, implementation of uniform accounting and corporate governance standards as well as the enactment of disclosure and documentation standards in line with international best practices will undoubtedly facilitate -cross border trading in emerging markets. In addition, vigilant surveillance and monitoring needs to be conducted to constantly supervise this activity” EMERGING MARKETS COMMITTEE OF THE INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS MARCH 2005

43. THANK YOU! Ingrid Pusey, Financial Services Commission Jamaica