For the past three years, Consumers International (CI), the world federation of consumer groups, has been focusing its annual commemorations on the financial services sector. This is evidenced by the themes:
- 2010 – “Our money, our rights”
- 2011 – “Consumers for Fair Financial Services”
- 2012 – “Our money, our rights: campaigning for real choice in financial services”
The theme for 2013 is Consumer Justice Now.
Over the years, the Trinidad and Tobago Securities and Exchange Commission (TTSEC), the national regulator for the securities market, has sought to heighten awareness of this international celebration by using its investor education programme to make the consumer more aware of his rights and responsibilities when accessing financial services.
Advances in technology and changing business practices have created many new challenges that did not apply when the Commission’s original legislation was first enacted in 1995 and came into force in 1997. As such, the Commission has spent the last few years revamping its existing legislation in order to enhance the protection of investors from unfair, improper or fraudulent practices; foster fair and efficient securities markets, reduce systemic risk and engender confidence in the securities industry in Trinidad and Tobago. This effort has resulted in the passage of the Securities Act (SA) in December 2012 which contains several improvements designed to protect consumers so that they can invest with confidence.
The new Act represents a decision of the Commission to move toward a more investor and disclosure-based standard as it relates to the investor’s decision-making ability. The premise is one of full disclosure thereby allowing investors to make informed decisions. The SA 2012 also provides for a more proactive approach to regulation. It now extends the Commission’s oversight powers to the conduct of compliance reviews of the books, records and documents of registrants. Regular compliance reviews including both off-site monitoring and on-site inspections are a standard feature of regulatory systems worldwide and can assist in identifying issues before any contagion occurs.
This legislation solidifies the enforcement powers of the Commission by the creation of new offences and by increasing penalties for existing offences. For example, new offences have been introduced to deter non-compliance with disclosure standards. These include:
- making a reporting issuer liable for a misrepresentation in financial statements;
- making liable those directors and senior officers who are responsible for a reporting issuer’s failure to comply with disclosure obligations; and
- making auditors liable for misleading audit reports.
Effective securities legislation requires suitable penalties to deter inappropriate conduct that can harm investors, compromise the integrity of the market and ultimately prohibit its growth. Under the new Act, penalties payable were raised and imprisonment terms were increased. The Commission also now has the ability to order the disgorgement of profits arising from the market misconduct or any other form of unjust enrichment. Administrative fines have been increased from a maximum of $50,000 to $500,000 and the maximum criminal penalty has increased from $200,000 and 2 years to $5,000,000 and 7 years.
A proper functioning system of insider reporting plays a critical role in regulating markets and in keeping investors informed. The 2012 Act repairs the deficiencies in the 1995 Act, in accordance with international best practice and thereby creates a more robust regime for monitoring insider reporting and insider trading.
The new Act also addresses civil liability and the rights of investors in the case of misrepresentations and other violations of the Act. A purchaser now has a right of action for damages, not only against the issuer but also against its directors, experts, promoters and other persons who sign certificates in a prospectus that contains misrepresentations.
The Commission’s ultimate goal through this legislation is to ensure a fair market by improved disclosure and to create and maintain a strong market that conforms to international standards and consequently, protects and attracts both domestic and international investors.
The Trinidad and Tobago Securities and Exchange Commission remains dedicated to the promotion of investor confidence, fairness and the orderly growth of the local capital market. This is primarily achieved through the ongoing development of a regulatory system that is geared toward ensuring a high degree of information dissemination and investor protection as well as building enforcement capacity to ensure the preservation of market integrity. We have been, and will continue to be, guided by a concern for the protection of investors and the maintenance of investor confidence.
The Securities Act 2012, enhanced to protect consumers so that they can Invest with Confidence