FSC to free up unit trusts regime
Published: Wednesday | March 11, 2009
Rohan Barnett, the new boss of Jamaica's Financial Services Commission (FSC), hopes to soon lift the decade-old moratorium on new unit trusts, while the FSC continues to work with stakeholders on the longer-term matter of untangling knotty taxation questions that have stymied the creation of mutual funds here.
Four companies now operate unit trusts in Jamaica under an old law that provides tax incentives for these schemes, which were originally intended as vehicles for small investors to enter sophisticated investment markets.
However, when Jamaica moved in the late 1990s to overhaul the regulatory arrangements, after the collapse of several banks and insurance companies, the government stopped the creation of additional trusts until the new laws were in place.
With the new market oversight regime in place, the creation of mutual funds was effectively blocked because of "inconsistencies between certain provisions of the Companies Act and the operational requirements of mutual funds," Barnett said this week.
Apparently, companies do not find it tax-efficient to set up mutual funds here but partially get around the problem by establishing them abroad and "importing" their operations to Jamaica.
"The combined impact of the moratorium on unit trusts and the current inoperability of local mutual funds has had a negative effect on the development of the Jamaican CIS (collective investment schemes) sector," Barnett told members of the Kiwanis Club of Downtown Kingston during a luncheon held Monday at the Jamaica Pegasus hotel in New Kingston.
The head of the regulatory agency said the FSC wants to address what he called an "anomaly in the law" but conceded that "these matters will not be resolved in the short term".
"The FSC has examined, as an interim measure, the possibility of lifting the moratorium on the unit trusts while still remaining committed to addressing the issue affecting mutual funds in the shortest possibility time," he said.
Move the impasse
"In the meantime, the FSC will continue to lobby the relevant stakeholders and work hand-in-hand with our counterparts in the private sector, as well as in government, to move the impasse, where we currently do not see the issuance of global mutual funds," Barnett added.
Barnett announced as his second initiative for this year the launch of "a national financial literacy programme".
This project, he said, was in the context of a rise in consumer debt and personal bankruptcy, growing instances of financial fraud, decreased levels of savings and the general need for people to understand the interplay of markets.
"The fundamental purpose of this programme is to allow the average man on the street to make informed financial decisions," Barnett said.