Securities

THE ROLE OF THE FSC AND THE SECURITIES INDUSTRY

The Securities Act (2001) provides for the licensing, operation and supervision of entities dealing in securities as well as the regulation of the capital markets. Securities regulation has continued to focus on monitoring the solvency and market conduct of licensed entities through a programme of routine and special examinations and stock market surveillance. Findings from these examinations sometimes identify areas of potential risk exposure and when these deficiencies are identified the licensee is required to put in place effective corrective measures. Whilst it would not be possible to display here a wide range of indicators, the growth in the capital base of securities dealers is indicative of the improving financial health of this sector.

The FSC’s role in detecting and investigating Unregistered Investment Schemes
Another area of interest in the area of securities regulation has been the FSC’s programme of investigation and enforcement. The FSC has been seeking to enforce the requirements of the Securities Act in relation to entities that are perceived to be conducting securities business without a licence or issuing unregistered securities to the public. The FSC maintains a vigorous interest in detecting and investigating these operations as they arise. The FSC’s interest in the activities of unregulated schemes arises from its statutory obligation to ensure that the law designed for the protection of investors is observed. In accordance with the Securities Act, entities that conduct or propose to conduct securities business or offer investment advice to the public are required to be licensed and issuers of securities are obliged to apply to have their securities registered by the FSC before they are issued. The licensing and registration process gives the FSC the authority to monitor promoters of investment schemes to see that they meet their statutory obligation to make full disclosures to investors so that they can make informed decisions before investing.

The FSC has also been progressively improving its ability to monitor and regulate the financial health of securities dealers. Two guidelines aimed at improving the degree of solvency protection in the securities sector were recently issued and implemented and the FSC is improving its system of early warning signals for the securities sector. However, the FSC’s role in the securities market still places a heavy reliance on disclosure and market conduct. It is the dealer’s (or depending on the circumstances, the issuer’s) responsibility to disclose all information that is necessary for an investor to make an informed decision. But you must also do your homework in order to understand the risks that you will assume if you make the investment. You cannot and must not take someone else’s word for it. Certainly you can and should seek advice but remember: only you can decide whether the risks embodied in any particular investment are worth taking in order to obtain the reward of higher returns.

To protect your own investment, you should, among other things, ensure that:

  1. The dealer/investment adviser is licensed by FSC.
  2. You have seen the latest audited Financial Statement of the firm. Get it explained by an independent expert.
  3. You are comfortable with any document that you are asked to sign. Take it and get a second opinion if necessary.
  4. You understand the level of risk that you are taking.
  5. You know what the dealer/investment adviser is getting out of the transaction.
  6. You are not putting all your eggs in one basket. Diversify your investment and the firms you use.
  7. You remember, the higher the return the greater the risk.
  8. You know what investment you are buying. Seek advice if you do not understand. If you do not have the information you need in an offering circular, or information memorandum, or you are not sure, then DO NOT INVEST. If anyone tells you otherwise come to us and tell us about it.
  9. You monitor your investment. Get regular statements and make new appraisal of the firm/individual and the investment instrument.
  10. You don’t hesitate to complain to the FSC if you are not satisfied with the quality of service you receive.

 

How Does The FSC Help to Secure Your Financial Safety?

The question “how does the FSC secure your financial safety” is somewhat misplaced. Each and every investment is inherently risky. Prudent investing involves the careful assessment of the risks attached to each investment opportunity and a consideration of whether expected returns from the investment are sufficient to compensate the investor for the risks being taken. No one has yet discovered a way to obtain high returns without risk. Therefore, investors must pay close attention to the risks that are embodied in any investment. This point cannot be overemphasized: An investor should fully understand the risks and responsibilities involved in making investments. In protecting your investment, you should be equipped with information and knowledge; you play the most important role. However, the FSC provides significant assistance to you in your efforts by overseeing the registration, solvency and conduct of insurance, securities and pension service providers.
The FSC Act and the Securities Act empower the FSC to, among other things:

  • Grant, refuse, suspend or cancel the licence of any entity (i.e. company or person) prescribed under the relevant acts;
  • Approve products before they are offered to the public;
  • Examine the records of licensees at least once annually and order corrective measures where management practices put policyholders/investors and the business at risk;
  • Investigate operational irregularities and take corrective action, including the removal of key personnel, where necessary;
  • Verify the competence and integrity of prescribed Officers, Directors, Managers, and other decision makers, in keeping with the “fit and proper” criteria laid down in law;
  • Introduce measures to reduce the threat of fraud or money laundering in licensed institutions;
  • Take action to prevent market manipulation;
  • Suspend trading in a security in the public’s interest; and
  • Wind up insolvent companies