11th REPUBLICAN PARLIAMENT: 2nd SESSION

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Bill Essentials: The Securities Bill, 2012

16 Nov 2012

SECURITIES CHANGES TO COME SOON….

The Securities Bill, 2012 was introduced in the House of Representatives by Senator the Honourable Larry Howai, Minister of Finance and the Economy on November 7th 2012.

The Bill consists of one hundred and seventy-eight (178) clauses.

What is the purpose of the Bill?

The Securities Bill, 2012 seeks to provide protection to investors from unfair, improper or fraudulent practices, foster fair and efficient securities markets and confidence in the securities industry in Trinidad and Tobago, reduce systemic risk and for other related matters.

What are the key features of this proposed legislation?

  • Repeals the Securities Industry Act Chapter 83:02
  • Establishes the Trinidad and Tobago Securities and Exchange Commission as a corporate body
  • Lists the functions of the Commission as follows:
    • To advise the Minister on all matters relating to the securities industry.
    • To oversee and regulate the securities industry.
    • To conduct inspections and examinations of self-regulatory organisations, broker-dealers, registered representatives, underwriters, issuers and investment advisers as may be necessary.
    • To protect the integrity of the securities market, educate and promote an understanding of the securities industry.
    • To provide assistance to regulatory authorities in T&T or elsewhere.
    • To ensure compliance with Proceeds of Crime Act, the Anti-Terrorism Act and any other law.
    • To create and promote conditions in the securities industry to ensure growth and development.
    • To co-operate with other jurisdictions in developing a fair and efficient securities industry.
  • Outlines the powers of the Commission:
  • To formulate principles for the guidance of the securities industry.
  • To deal with matters referred to it by any person from time to time.
  • To register and regulate market actors.
  • To monitor the solvency of registrants, securities markets and self-regulatory organisations and take measures to protect the interest of investors.
  • To supervise and minimize any conflict of interest that may arise in the case of registrants.
  • To review, approve and regulate takeovers, amalgamations and all forms of business combinations.
  • To review the contents of prospectuses and issue receipts.
  • To review any form of solicitation, advertisement or announcement by which securities are proposed to be distributed.
  • To take enforcement action against any person failing to comply with this Act.
  • To recommend By-laws to the Minister.
    • To formulate, prepare and publish notices, guidelines, bulletins and policies describing the views of the Commission regarding the interpretation, application or enforcement of the Act.
    • To make orders.
  • The seal of the Commission to be kept in the custody of the Chairman or Secretary and all documents to be kept under seal shall be signed by the Chairman or Secretary.
  • The membership of the Commission to be no more than seven nor fewer than three individuals including an attorney-at-law and a representative from Ministry of Finance.
  • Commissioners can hold office for no more than three years.
  • Proceedings for the commission are established:
    • The Commission must meet at least once in every two months.
    • The Commission may appoint a committee who will submit recommendations with respect to the performance of that function.
    • The Secretary shall keep minutes.
  • In order to maximize the protection of investors, the Commission shall co-operate and provide information to the Central Bank of T&T, the Financial Intelligence Unit and any other entity.
  • The Commission shall send an annual report of its activities to the Minister within four months of the end of its financial year to be laid in Parliament.
  • The Commission shall also prepare financial statements within four months after the end of each financial year. These accounts shall be audited by an auditor.
  • The Stock exchange and the Central Depository are registered under this Act and shall review and amend the rules within two years after coming into force of the Act.
  • Provides for the registration of self-regulatory organizations.
  • A person must be registered in accordance with this Act in order to carry on business or hold himself out as or engage in any act, action or course of conduct in connection to the business activities of a broker-dealer, an investment adviser or an underwriter.
  • A person’s shall be registered as a registrant for a period of one year after which registration can be renewed.
  • A person’s eligibility for registration will depend on the:
    • financial condition and solvency of the person;
    • educational background and other qualifications and experience;
    • person’s ability to perform his proposed business efficiently, honestly and fairly;
    • person’s ability to comply with the requirements of the Act; and
    • person’s character, financial integrity and reliability.
  • A register of all registrants and self-regulatory organisations shall be maintained by the Commission.
  • Requirements for substantial shareholders of registrants are established in the Act.
  • The Commission may suspend, revoke or accept voluntary surrender of registrations.
  • After the end of each financial year, annual reports must be sent to each holder of securities other than debt securities.
  • Reporting issuers shall prepare annually, financial statements which shall be accompanied by an auditor’s report and interim financial statements which do not necessarily need an auditor’s report.
  • Financial statements must be sent to each holder of securities other than debt securities at the time the financial statements are filed with the Commission.
  • The Act exempts certain foreign issuers where the reporting issuer has a market capitalization, complies in all respects with foreign disclosure requirements, files with the Commission all such documents which it files with the securities regulatory authority in a designated foreign jurisdiction where it is registered and delivers to each security holder, resident in T&T documents that such security holder would be entitled to receive under the securities laws of the designated foreign jurisdiction.
  • An advertisement solicits the purchase or sale of securities.
  • Where trades are conducted other than through a securities exchange, such registrant shall file with the Commission a report of the trades.
  • The Act establishes market manipulation offences.
  • A person who contravene these offences commit an offence and is liable on conviction on indictment to a fine of two million dollars and two years’ imprisonment.
  • The Act prohibits the disclosure of non-public information. Any person who contravenes commits an offence and is liable on conviction on indictment to a fine of five million dollars and five years’ imprisonment.
  • The Act addresses the issue of price rigging.
  • The Act provides for:
    • client accounts;
    • use of a clearing agency as registered owner of securities;
    • reports by connected persons; and
    • civil liability: liability for misrepresentation, market misconduct offences.
  • The Commission may make guidelines on any matter it considers necessary.
  • The Minister may make By-laws which must be published by the Commission at least thirty days before proposed effective date.
  • The Commission may appoint a suitably qualified person to conduct investigations.
  • The Act outlines the Commission’s power to obtain information and documents.
  • The Act establishes a Securities Industry Tribunal, members of which shall be appointed by the President after consultation with the Prime Minister and Leader of the Opposition.
  • The Chairman of the Tribunal must be an Attorney-at-Law.
  • Jurisdiction of the Tribunal is to hear and determine:
    • Appeals from decisions of the Commission or a delegate of the Commission.
    • Market misconduct proceedings.
    • Matters referred by the Commission.
  • Outlines the powers of the Tribunal to include:
    • Making orders.
    • Ordering the payment of administrative fines not exceeding five hundred thousand dollars.
    • Censuring a person or entity.
    • Ordering the payment of compensation or restitution.
    • Ordering persons or entity to account for profits arising from the market misconduct or unjust enrichment.
    • Making an order to cease and desist from activities.
    • Prohibiting persons from being or becoming a senior officer of a registrant.
    • Ordering the payment of proceedings.
    • Ordering the performance of any other Act.
  • Members of the Tribunal shall hold offices for no more than three years and shall be eligible for reappointment
  • Allows persons to appeal the Commission’s decisions.
  • Allows persons to make appeals to the Tribunal.
  • Appeals from decisions of the Tribunal lie to the High Courts and appeals from the decision of the High Court lie with the Court of Appeal.
Important issues for consideration:
  • Legislation will be inconsistent with sections 4 and 5 of the Constitution.
  • The Act will provide that a trade can occur in the country in the absence of evidence to the contrary where an act, advertisement, solicitation, conduct or negotiation in furtherance of a purchase or sale of a security is made by:
    • Mail, courier, telephone, facsimile transmission. (whether or not solicited by such person)
    • electronic mail (where the recipient of the email is in Trinidad and Tobago and the sender has knowledge of this)
    • via the internet, web pages and documents (except in cases where a disclaimer exists)
  • The Stock Exchange and Central Depository will be given two years after the commencement of the Act to ensure conformity with the Act. Some may argue that the time period given is too short or too long to conform.
  • Self-regulatory organizations will be mandated to be registered under the new Act and registration will be required to be renewed annually.
  • The registration process also demands a prescribed fee of a sum not stated in the Bill and compliance with such other conditions as the Commission may determine.
  • Applications for registration are to be published in two daily newspapers and open to submissions by interested persons. It may be argued that the registration process is rigid as the Bill lists a number of requirements for granting and for refusal of an application for registration.
  • The Securities and Exchange Commission will have the power to:
    • refuse a proposed amendment to the rules of governance of a self–regulatory organization in such instances as set out in the Bill; and
    • require change in rules of governance.
  • A person registered or deemed registered under the former Act has to comply with the registration requirements as laid down in section 51(1) or (2) within twelve (12) months from the date the Act is enforced in order to be permitted to continue to perform the functions under the Act.
  • A person opening a branch office for which the person is registered under Section 51 (1) of the Bill will have to apply to the Commission for registration of the branch office in the prescribed form and pay the prescribed fee and await consent from the Commission subject to such conditions as it considers appropriate.
  • Registrant under section 57 shall not be suspended unless given the opportunity to be heard
  • The Commission will be able to suspend a registration of a registrant for a period of thirty (30) days from the date of the prosecution or at any time thereafter where it considers that immediate suspension is in the public interest or that any delay may be prejudicial to the public interest. However such suspension will automatically cease upon the dismissal of a charge or all charges.
  • Where there is the withdrawal of a suspension of the registration the registrant shall be reinstated with full terms conditions rights privileges and obligations of such registration, license or membership.
  • The new Act will provide for an increase in offences as well as harsher penalties.
  • The Act will provide for exemptions for approved foreign issuers once the requirements are satisfied, which was not provided for in the previous Act.
  • The Bill also provides for the following:-
    • Securities market manipulation
    • Use of fraudulent or deceptive devices
  • The Bill strengthens the powers of the Commission.

Please take the opportunity to access the Bill via this link and feel free to submit your comments and concerns to the Parliament.