“Cooperation and technical assistance are important to the development of securities markets in the Caribbean and around the world.”
This was the view of Ester Saverson Jr, Assistant Director, International Affairs at the United States Securities and Exchange Commission (U.S. SEC). Mr. Saverson Jr, along with his colleagues from the USSEC, were in Trinidad to facilitate a four day Inspections and Compliance Training Programme with staff of the Trinidad and Tobago Securities and Exchange Commission (TTSEC) and regulators from the region. A one day Seminar on the same topic was also facilitated with market actors. These programmes were timely because the new provisions in the recently enacted Securities Act 2012 give the TTSEC the power to conduct on-site examinations of Self-Regulatory Organizations (SROs) and persons registered under Part IV of the Act.
In an interview with Diké Noel of the TTSEC’s Corporate Communications, Education and Information Division, Mr. Saverson stated that one of the roles of the Office of International Affairs, of which he is an Assistant Director, is to help countries with their regulatory policies and consequently implement robust regulatory structures through training programmes and the conduct of assessments. These assessments and programmes are vital because they help to identify any gaps in regulatory programmes and to highlight the areas in which improvements may be required. He indicated that this Inspections and Compliance Training Programme fits in perfectly with this mandate since the programme aims to provide both the TTSEC and other regional regulatory bodies with the basic tools to develop an On-Site Inspections Programme and an opportunity to understand the intricacies of the inspections process. He affirmed that at the end of this session, participants would have developed a better understanding of the inspections process and thus, will now be better able to design an appropriate programme for their respective bodies.
Mr. Saverson who is no stranger to Trinidad and Tobago and the region, indicated that not only is it vital to have a good relationship with fellow regulators in the areas of technical assistance but it is also important in the domain of information sharing. He stated categorically that “crime has no borders”. It is therefore important to have a positive working relationship with all regulators, in the event that there is need to get specific information which can lead to successful investigations into a growing number of insider traders, fraudsters and other offenders. Since the TTSEC is now a Full Signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU), both the U.S. SEC and the TTSEC can consult, cooperate, and exchange information for securities regulatory enforcement purposes. In fact, this agreement provides a robust mechanism through which signatories share with each other essential investigative material, such as beneficial ownership information, and securities and derivatives transaction records such as bank and brokerage information.
The U.S. SEC, whose mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation in the United States of America, is one of the more widely-known securities regulators. Mr. Saverson surmised that this may be due to the number of enforcement actions which once filed in court, are public. “The number of actions brought, along with the publishing of those enforcement actions, sends a message that the U.S. SEC is serious in protecting investors, providing full and fair disclosure of information and maintaining fair, orderly and efficient markets that are free from market manipulations and fraud”. However, he stated that a number of the Commission’s activities such as on-site inspections are private and confidential and therefore not available to the media but are an important component in the fight to protect investors. That confidentiality allows the U.S. SEC and the inspected entity to have a more open and frank conversation about what is needed to have high quality compliance procedures.
Mr. Saverson noted that the U.S. SEC cannot use the fines and penalties that are collected for operational expenses but may be used to reimburse harmed investors. Any fines and penalties that are not used to reimburse investors are turned over to the U.S. Treasury. This is to assure that the there is no appearance of impropriety regarding the use of enforcement to fund the securities regulator. The Financial Industry Regulatory Authority (FINRA) has more flexibility to use fines and penalties collected to fund investor education programmes. The United States of America like most countries has its share of unsophisticated investors. Consequently, the U.S.SEC partners with other organizations including FINRA to develop and conduct investor education programmes for the investing public and outreach programmes to senior citizens, military families and young adults through the school based curriculum. The TTSEC’s approach to investor education is quite similar in that it incorporates all media (new, digital and traditional) along with tried methods such as direct interface and outreach.
The U.S. SEC and the TTSEC have enjoyed mutually rewarding collaborations in the past. Each year, since 2008, the U.S. SEC has provided a technical team to facilitate the TTSEC’s Capital Market Development Workshop. Members of staff of the TTSEC also participate in training programmes offered by the U.S. SEC which are conducted at their headquarters in Washington DC. Mr. Saverson reiterated that the U.S. SEC remains committed to providing the TTSEC and other “young regulators” with the tools and resources to build capacity and further develop the securities market in their respective jurisdictions.