Establishment of regulatory body pivotal to stock market--UK expert
By Gitanjali Singh
United Kingdom securities expert, Jonathan Miller, recommends the setting up of a private company modelled on the NASDAQ in the United States, to regulate members and develop a market in Guyana as a precursor to implementing the securities legislation of 1998. Private Sector Commission (PSC) Executive Secretary, David Yankana, said the implementation unit at the Office of the President, headed by Coby Frimpong is charged with getting this project off the ground and he expects that by the middle of March it should get going. Yankana; PSC Chairman, George Jardim; PSC Trade and Investment Manager, Faith Solomon; Head of the Guyana Office for Investment (Go-Invest), Deochand Narain and government coordinator on investment, Kellawan Lall sit on the joint implementation committee. Miller, whose services were sought by the implementation unit arising from the Presidential Business Summit of October 1999, said that initially one self-regulatory private sector organisation ought to be created and named the Guyanese Association of Securities Dealers (GASD). For him, limited commencement of the GASD as an operational entity is not dependent upon the establishment of the Securities Council or registration. Securities legislation passed in 1998 and assented to has not been brought into effect by ministerial order as yet because there has not been much interest expressed so far in operationalising a securities market. Yankana said it was estimated that there were about 30,000 bond holders in Guyana with 60% of these bonds held by financial institutions such as commercial banks and insurance companies. "As far as we know, based on the Call Exchange [now defunct] experience, there is no large trading in shares; individuals hold on to shares to attend meetings and institutions as well hardly trade." The Securities Act provides for the establishment of a Securities Council composed of five members appointed by the minister of finance but under conditions set out. It also caters for the creation of self-regulatory organisations (SROs) which are seen as the market mechanisms and for the regulation of dealers and brokers in securities. Yankana said it was because of the obscurity of the legislation to stakeholders in Guyana that the Adam Smith Institute of the UK was called upon for help to educate the private sector on the legislation and the operationalisation of a stock market. Miller was retained and recently met the PSC members, commercial banks, trust companies and insurance companies among others before handing in a report on January 25. The UK securities expert expressed the view in this report that the successful implementation of the Securities Act will depend on creating confidence in the market and regulatory institutions. He said that the Act should not be swiftly brought into effect as it would not be effectively enforced and this would destroy confidence. He suggested a step-by-step programme to operationalise the law. As such, Miller recommended a private self-regulatory organisation which is to be approved by the Securities Council before it can issue licences. Miller emphasied the need for phased implementation being tied to a public timetable to which the government and market participants are committed. He recommended that the first regulations to be made by the minister should be to compel all market participants to apply for registration but permitting them to carry on trading pending the determination of their application. The GASD will be recognised as having powers to reprimand, suspend and expel members until the Securities Council is made operational. The Securities Council is designed to be a powerful institution with wide ranging responsibilities and jurisdiction. According to Miller, it is an enforcement agency with power to initiate regulation, investigative and arbitral functions, administrative disciplinary powers and access to the court for injunctive support. Miller said this council will need to be headed by well-regarded senior individuals and the council itself should to the greatest extent possible, be seen as an enduring national body, above politics and untainted by sectional bias. According to Miller, the minimum conditions for a securities market are transparency and a process of discovering a single price for any traded security at any one time. "The minimum conditions are a start, even if the market is very small, and should be undertaken as soon as possible," Miller said. The minimum transitional market regime would commit members of the SRO to deal fairly with customers, to deal promptly, to expose unexecuted orders to other members, to report and publish trades, bids and offers and to be parties to complaints procedure which compensated customers who had incurred loss as a result of misconduct or negligence by a member. Miller sees the need for financial and technical assistance and Yankana said the Inter-American Development Bank has offered technical support and the Adam Smith Institute is again to be approached through the UK government. An approach has also been made to the US Agency for International Development for assistance. Yankana said there will be need to coordinate all of these activities. Miller said the immediate next steps required are:
* a securities industry development programme to be agreed by the government and the PSC; Yankana said that while the law is being implemented in stages, there is to be a continuous process of education to build interest in market activities.
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