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Features - July 2011



The Bahamas Investor

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Securities law–keeping the industry up to date

Securities law–keeping the industry up to date

Revised Securities Industry Act keeps The Bahamas internationally compliant, gives commission more power

The Bahamas Investor Magazine
July 13, 2011
July 13, 2011
Tosheena Robinson-Blair

  • An interview with Philip Stubbs, the acting executive director and chairman of the Securities Commission, by Tosheena Robinson-Blair.
  • The new Securities Industry Act passed earlier this year not only brings The Bahamas into compliance with international standards, it also enhances existing rulings in the Securities Industry Act, 1999 and Securities Industry Regulations, 2000.

    The new act provides The Securities Commission of The Bahamas with powers to regulate the securities market. Before offering the public shares, bonds and other financial instruments, issuers are required to file a prospectus with the commission.

    All industry participants, including stock exchanges, brokers, broker-dealers and securities investment advisors, operating in (or from) The Bahamas are required to register with, or be licensed by the commission. The statutory body is also empowered to regulate investment funds and to license their administrators.

    Heading the regulatory body is chairman Philip Stubbs, who was appointed in 2007. He also serves as acting executive director, an interim appointment that became effective September 1, 2010. Prior to his appointment as chairman of the commission, he served as a member of the executive board of Ernst & Young Bahamas, Bermuda and Cayman Area Practices, and as the country managing partner of Ernst & Young (Bahamas), for more than a decade.

    Stubbs is also the chairman of the Compliance Commission of The Bahamas and a director of The Central Bank of The Bahamas. He has over 36 years experience in the accounting field, 27 of them at the senior managerial level. In 2006, he received the Minister of Financial Services Award of Excellence.

    In an exclusive interview with The Bahamas Investor, Stubbs talks about his role in the commission and the local and international impact of the new legislation on the industry.

    Q: As commission chief what are your priorities?

    A: One of the things that’s going to be top priority for me, and for the commission’s management team, is the implementation of the new Securities Industry Act. Another area is the institutional strengthening of the commission. Part of the commission’s strategic goals speaks to the improvement of various processes and procedures within the commission. It is something that is ongoing. The strengthening is to ensure that we, more effectively and more efficiently, carry out our mandate, in terms of regulating and serving the needs of the industry.

    Q: What are some of the challenges or opportunities in the securities industry today?

    A: First of all, we regulate an industry–the securities and capital market–which is quite dynamic. Change is always taking place. We also regulate a diverse industry. We are responsible for the securities and capital markets locally and internationally. We have the local public companies and we have the international market, which is mainly involved with investment funds. We have to deal with fund administrators that manage those funds and other service providers.

    We are in an environment where The Bahamas, as a jurisdiction, is challenged to meet international, world-class standards and best practices. Outside agencies look at jurisdictions such as ours to ensure that the laws and the regulations we have here are not conducive to money laundering, people using proceeds of crime, or the technologies of today, to have cross-border violations with securities laws.

    Q: The Securities Industry Act has been called a “critical” piece of legislation. How does its passage benefit the Securities Commission and other relevant stakeholders?

    A: The Securities Commission is a part of the International Organization of the Securities Commission (IOSCO). IOSCO sets the principles and objectives for securities regulation. Therefore, the G20 countries, the Organisation for Economic Co-operation and Development (OECD) and other organizations look to IOSCO’s principles as the ones to be followed in judging whether a jurisdiction has proper regulations in place for the securities and capital markets.

    This new legislation fully complies with IOSCO’s principles. It allows us to fully be a part of IOSCO’s Multilateral Memorandum of Understanding (MMoU), which is a document that all securities regulators worldwide are being called on to sign. The MMoU provides the protocols and the rules for the exchange of information [in cases] where there could be possible violation of securities laws through cross-border transactions and activities in the securities and capital markets.

    The Bahamas has the opportunity to assist other securities regulators from other parts of the world, if it is felt that somebody is using our jurisdiction to break the law. Those countries would then be satisfied with their citizens using The Bahamas as a jurisdiction to carry out part of their financial planning and investing, because they have a means by which to receive information in such a case. That’s an opportunity for growth in the business here.

    Secondly, by being signatories to the MMoU, as we carry out our own enforcement, we are able to go to other securities regulators and get information from them as well. This legislation also provides a more effective means for us to protect investors and ensure that there are fair and equitable dealings in the marketplace, especially the local capital market place.

    Q: What are some of the key features of the legislation?

    A: This legislation is designed to keep the Securities Commission up to date with what is happening in the industry. The commission will be able to more easily make changes to regulations without having to go to parliament. There are also rules that can be implemented or changed. In some cases, they may need the [Finance] Minister’s approval or recognition. In other cases, the commission will have the powers to make some of those changes on its own. We are going to be more flexible in being able to respond to the needs of the industry and also slightly more autonomous. There are features in the act that provides a bit more independence to the commission.

    Q: So, how does this aid the work of the commission?

    A: Currently, in enforcement, there are certain areas where the commission does not have full powers to get information and seize records. The new legislation makes that much easier. That is one thing.

    Another area, is monitoring obligations of public companies. The new legislation will allow us to bring various rules that will make it easier for us to enforce some obligations of public companies. Soon after the new legislation is enacted, we intend to introduce a new takeover code, which is already drafted. That takeover code sets out rules for what has to happen whenever an individual, or another company, goes to buy a substantial portion of shares in another company. It is something that we don’t have now. It clearly sets out what has to be done, how it is to be done and what happens when it isn’t done.

    Q: The tabling and passage of this legislation was one thing The Bahamas did to keep compliant with the IOSCO policy changes. What else is being done?

    A: Passing the law is one thing, but we have to be able to show that we can implement it, by being able to enforce the provisions of the legislation. We have to gear up in terms of training and preparing our management team and our staff to be able to know and understand the legislation, its provisions and how to apply them.

    In addition to that, the Securities Commission took part in a self-assessment of our operations to come up with an action plan to see what we should be doing in relation to IOSCO’s principles. Where there are areas that we need to make improvements we come up with initiatives to ensure that we are doing things to fully comply with those principles. There are areas where we are doing okay, but there are also areas where we need to make improvements.

    Q: Where do you see the securities industry in The Bahamas in the next five to 10 years?

    A: We hope to see an industry that is growing. We know that the government and other participants in the industry are doing what they can to strategically plan where we need to go. The industry is positioning itself to place The Bahamas in such a way as to strategically exploit whatever opportunities are out there. [I expect] regulators to be cognizant of what the industry is doing, what is happening in terms of the products, services and strategies. As a regulator, we will effectively serve and not be a hindrance to the industry, while at the same time ensuring that securities laws and regulations are complied with.

    Q:?Anything else you’d like to add?

    A: As an entity with limited resources, we try to ensure that we make the necessary improvements: the institutional strengthening, training professionals and looking at some of our processes to ensure that they are in line with what’s happening now, so we can be effective and efficient.

    Those things require money. The commission is financed by the fees we get from our registrants and licensees. Sometimes that is not enough. When that is not enough we do get some subvention from the government. We are moving forward to try and become fully self-funded. As we try to improve our services to the industry we regulate, we are also looking at restructuring our fees. We are going back to the industry to look at a new fee schedule not only for the Securities Industry Act, but for all of the legislation that we are responsible for.

    The industry is running a business. They are trying to make money. The regulators are there to ensure that laws are complied with, but at the same time to do it in a non-obtrusive way so that people can operate their business. We want to operate in an environment where we are working hand in hand to achieve the same objective of having an industry that is continually growing and providing opportunities for the country and for Bahamians to grow and sustain themselves.

    While confidentiality is still the order of the day, there are tools to bring errant IBCs to account

    Entry into trade body still at least three years away, as jurisdiction seeks further integration into global economy

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