Diversification Needed in Jamaica's Securities Industry

In order to further the growth of the capital market in Jamaica, local securities dealers should be allowed to diversify their asset portfolios outside of Government securities to include instruments from other countries, in particular the Caribbean and North America.

This was the view of Mr. Christopher Williams, Managing Director of NCB Capital Markets during a seminar entitled, "Securities Market in Jamaica…is the Public Protected?" hosted by Institute of Chartered Accountants of Jamaica (ICAJ) on Saturday, November 27, 2004 at the Jamaica Conference Centre.

"If we are going to establish a true global capital market we must be able to own securities instruments from other countries so that we can effectively compete with the trading of instruments on the international market," he said.

Mr. Williams argued that at present securities dealers were limited to investing in Government of Jamaica (GOJ) securities and were not allowed to add instruments from other countries to their asset portfolios. This restriction followed the position taken by the Bank of Jamaica in June 2003 that securities dealers were restricted in acquiring foreign assets on their own account unless a Ministerial Authorization was granted.

Mr. Williams added that greater and timelier disclosure of macro economic information on the Jamaican economy was also critical to ensuring the efficiency and continued growth of the local securities market. The disclosure of information would also ensure that the interest of the public and investors is better protected.

"This means that the Financial Services Commission needs to be more aggressive in ensuring that the Government of Jamaica provides more timely fiscal information so that we can determine the extent of credit risks associated with our participation in the local securities market and ensure that the said risks are properly priced," he said.

He noted that despite the significant growth in the market, to date, the size of the fixed income market and the daily trading volume is still relatively unknown.

"Additionally, the Government of Jamaica has been participating in private placements with brokerage houses in its effort to raise funds to meet its fiscal needs. However, there is also no available information about these private placements within the market," he said.

Mr. Williams further noted that the lack of information about daily trading details results in the inability of the market to develop an accurate yield curve on securities and this has implications for, among other things, the balance sheet and/or profit and loss position of securities dealers.

He argued that there was a need for more disclosure of information so that an accurate yield curve could be developed to ensure the efficiency of the local securities market. He also noted that in the current environment, investors who desire to participate in the local market would require reliable and credible information.

The securities market seminar was aimed at examining the phenomenal growth that has taken place in recent years in Jamaica's securities market and the regulation of the market. Discussions also focused on the impact of International Financial Reporting Standards (IFRS) on the securities market and its implications for stakeholders. IFRS, formerly International Accounting Standards, which were adopted as Jamaica's national standards for accounting, require a fundamental shift in reporting requirements for many companies. These new requirements have implications for the securities market, including the classification and valuation of securities.

Other seminar presenters were Mr. Laurence Crossley, Special Projects Officer, Financial Services Commission, Mr. Dennis Cohen, Group Chief Financial Officer, National Commercial Bank and Mrs. Sharon Harvey-Wilson, Audit Manager, PricewaterhouseCoopers.

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