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FSC plugging regulatory gaps

Published:Friday | January 29, 2021 | 12:25 AM
File 
FSC Executive Director, Everton McFarlane.
File FSC Executive Director, Everton McFarlane.

The Financial Services Commission, FSC, has been working on mechanisms to improve price transparency in the market and the flow of information to the investing public.

It’s also been working with the entities it regulates on the realignment of capital and liquidity risk management.

Those issue and other reforms to close regulatory gaps have become more urgent because of the disruptions caused by the coronavirus pandemic, not just in Jamaica, but worldwide, as FSC Executive Director Everton McFarlane noted on Wednesday.

“We adopted a three-pronged approach of enhanced dialogue with stakeholders, including market participants, dealers, and partner regulator in the Bank of Jamaica. Through those mechanisms and weekly meetings, we had a tailored response, enhanced monitoring of critical licensees, moving from a monthly basis to weekly, gathering data to develop an appropriate policy response,” McFarlane said, while addressing the Jamaica Stock Exchange 16th Regional Investments and Capital Markets Conference streamed from Jamaica Pegasus Hotel in New Kingston.

The FSC, whose work is conducted behind closed doors, rarely issues public statements and does not do press briefings on developments under its regulatory portfolio, which spans the insurance, private pension and securities markets. But the regulator does post consultation documents and guidelines on its website.

“We now have revised issuer guidelines covering dealer disclosures on whether they are acting as principal or agent. In addition, bond issuers are subject to closer scrutiny in terms of higher quality financial disclosures and a better discussion around the risks associated with a particular product offering,” said McFarlane, whose presentation was on ‘Identifying Regulatory Gaps in the Capital Markets: Lessons Learnt and the Way Forward’.

The FSC will also be tightening regulations around the trading of securities at or around the time of an issuance. Presently, rules prevent the trading of securities at a time when there is material information not known to the public that may affect the value of the securities, including during the run-up to initial public offerings of shares, or IPOs.

“We’re looking at insider and block-out trading guidelines that would help to mitigate some of the issues that arise because a segment of the investing public has more information than the other, specially to manage the use of material non-public information,” said the regulator.

“We are exploring the matter of restrictions around the way in which information about IPOs are disseminated to the public prior to registration, as well as the activities of insiders that may or may not impact on the integrity of a particular issue,” he added.

The FSC is also concerned that there is insufficient price transparency around the offers, that is, how brokers and the issuing companies arrive at the price of the securities.

neville.graham@gleanerjm.com