PORT-OF-SPAIN, Trinidad, Wednesday October 31, 2012 – If Trinidad and Tobago fails to enact legislation aimed at strengthening the regulatory and supervisory regime, the twin-island state could be blacklisted by the International Organization of Securities Commissions (IOSCO).
That was the word from Finance Minister Larry Howai while addressing the two-day Council of Securities Regulators of the Americas (COSRA) meeting in Port-of-Spain on Monday. Howai indicated that the Kamla Persad Bissessar administration intends to bring the appropriate legislation to parliament this week.
The finance minister said it is intended to replace the existing Securities Industry Act 1995 and includes strengthening protection for investors from unfair, improper or fraudulent practices; fostering fair and efficient capital markets, promoting confidence in the securities industry in Trinidad and Tobago and reducing systemic risk.
“This Bill seeks to address deficiencies in the previous Bill relating to regulator access to records of market participants, sharing information with other regulators, record-keeping and confidentiality provisions. Failure to enact this Bill into law this year will result in Trinidad and Tobago being blacklisted by IOSCO.
“We cannot afford to find ourselves in such a situation in which we are unable to comply with these international standards, as the consequence for our securities market in such an event would indeed be dire,” Howai told the delegates.
He further told the meeting, which is being held under the theme “The Changing Landscape of Regulation: Embracing the Global Dynamic,” that in a strong regulatory environment, the securities market will provide channels for reallocation of savings and investments, and a linkage between the savings and the preferred investments across listed companies.
“The securities market will enable all individuals to share in the increased wealth created by competitive enterprises. A well regulated securities market will allow individual investors who lack the wherewithal to start and manage an enterprise either because of insufficient resources or entrepreneurial ability or both, to invest in the stock of a listed enterprise.”
The minister said that the global financial crisis of 2008/09 will forever change the field of regulation, adding “the actions of a few have never threatened the financial welfare of so many as during the 2008/09 financial crisis”.
He said the International Monetary Fund (IMF), in its most recent forecast, anticipated that growth in world output will fall from 3.9 per cent in 2011 to 3.3 per cent in 2012.
Howai noted that the recently held meeting of the Inter-Governmental Group of 24 on International Monetary Affairs and Development had indicated that “this low growth reflects instability in financial markets, fiscal adjustments and deleveraging by banks, leaving in its wake, adverse affects on the economies of many emerging market and developing countries (EMDCs).
“Added to the mix, the flow of capital to EMDCs has become more erratic,’ he said, noting that the international community has reiterated that one of the immediate and concerted actions needed to boost global growth is the repair of financial sectors, particularly in the major financial centres of the world.
The minister said that the steps taken to enhance securities and financial regulation by financial regulators across the globe, in particular the Euro area, are encouraging and have been essential is addressing the vulnerabilities of the financial system.
He said it has also been essential in addressing investors’ biggest fears, but what is urgently required is faster and rigorous implementation.
“As the financial crisis has clearly demonstrated, we, in the Caribbean, are not isolated economies and I have deliberately drawn reference from financial reform taking place in the Euro area, as emerging markets need to strengthen their regulatory framework to guard against potential further shockwaves, while managing a slowdown in growth that could expose home-grown financial stability risks.
“We, as Policymakers, are well advised to deftly navigate country-specific challenges to safeguard financial stability,” he said, acknowledging that “regionally, we have our own challenges”.
Howai went on to say that the recent enactment of the Foreign Account Tax Compliance Act (FATCA) by the United States, as part of the Hiring Incentive to Restore Employment (“HIRE”) Act is to increase transparency for its Inland Revenue Service with respect to US residents who may be investing and earning income through non-US financial institutions.
He said that while the Act is primarily aimed at US residents and entities who minimize the payment of taxes, through the use of offshore accounts, it also provides “onerous reporting requirements on our financial institutions (FFIs) as well as non-financial foreign entities (NFFE) and will enforce a withholding tax where the desired documentation and reporting requirements are not met.
“Our financial institutions expect the Act to impact their processes and operations, customer service and technological systems. I am aware that some attempt is being made to address this issue through the establishment of a Regional Task Force.
“It is therefore my hope that we can mobilize our regional machinery and speak with one voice to resolve challenges such as this,” he added.
The minister said the two day meeting attended by member states of the Association of Caribbean Securities Regulators (CGSR) will identify specific measures which will be implemented to address the challenges which the region faces regarding the securities market, in particular the challenges faced in the harmonization of legislation among member states.
“If we can reach consensus or at least make some headway in resolving outstanding issues at this forum, the region will be better prepared to make representation at the wider regional and international level,” Howai added.