RBTT Investor Forum

1
Regulatory Developments in Trinidad and Tobago

• RBTT Investor Forum
• December 11 12, 2008
• Osborne Nurse, Chairman and CEO
• Trinidad Tobago Securities
• Exchange Commission

2
Objectives

• The revised securities law in Trinidad and Tobago
  is designed to achieve the following major
  objectives as set out in the IOSCO Principles of
  Securities Regulation
• The protection of investors
• Ensuring that markets are fair, efficient and
  transparent
• The reduction of systemic risk
• Systemic risk captures the importance of
  ensuring that participants in the securities
  market, broker-dealers, custodians, reporting
  issuers and others remain solvent and capable of
  fulfilling their functions in securities trading
  and the settlement process (Extract from
  Stikeman Elliott Report December, 2005)

3
The Current Regulatory Challenge

• "Today, we are continuing to build on that
  essential premise that investors have a right to
  know the truth and the risks about the
  securities that trade in our public markets.
  Never in this agency's history has this
  fundamental mission been more relevant, and more
  urgent. The current credit crisis has shown the
  importance of transparency to a healthy
  marketplace and how costly hidden risk can be.
  
• Christopher Cox, Chairman, USSEC - Opening
  Remarks at Roundtable on 10/08/08

4
Structure of the Securities Act (SA)

• The SA is structured as follows
• A Principal Act (SA)
• General By-Laws (governing day to day operations)
• Specific By-Laws governing collective investment
  schemes, take-overs and the issuance of
  prospectuses
• The power to issue other By-Laws as well as
  Guidelines from time to time

5
Areas of change

• Substantial Changes
• Commission given increased capacity and
  responsibilities are clearly and objectively
  stated
• Increased supervisory and enforcement powers
• Insider Trading enforcement improved and
  Reporting Regime is instituted
• New Investor Rights
• Sanctions and Penalties significantly increased

6
Increased capacity of the Commission

• Commission may be strengthened by appointment of
  three temporary Commissioners to facilitate the
  fair discharge of its adjudicative function
• The Commissions power to review, approve and
  regulate take-overs, amalgamations and all forms
  of business combinations under the SA is clearly
  stated

7
Power to make By-Laws and Orders

• By-Law making power extended to allow the
  Commission to make urgent by-laws to regulate
  conditions that the market requires as a matter
  of urgency for ninety days
• Additional power to order a cease trade for non
  compliance or contravention of the SA or by-laws
  by a reporting issuer

8
Supervision Enforcement

• On site inspections of Self Regulatory
  Organizations (SROs) and Market Actors
• Power to enter a place of business of a SRO or
  Market Actor and examine and review books,
  records and documents
• Sharing of information with local and foreign
  regulatory authorities
• Ongoing supervisory and compliance powers over
  market actors and reporting issuers similar to
  those which it has over SROs

9
Stronger Sanctions

• For
• Misrepresentation in filing of documents and the
  failure to register under the SA
• Failure to disclose information as a reporting
  issuer-directors and senior officers may also be
  held liable if a reporting issuer fails to
  disclose
• A director or senior officer to be disqualified
  by order of the Commission for a period not
  exceeding five years
• An auditor to be sanctioned for making a false or
  misleading audit report and barred for a period
  not exceeding five years

10
larger Penalties

• Administrative penalty increased from 50k to
  500k for breaches or contravention of the SA or
  By-Law.
• Penalty of 1000.00 a day for each day that the
  document is not filed may be imposed for late
  filing of same
• These penalties can be imposed by an order of
  the Commission without a hearing, but the person
  does have the right to request a hearing after
  the document has been filed.

11
Insider Reporting Regime

• Persons required to report are those connected to
  reporting issuers (connected persons) for
  example
• A director or senior officer of the reporting
  issuer or of an affiliate or
• A person that beneficially owns securities
  carrying more than 10 of the votes
• A person who is an expert retained or hired by
  the reporting issuer
• A person contemplating or proposing whether alone
  or with another, to make a take over bid for any
  securities of a reporting issuer, or
  amalgamation, merger or similar business
  combination of the reporting issuer or any
  affiliate

12
Insider Reporting Regime

• Insider reports to be filed with the Commission
  which must make the information publicly
  available as soon as possible
• All connected persons must report to the
  Commission and to the reporting issuer within
  five business days of becoming connected and on
  every subsequent trade in securities
• This obligation to disclose relates to all
  securities including convertible securities,
  rights issues and third party derivatives

13
Insider Trading offence simplified

• Prohibition on connected persons to
• directly or indirectly
• buy sell or otherwise trade in securities of such
  reporting issuer
• with knowledge or possession of undisclosed price
  sensitive information, however obtained, until
  such information is generally disclosed
• Prohibition on tipping
• Removal of Commissions burden to prove intent
• Exceptions also simplified
• Liquidator or receiver
• ESOPS

14
Investors Rights of Action

• Investors given a right of action for
• damages against the responsible persons,
  including
• the reporting issuer,
• its directors, experts,
• promoters and
• other persons who sign certificates
• misrepresentation in offering documents other
  than the prospectus

15
The Benefits of the SA

• The benefits will
• Bring securities regulation in line with best
  international practice
• Create a strong market that protects and attracts
  domestic and international investors
• Ensure that the Trinidad and Tobago International
  Financial Centre or TTIFC operates in a fair,
  transparent and equitable market
• Improve the independence of the Commission for
  effective supervision and enforcement of the
  securities market