An empowered T&T Securities and Exchange Commission (SEC) has imposed penalties totalling $6.2 million on registered companies for various infractions of its by-laws. May 2, 2012, made it 15 years since the SEC came into being. Back then, it had a staff of 20; today, its staff has grown to 60. The SEC, which has Prof Patrick Watson as its new chairman—replacing Deborah Thomas-Felix—described itself in a four-page anniversary pullout as a “quasi-judicial body” which conducts hearings into matters related to the securities market, for which it can issue penalties and make orders. For instance, the SEC can make orders cancelling a market actor or requiring the resignation of company directors or senior officers of a reporting issuer where it considers it to be in the public interest. In the past—pre-2003, to be exact—registrants viewed the filing requirements stipulated under the Securities Industry Act (SIA) 1995 as a “minor administrative matter,” where documents were filed late or not at all. No more. In 2004, the SEC published a public notice exhorting the market to adhere to the filing obligations. “In 2004, the Commission introduced a regime for enforcement, which (by June 30, 2004) found that 60 per cent of all registrants were in contravention of Section 66 of the SIA and by-laws 28, 55 and 56,” the commission stated in its analytical report.
Given that data, the SEC began enforcement proceedings against 82 registrants and imposed penalties of $1.2 million on 62 of them, pursuant to Section 143 of the SIA. Fast-forward five years to 2009—the SEC acted to enforce proceedings against an estimated 80 registrants who were delinquent in meeting their financial and other filing obligations to the SEC. “This initiative began in April of that year and continued to the end of September 2010,” the SEC stated. Higher volume of registrants failed to file documents in time. Within that 17-month period, there were 249 contraventions by reporting issuers who had failed to file particular financial statements or had filed late. Of that lot, the SEC reprimanded 20 offenders. Three matters were determined via written hearing in accordance with hearings and settlements practice rules 2008. Among the offenders, there were 171 whose contraventions were settled with $3,110,056.50 in penalties. The offenders didn’t stop there. Between October 1, 2010, and September 30, 2011, the SEC board issued 33 orders from 73 contravention matters resulting in $1,976,750 in penalty payments. “The commission treated with six contraventions of Section 66(3) of the Act, where several reporting issuers failed to file and issue press releases disclosing material changes in the affairs of their business,” the SEC noted.
The SEC noted in its report that complaints have been rising within recent times, which developed as people became more aware of the functions of the commission through its public-awareness campaign. “Some complaints have initiated the launch of formal investigations and others have resulted in the closure of entities in order to protect investors. In 2011, 15 persons reported possible market abuses to the commission. “Although not all enforcement actions result in investors regaining their lost investments, investors will agree that having unscrupulous, fraudulent abusers removed from the market is success in itself.”
Case of SEC v Welthecon
A case in point: the SEC’s Web site states in the matter against Welthecon Investment Managers Ltd, Pierre Finance Investments Ltd and Peter de Gannes, it had filed legal action on July 28, 2011, against the aforementioned parties in the High Court and obtained an order a day later restraining the defendants from disposing of, transferring or diminishing the value of their assets, including in particular any monies held in any T&T institution pending the hearing of the Commission’s claim against the defendants or further order. Further, the defendants were restrained until the hearing and determination of the action or further order from carrying on any business with respect to any investment whatsoever in any securities or the purchase or sale of any securities. This order was served on the defendants on August 2, 2011. Brian Hackett of PricewaterhouseCoopers Advisory Services Ltd has been appointed as receiver/manager over the defendants’ assets. Hackett’s job is two-fold—to make restitution to the affected parties and repay profits obtained by reason of the first and second defendants’ non-compliance with the SIA.
Commissioners of the SEC:
Prof Patrick Watson (chairman)
Commissioners: Dr Shelton Nicholls, deputy governor of the Central Bank, research and policy; Horace Mahara, accountant; and Marsha King and Ravi Rajcoomar, both attorneys.
A draft Securities Bill 2012 and Securities (General) By-laws, 2012, both now out for public comment, seek to provide protection to investors from unfair, improper or fraudulent practices; foster fair and efficient capital markets and confidence in the capital markets in T&T; reduce systemic risk; foster co-operation with other jurisdictions in the development of fair and efficient capital markets, and for other related matters. Comments can be sent to: SIB2012@ttsec.org.tt
by June 1. Times and venues for public consultations to be held on June 12 in Trinidad and June 13 in Tobago will be announced.
Neal and Massy Holdings Ltd’s subsidiary, Barbados Shipping and Trading Company Ltd (BS&T), was delisted from the TTSE as of May 28. The order was approved by the SEC under Section 45 of the Securities Industry Act, 1995. The SEC said its 2004 implementation of a regime of public hearings was new to the T&T securities market. “There were two hearings regarding matters with the T&T Stock Exchange Ltd. Based on a request from the TTSE on December 15, 2006, the commission ordered that BWIA be delisted from trading on the stock exchange effective December 22, 2006. “On February 4, 2009, a hearing for the delisting of Furness (Trinidad) Ltd and Valpark Shopping Plaza Ltd, also based on the request of the TTSE, was held at the commission. The delistings were subsequently approved by order of the commission.” Between 2009 and 2010, four more matters were determined via hearings. One of these matters went to settlement and the other three were ruled in the commission’s favour, resulting in penalties being ordered against the respondents.
Since 2004, the SEC initiated major investigations into 30 matters for various breaches:
• insider trading
• failure to disclose substantial shareholding
• market manipulation
• soliciting investments without due registration with the commission
• unauthorised holding of clients’ cash
The outcome of some of those matters is still pending. However, the majority of those investigations led to:
• orders for penalties being levied against the transgressors and being filed in the
• winding up of entities
• High Court decisions ordering the appointment of a receiver to wind up and attend to disgorgement and restitution
• issuance of cease and desist warnings