MGMT 3067

The Securities Act, 1993

with salient 2013 Amendments

Lecturer: Shirley-Ann Eaton/Joseph Shoucair

 Commission
The Financial Services Commission is
responsible for the general administration
of provisions of the Securities Act
The Commission is empowered to
carryout investigations and examinations
of the securities industry for the purpose of
ascertaining whether the provisions of this
Act are being complied with

2
 Licence
A person must be licensed to carry on a
securities business or investment advice
business
Securities business means a business of
dealing in securities
Investment advice business means the
business of advising persons as to the
investing in or the buying or selling of
securities
3
 Definition of Securities
Securities means
stocks or bonds issued or proposed to be issued
by a government
debentures, stocks, shares, bonds or promissory
notes issued or proposed to be issued by a
company or unincorporated body
documents or writings commonly known as
securities
rights in, or options in respect of, a derivative

4
 Definition of Securities
certificates of interest or participation in
any profit sharing agreement
collateral trust certificates, preorganisation
certificates, or subscriptions, transferable
share, investment contracts, voting trust
certificates or certificates of deposit for
securities

5
 Definition of Securities
any document constituting evidence of an
interest in a scholarship or educational
plan or trust, other than a private plan or
trust not offered to the public as an
investment
any rights, interest or instrument
designated by the Commission by order
made with the approval of the Minister and
published in the Gazette
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 Definition of Securities
But Subject to s 35A (see slide 42 & 43) DOES NOT
INCLUDE
bills of exchange
stocks or shares of private companies
certificates of deposits issued by commercial banks and
entities licensed under the Financial institutions Act or by
building societies
securities issued by the Bank of Jamaica
certificates of deposit issued by credit unions
any form of investment excluded by order of the Minister

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 Definition of Securities
Derivative
means an option, swap, futures contract, or other
financial commodity, contract or instrument, the market
price, value, delivery obligations, payments obligations
or settlement obligations of which are derived from
reference to, or based on, an underlying interest
(including a value, price, rate, variable index, event,
probability or thing); and
does not include any financial commodity, contract or
instrument excluded from this definition by regulations

8
 Meaning of Deal
Deal in relation to securities means
acquire, dispose of, subscribe for or underwrite
the securities, or
make or offer to make, or induce or attempt to
induce a person to make, an agreement for or
with respect to acquiring, disposing of,
subscribing for, or underwriting the securities for
the purpose of securing a profit or gain to a
person who acquires, disposes of, subscribes for
or underwrites the securities or to any of the
parties to the agreement in relation to the
securities
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 Grant of Licence
A licence may be granted by the Commission if
it is satisfied that
a. In the case of a company applying for a
dealers licence or an investment advisers
licence-
i. it is incorporated or registered in Jamaica or
other CARICOM member state and is owned,
controlled or supervised by persons who are
citizens of, and are habitually resident in
Jamaica or such member state

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 Grant of Licence
ii. it is a fit and proper person, that is, none
of its officers or members holding
(whether in their own right or when
counted with any holding of an
associated person) 10% or more of the
voting shares of the company has been
convicted of an offence involving
dishonesty or is an undischarged
bankrupt and such officers or members
satisfy the other fit and proper criteria
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 Grant of Licence
b. In the case of an individual applicant
i. he is a fit and proper person
ii. he satisfies such solvency and liquidity
requirements a the Commission may specify
and such other criteria as may be prescribed
iii. he is not associated with a company which, at
the time of the association, is engaged in or
has conducted securities business without a
licence

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 Suspension or Cancellation of
Licence
The Commission may suspend a licence if
it is satisfied that
the person or persons owning or
controlling or supervising the licensee
have ceased to be fit and proper persons
the licensee has failed to meet such
solvency or liquidity requirements as
specified or prescribed by the Commission

13
 Suspension or Cancellation of
Licence
information submitted to the Commission
by the licensee pursuant to this Act or in
support of his application for a licence is
false or misleading
the licensee has contravened any
condition of his licence, a provision of this
Act, or rules and regulations made
thereunder or the rules of a recognised
stock exchange of which he is a member

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 Refusal and Cancellation of
Licence
The Commission shall not refuse to grant
a licence, grant a licence subject to
conditions, or cancel a licence, unless it
notifies the licensee of its intention to do
so and affords to that licensee an
opportunity to be heard

15
Enhanced Investigatory Powers
Commission is given additional powers to, inter
alia:
Request, copy, remove documents form persons
included licensed financial institutions
Require further information in support of
application for licence
Enter premises of applicant for licence to assess
operational capability of applicant

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Registration of Representatives
A person cannot perform functions as a dealers
representative or investment advisers
representative unless he registered for that
purpose under the Act
An application must be made by the dealer or
investment adviser on whose behalf the persons
will perform their functions
The person to whom the application relates must
be a fit and proper person and must have the
prescribed minimum qualifications

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 Suspension or Cancellation of
Registration
The Commission may suspend or cancel the
registration of any person for the same reasons
that it may suspend or cancel a licence
The Commission shall not suspend or cancel
any registration until it notifies the person who
applied for such registration and the person
registered of its intention to do so and affords to
such persons an opportunity to be heard

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 Responsible Officer
Every licensee must appoint a responsible
officer of that company who shall be answerable
for doing all acts, matters and things as are
required to ensure compliance with the
provisions of this Act and regulations made
thereunder including reporting to the
Commission on matters relating to compliance
Every person appointed as a responsible officer
must, within 30 days of such appointment, apply
to the Commission to be registered as a
responsible officer
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 Responsible Officer
In the absence of the appointment of a
responsible officer, the Commission will register,
as the responsible officer, the managing director
or the person by whatever name called,
performing the duties normally carried out by a
managing director or the person appearing to
the Commission to be primarily in charge of the
licensees affairs
Where a person ceases to hold the post of
responsible officer, the licensee must within 7
days thereafter, notify the Commission in writing
of such cessation

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 Responsible Officer
Where the Commission is satisfied that the responsible
officer has failed to carry out his duties under the Act,
the Commission can
a. issue a warning to the responsible officer
b. suspend the registration of the responsible officer, or
c. cancel the registration of the responsible officer
All the above actions must be notified to the licensee in
writing and upon notice of the cancellation of a persons
registration as responsible officer, the licensee must
terminate the appointment of that person as responsible
officer

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 Appeals
Any person aggrieved by a decision of the
Commission may within 30 days of the
decision appeal to the Tribunal and the
Tribunal may make such order as it thinks
fit

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Register of Licensees and Persons
Registered
The Commission must maintain a register
of the particulars of each person to whom
a license is granted or who is registered
including name, address, date of grant of
licence or registration, particulars of any
suspension or cancellation of licence or
registration

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 Records of Securities
A licensee or registered person must maintain a
record of the securities in which he has an
interest and must record any changes in interest
therein in the records within 7 days of a change
Failure to keep the required records is an
offence punishable by fine not exceeding
$100,000 and in default of payment thereof to
imprisonment for a term not exceeding 12
months. In the case of a continuing offence a
further fine is applied of an amount not
exceeding $5,000 for each day on which the
offence continues after conviction

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 Investment Schemes
Collective investment scheme any scheme in
whatever form, in JA or elsewhere whereby members of
the public are invited or permitted to invest money or any
other property
in a portfolio of assets managed as a whole by or on
behalf of the operator of the scheme and
on terms which those investors, being two or more in
number, and in which they hold a participating interest
in, receive profits or income arising out of, or share in
the risks and benefits of the scheme

25
 Investment Schemes
No person can issue or cause to be issued
any invitation to another person to
participate in a collective investment
scheme unless the scheme is registered
with the Commission in accordance with
regulations under the Act, or is exempt
from registration by virtue of regulations

26
 Investment Club
Investment Club is exempt from registration as a
collective investment scheme if it meets certain criteria
as follows:
1) Membership in club is limited to maximum of twenty
persons
2) Payments by members consist of equal sums payable at
agreed periodic intervals
3) Specified limit on maximum annual contribution of
members which limit must not exceed maximum set by
Commission in rules

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 Investment Club
4) All members are entitled to equal participation and
voting rights
5) Borrowing from the public is prohibited
6) Remuneration of officers or members for administrative
or other services is prohibited (except for
reimbursement for expenses reasonably incurred)
7) Returns are filed with the Commission on membership,
investment operations and financial accounts

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 Prohibited Schemes
Prohibited schemes means ponzi scheme or
pyramid selling scheme
Establishing, operating or knowingly inviting a
person to become an investor in any prohibited
scheme is an offence making person liable on
conviction in Supreme Court to a fine or to
imprisonment for a term not exceeding ten (10)
years

29
 Prohibited Schemes
Ponzi scheme investment scheme that
provides investors with returns derived
substantially from investments made by
other investors in scheme rather than from
genuine profits whether or not name ponzi
is used or scheme limits number of
participants expressly or by conditions
affecting eligibility

30
 Prohibited Schemes
Pyramid selling scheme selling of financial
products(any transaction that involves the
creation of a security) in circumstances where
promoter or operator of, or investor in scheme
induces or attempts to induce person to make
payments into a scheme by holding out to
person the receipt of some payment or other
benefit from other investors in scheme or from
the introduction of other investors in scheme

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Transactions Involving Prohibited Schemes
or Unlicensed Persons
Licensees and persons registered under the Act
are prohibited from carrying out transactions
with the following:
Prohibited schemes
Person or entity operating securities or
investment advice business without licence
Unregistered collective investment schemes
Persons performing functions as dealers or
investment advisers representative without
registration
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 Stock Exchange
A company may apply to the Commission
for a licence to establish and operate a
stock exchange and if the Commission is
satisfied that the establishment of the
stock exchange is necessary in the public
interest having regard to the nature of the
securities industry it will grant the licence
The Jamaica Stock Exchange is deemed
to be licensed under the Act

33
 Stock Exchange
Where a recognised stock exchange alters,
amends rescinds or makes additions to its
business rules or listing rules, it must lodge a
written notice of same with the Commission
along with an explanation of the purpose of such
changes.
Upon receipt of the notice the Commission must
send a copy to the Minister
The Commission may within 30 days of receipt
of notice of change, approve or disallow same in
whole or in part
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 Stock Exchange
The Commission must approve members
of the Board of a recognised stock
exchange
A person who is not licensed under this
Act shall not be appointed to the board of
a recognised stock exchange unless the
Commission approves that person as a fit
and proper person

35
 Stock Exchange
The Commission may, where it appears in the
public interest, issue directions to a recognised
stock exchange with respect to -
Trading on or through the facilities of that stock
exchange or with respect to any security listed
on that stock exchange
The manner in which a recognised stock
exchange carries on its business or
Any other matters which the Commission
considers necessary for the effective
administration of the Act

36
 Power To Prohibit Trading
Where the Commission is of the opinion
that it is necessary to prohibit trading in
particular securities of, or made available
by, an issuer on a recognised stock
exchange so as to protect, in the public
interest, persons buying or selling the
securities, the commission may by notice
in writing to that stock exchange, prohibit
such trading stating its reasons for so
doing
37
 Registration of Issuer
Every issuer (person or company who has
securities outstanding, or issues or proposes to
issue a security or securities to the public) must
within the prescribed period and before issuing
any security, apply to the Commission to be
registered in respect to that security
Where the Commission refuses to register an
applicant, the commission must notify the
applicant in writing of the refusal and the reason
for same
38
 Registration of Issuer
The requirement for registration does not apply
to
The Government of Jamaica
A person who issues securities to a licensee
under the Banking Act, the Building Societies
Act and the Financial Institutions Act and a
society registered under the Co-operatives
Societies Act in the course of the conduct of
business pursuant to its licence or registration

39
 Registration of Issuer
Such licensee or society which intends to
dispose of any interest in any security issued to
it by a person who is exempt from registration as
an issuer, to any person other than another
licensee or society must give written notice of
that intention to the person who issued the
security to it and require that person to register
the security and shall not dispose of the security
until it is furnished with proof of such registration

40
 Part V - Section 35A Conduct of Security
Business
Section 35A provides that sections 44 to 49 and sections 52 and 53
of the Act shall apply to securities
For the purposes of those sections -
certificates of deposits issued by banks licensed under the
banking Act, by financial institutions licensed under the Financial
Institutions Act, or by building societies licensed under the
Building Societies Act;
securities issued by the Bank of Jamaica; and
certificates of deposit issued pursuant to the carrying on of credit
union business by a society registered under the Co-operative
Societies Act
are deemed to be securities for the purposes of those sections

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 Part V - Section 35A Conduct of Security
Business
Section 44 false trading and market rigging
Section 45 stock market manipulation
Section 46 false or misleading statements etc.
Section 47 fraudulently inducing person to deal in
securities
Section 48 inducement to purchase or sell by
dissemination of information
Section 49 employment of manipulative and deceptive devices
Section 52 Penalties
Section 53 Convicted persons liable to pay compensation to
persons who suffer loss
(NB s.51 and 52 prohibition of dealings in securities by insiders)

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 Conduct of Securities Business
Trust Account
A dealer in securities must open and
maintain with a bank in Jamaica an
account designated a trust account into
which shall be paid
a. Money held by the dealer in trust for a
client, and
b. Money received by the dealer from a
client
BUT NOT
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 Conduct of Securities Business
Trust Account
i. money received in respect of brokerage
or any other preferred charge
ii. money received in payment or part
payment for securities delivered to the
dealer before the money is received
iii. money in relation to which the dealer is
required under this Act to treat in a
specified way

44
 Conduct of Securities Business
Prohibited Representations
A licensee must not represent or imply or
knowingly permit to be represented or
implied in any manner to any person that
his abilities or qualifications have in any
respect been approved by the
Commission
The statement that a person is a licensee
under this Act is not a contravention of this
section

45
 Conduct of Securities Business
Issue of Contract Notes
A dealer must in respect of a transaction of
sale or purchase of securities give a contract
note
a. where the transaction took place in the
ordinary course of business on a recognised
stock exchange and the dealer entered into the
transaction otherwise than as principal to the
person for whom the dealer entered into the
transaction

46
 Conduct of Securities Business
Issue of Contract Notes
b. where the transaction did not take place in the
ordinary course of business on a recognised
stock exchange and the dealer entered into the
transaction otherwise than as principal, to the
person for whom the dealer entered into the
transaction
c. where the transaction did not take place in the
ordinary course of business on a recognised
stock exchange and the dealer entered into the
transaction as principal, to the person with
whom the dealer entered into a transaction
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 Conduct of Securities Business
Content of Contract Note
A contract note given by a dealer must specify
The name or style under which the dealer
carries on business as a dealer and the address
of the principal place at which the dealer carries
on business
Each recognised stock exchange of which the
dealer is a member
If the dealer is dealing as principal with a person
who is not the holder of a dealers licence, a
statement that he is so acting

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 Conduct of Securities Business
Content of Contract Note
The name and address of the person to whom
the dealer gives the contract note
The day on which the transaction took place
and, if the transaction did not take place in the
ordinary course of business as a recognised
stock exchange, a statement to that effect
The number, or amount and description, of the
securities that are the subject of the contract
The price per unit of the securities

49
 Conduct of Securities Business
Content of Contract Note
The amount of the consideration
The amount of commission charged
The amount of all stamp duties or other duties
and taxes payable in connection with the
contract and
If an amount is to be added to or deducted from
the settlement amount in respect of the right to a
benefit bought or sold together with the
securities, the first mentioned amount and the
nature of the benefit

50
 Conduct of Securities Business
Disclosure of Interest
Where a dealer, investment adviser, dealers
representative or investment advisers representative
sends circulars, or other written communication in which
he makes a recommendation with respect to securities
or class of securities, he must include on the circular or
other communication, a concise statement of the nature
of his interest in, or his interest in the acquisition or
disposal of, those securities or securities included in that
class, or the interest of any associated person at the
date on which the first-mentioned person last sends the
circular or other communication

51
 Conduct of Securities Business
Dealing as Principal
A dealer must not , as principal, deal in any securities
with a person who is not a dealer unless he first informs
the person with whom he is dealing that he is acting in
the transaction as principal and not as agent
A dealer must not enter into, as principal or on behalf of
an associated person a transaction of purchase or sale
of securities that are permitted to be traded on a
recognised stock exchange if a client of the dealer, who
is not an associated person, has instructed the dealer to
buy, or sell, respectively, securities of the same class
and the dealer has not complied with the instruction

52
 Conduct of Securities Business
Short Selling of Securities
A dealer shall not sell securities to a buyer
unless at the time of the sale
a. the dealer has, or believes on
reasonable grounds that he has a
presently exercisable and unconditional
right to vest the securities in a buyer, or
b. where the dealer is selling as agent, his
principal has such presently exercisable
and unconditional right
53
 Conduct of Securities Business
False Trading and Market Rigging
Transactions
A person must not create, or cause to be
created, or do anything that is intended or
likely to create:
a false or misleading appearance of active
trading in any securities on a recognized
stock exchange or
false or misleading appearance with
respect to the market for, or the price of,
any such securities
54
 Conduct of Securities Business
Prohibition of Dealings in Securities By
Insiders
A person who is, or at any time in the
preceding 12 months has been, or
associated with an issuer must nor deal in
any securities of that issuer, if by reason of
his being or having been, an associated
person, he is in possession of information
that is not generally available but, if it
were, would be likely to materially affect
the price of those securities
55
 Conduct of Securities Business
Prohibition of Dealings in Securities By
Insiders
A person who is or at any time in the preceding
12 months has been, or associated with an
issuer shall not deal in any securities of any
issuer if by reason of his so being, or having
been, or associated with the first-mentioned
issuer he is in possession of information that
a) is not generally available but, if it were, would
be likely to materially affect the price of those
securities

56
 Conduct of Securities Business
Prohibition of Dealings in Securities By
Insiders
b) relates to any transaction (actual or expected)
involving both those issuers or involving one of
them and securities of the other
A company is not precluded from entering into
a transaction by reason only of information in
the possession of an officer of that company if
a) the decision to enter into the transaction was
taken on its behalf by a person other then the
officer

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 Conduct of Securities Business
Prohibition of Dealings in Securities By
Insiders
b) It had in operation at the time arrangements to
ensure that the information was not
communicated to that person and that no
advice with respect to the transaction was
given to him by a person in possession of the
information; and
c) The information was not so communicated and
such advice was not given

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 Conduct of Securities Business
Penalties
The penalty for contravening provisions
against false trading and market rigging
transactions and insider trading:
in the case of an individual a fine or
imprisonment for up to 10 years; or
in the case of a company, to a fine

59
 Conduct of Securities Business
Other Provisions
Prohibition against:
Stock market manipulation
False or misleading statements
Fraudulently inducing person to deal in
securities
Employment of manipulative and
deceptive devices
Penalty same as that for false trading,
market rigging, and insider trading
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Questions?

THE END