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JSE Investor Forum 27-Jul-2010 Mr. Livingstone Morrison, Chairman of the Market Regulatory and Oversight Committee, reassured the audience that the Market is protected through strong Market Regulations. He was speaking at the JSE's Public Investor Forum on Tuesday, July 20, 2010. Please see his presentation below. Master of Ceremony, Mrs. Norma Brown Bell, General Manager of the Jamaica Stock Exchange, Mrs. Marlene Street Forrest, General Manager of the Jamaica Central Securities Depository, Mr. Robin Levy, Other Presenters, Chief Regulatory Officer of the Jamaica Stock Exchange, Mr. Wentworth Graham, Other distinguished quests, ladies and gentlemen a pleasant evening to all.
I welcome this opportunity to share a few thoughts with you from a regulatory perspective. My comments are grounded in the fact that the continued growth and development of the domestic capital market is of vital importance if this country is to realize its true economic potential. Clearly, capital formation and a dramatic increase in the rate of capital formation are of vital importance in pursuit of the many economic opportunities that are available in this country.
I am also mindful of the fact that the cultivation of a larger pool of knowledgably investors is of central importance to the process of strengthening and deepening the capital market in general, and the stock market in particular. It is in this context that I must commend the efforts of Mrs. Street Forrest and her team in putting this forum together. The success of our efforts to build awareness about the role, the functions and the operations of the Jamaica Stock Exchange and the domestic equities market must be the pillar on which we seek to build increased efficiency in the mechanisms for the allocation of capital throughout the economy.
Note that when I speak of capital market efficiency I am speaking of the speed with which available market information come to be reflected in the price of stocks and shares and other investment instruments. It is only our focus on improved market efficiency that we can hope to ensure equity, fairness and transparency of the capital market.
There are three quick points that I want to make before I open the floor for questions. Firstly I want to speak to the role of the Regulatory and Market Oversight Committee of the Jamaica Stock Exchange and my role as Chairman of the RMOC. Secondly I will share a few comments on the importance of rules and regulations, and more importantly compliance with rules and regulations, in the whole process of protecting stakeholder interest and in the promotion of market integrity. And finally I will share a few comments on the question as to the basis for investor confidence in the integrity of the domestic stock market.
The Role of the RMOC
Now the Regulatory and Market Oversight Committee is a Committee of the Board of Directors of the Exchange. Of significance is the fact that the RMOC is comprised of the five independent directors who are not nominated by, or connected to, any Member /Dealer of the Exchange.
The Board has delegated responsibility to the RMOC for reviewing and ensuring compliance with, and enforcement of, the rules and regulations governing member dealers, their clients and participants on the Exchange. The Board’s complete delegation of the regulatory functions to the RMOC came with the finalization of the JSE’s de-mutualization process in the last quarter of 2007. Since then the Exchange has operated will full and complete separation of the regulatory functions from its commercial activities.
Arising from this process the Regulatory and Market Oversight Department commenced operations on April 1, 2008. The purpose of the Regulatory and Market Oversight Committee of the Jamaica Stock Exchange is very simple; it is to protect investors, by maintaining a fair, orderly, and efficient stock market.
My role as Chairman of the RMOC of the Exchange is to coordinate the work of the Committee to provide the strategic guidance and direction for the administration of the regulatory functions of the Exchange. I am pleased to advise that we have made tremendous strides over the three years of existence of the Committee and have firmly established market regulation and surveillance as independent functions of the Exchange.
The Importance Of Rules And Regulations
The importance of rules and regulations to the operation of an exchange cannot be over-emphasized. When the RMOC speaks about protecting the interest of investors we are speaking about maintaining a level playing field for all investors. I like to view the laws, rules and regulations as emanating from a simple concept; which is that all investors, whether it is a large institution or a private individual, should have access to certain basic information about an investment prior to making that investment. Similarly, all investors, be they large or small, must have access to certain basic information throughout the period of their ownership of the stocks that they choose to hold. To achieve this, the JSE requires listed companies to disclose meaningful financial and other information to the public. The published information provides a common pool of knowledge for all investors to use to judge for themselves whether to buy, sell, or hold a particular security. Only through the steady flow of timely, comprehensive, and accurate information can people make sound investment decisions.
It is against this background that the regulatory activities have been redesigned to ensure close and continuous monitoring of compliance with the rules and regulations with emphasis on timely filing of all reports and documents.
The Basis For Investor Confidence In The Integrity Of The Stock Market
Independence of the regulatory functions. The independence of the regulatory functions should clearly indicate to investors that the Exchange is position to ensure that the market is operated in a manner that protects the interest of all stakeholders. From where I sit there is no credible basis on which to argue that the interest of member/dealers will be promoted above the interest of private investors or other stakeholders. There is absolutely no interference from the member/dealers in the regulatory process, a fact which should instill confidence in the all investors.
Surveillance. I would like to submit that the extensive surveillance and monitoring processes being employed by the RMOD should provide another source for investor confidence. In addition to ensuring that listed companies publish relevant information on a timely basis the RMOC also work towards ensuring that security dealers, and the employees acting on their behalf, comply with the reporting and disclosure requirements of the Exchange. This is to ensure the availability of important market-related information and to maintain equity and fairness in all dealings on the market. The RMOC has established various monitoring and surveillance routines to test for various infractions including insider trading, breech of accounting and reporting requirements, and publication of false or misleading information to the public. Crucial to the RMOC's effectiveness in each of these areas is its enforcement authority.
Sensitivity to Stakeholder views. And finally I am submitting that the increased sensitivity of the RMOC to the views and opinions of stakeholders in general should be a source of confidence for all investors. We recognise that one of the major sources of information on which the RMOC must rely to bring enforcement action is investors themselves. This of course is another reason why educated investors are so critical to the functioning of efficient markets. Though the RMOD we have logged and pursued every issue that has been raised with us. By way of example please note that since 1 January 2010 a total of 59 issues have been raised with the RMOD and with the exception of three, all issues have been resolved.
In closing I highlight the fact that the Exchange has benchmarked its operations against international best practice and is satisfied that it is in an excellent position to ensure that the highest standards of market integrity are observed by listed companies, member dealers and investors. These are matters on which we cannot afford to waver as the continued growth and development of the stock market is at stake.
Ladies and Gentlemen I thank you.
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