BFSB Newletter ~ Part 4

Companies and persons engaged in certain aspects of the securities business, either in or from The Bahamas, are required to apply for registration with the Securities Commission of The Bahamas.

The categories of registration include (a) securities investment advisors and (b) broker-dealers. Broker-dealers and securities investment advisors must also apply to the Commission for registration of key personnel as "stockbrokers, dealers, traders, principals or associated persons."

A recent Public Notice targetted broker-dealers and advisors involved in non-Bahamian securities and dealing with investors that are located elsewhere and "offshore" institutions located in The Bahamas. The Commission is well along in the process of registering those companies and individuals who deal in local securities.

Certain exemptions - strictly circumscribed - exist in terms of the giving of investment advice. No organisation engaged in dealing or trading in securities is exempt.

The Bahamas International Securities Exchange (BISX) was established as a company in September 1999, and in May 2000 successfully launched its domestic market for the listing and trading of local public companies. The securities of 15 companies are being traded actively on the Exchange already. From this solid operational base, BISX is moving now to launch its international segment, with the opening of its mutual funds facility over the next few months.

There are many reasons why a mutual fund should list, including the intrinsic marketing benefits that a listing provides in extending the reach of a fund to a wider array of institutional investors. At this time of heightened external scrutiny of offshore structures, listing - in accordance with international standards - reduces the apparent air of anonymity about mutual funds registered in any offshore centre. A BISX listing will add a stamp of credibility and prestige, as well as enhanced visibility to a mutual fund.

Gerry Ritchie, a BTA consultant who is project managing the launch of the listing facility at BISX comments "BISX has been working closely and consulting with the Bahamian service providers in the funds industry to align its facilities with their business development objectives. The listing facility provides an additional element to their services offering in the growing and highly competitive offshore funds industry, and a spur to the ambitions of the Bahamian funds industry within that sector." There is a substantial offshore funds industry based in The Bahamas, with some 600 mutual funds based here, valued at more than $90 billion.

BISX will provide for primary and secondary listing of Bahamian regulated and overseas regulated funds, sponsored by specialist members of the Exchange.

An industry consultation on the BISX listing rules for mutual funds has been completed recently, enjoying a high level of participation by the mutual fund administrators sector, lawyers and accountants, and their professional and representative bodies.

Distinct features of the rules are:

• a close fit with mutual funds legislation and regulations
• recognition of previously published documents as part of the listing disclosure documents, thus avoiding excessive expense to issuers in advisory fees
• congruence with generally accepted international listing standards, and
• recognition of existing regulatory registrations and licenses.

Gerry Ritchie adds: "To meet the demands of mutual fund operators and its sponsor-users, BISX will establish a user-friendly, fast-track listing service. A BISX listing function has already been established to ensure the highest quality of listing service for all its listed products, superior to that offered by other offshore exchanges, is achieved. Listing fees have been set to position BISX and the Bahamian service providers competitively in the offshore markets."

Ideally, BISX and its sponsor-users would like to offer a full listings service via the Internet. As soon as Bahamian legislation facilitating E-Commerce, currently being devised by the Government in consultation with the financial industry, is enacted, and digital signatures are recognized, BISX will be aiming to leapfrog developments elsewhere.

BISX listing rules will require listed funds to provide price information such as bid and ask prices to BISX on the day that the funds are revalued, for dissemination to the media.

BISX is exploring the potential for utilising its systems and website to maximise the potential for the widest dissemination of fund information. The provision of dedicated pages on well-known international information services allowing BISX listed funds to achieve global exposure to their published NAVs and to information on their investment profiles is being discussed. The provision of BISX website space for the publication of fund's marketing materials, including the use of hyperlinks to their own sites or relevant related sites publishing research on the fund's activities, is being explored as well.

BISX will market aggressively the advantages of listing funds on BISX to its users internationally, and continue to work with the Bahamas Financial Services Board to place itself in the vanguard of the ever-growing and diverse range of financial services available to international investors in The Bahamas.

The Bahamas International Securities Exchange (BISX) hosted a one-day conference on September 19 in Nassau, to raise awareness of the capital markets in the region, and to exchange and develop ideas for growth within The Bahamas and regionally.

Opening the conference, Securities Commission of the Bahamas (SCB) Chairman T. Baswell Donaldson commented that the rapid shrinking of the global economy made it fitting that the countries of the Caribbean markets explore ways of cooperating with each other. In respect to The Bahamas, Chairman Donaldson expressed that the time was right to define the strategic role of capital markets in the economy. Recent focus has been on passing the Securities Industry Act and Regulations, although it is recognised also that amendments are needed to fine-tune the regulatory structure. He indicated that the SCB is working with BISX to achieve timely implementation of these necessary changes. Insufficient supply of capital in the form of share offerings and listings can hinder the growth of the local capital markets, and an immediate goal should be to turn The Bahamas into a "share-owning democracy". The privatisation of selected public companies was one suggestion offered as a means of stimulating the market.

Key participants at the Conference included the CEOs from the stock exchanges in Barbados, Dominican Republic, Jamaica and Trinidad and Tobago -- all of which centres also have been involved with The Bahamas in the Inter-American Development Bank's project on Harmonisation of Capital Markets in the Caribbean. The over 100 attendees included key participants in the financial services industry, including securities broker-dealers, corporate financiers, lawyers, accountants, mutual fund administrators, and bankers.

In his remarks to conference participants, BISX Chairman Ian Fair reported that BISX's primary goal is to become one of the top 20 exchanges world wide within the next 10 years, complementing the existing pillars of the Bahamian economy with an efficient capital market that is both domestic and international.

Earlier in the year, BFSB presented to the Bahamas Government an E-Commerce Position Paper, detailing a strategy for The Bahamas to become a global leader as an electronic commerce and communications hub, including the development of enabling legislation. It also served on the Ministry of Finance's National Steering Committee on E-Commerce, which led to the drafting of an action plan submitted to the Cabinet.

The BFSB Working Group on E-Commerce now has been presented with the drafts for proposed legislation, as follows:

• Computer Misuse Act, 2000
• Electronic Communications Act, 2000
• Data Protection (Privacy of Information) Act 2000

The Working Group will be submitting industry input to the Ministry of Finance once review of the draft legislation is completed.

BFSB held its 2000 AGM on Wednesday, October 4, at the British Colonial Hilton Hotel in downtown Nassau.

In his Annual Report, Executive Director Barry J. Malcolm highlighted BFSB programmes and achievements, including membership services, the www site, BFSB publications and products, promotional tours, conference sponsorships, international and domestic advertising, BISX support and Government liaison initiatives. He took the opportunity to present a preliminary overview of the Year 2001 Plan, indicating that BFSB's 2001 marketing and strategic development programmes will be geared towards reassuring and confirming to the market that The Bahamas remains the superior jurisdiction for financial services. According to the Executive Director, BFSB "will build on what we already have been doing over the last number of years, but with a specific purpose towards having the international marketplace truly understand how The Bahamas has emerged through the current initiatives, and who we are, in light of refinement to the industry".

Vice Chairman Gregory Cleare also spoke of BFSB's future plans, indicating that while promotion of the industry will no doubt again be a focus of efforts, the organisation must in the circumstances now lay new foundations for the industry, re-shaping and establishing services and products -- and even how it perceives the industry.

The Agenda for the AGM also included the Election of Directors for the year 2000-2001. Directors re-elected to the Board were: Gregory Bethel, Fidelity Merchant Bank & Trust Ltd.; Carmen Butler, Citibank, N.A.; Gregory Cleare, KPMG; Clifford Culmer, BDO Mann Judd; Ian D. Fair, MeesPierson (Bahamas) Ltd.; Larry Gibson, Colina Financial Advisors; William Jennings, Leadenhall Bank & Trust Company Ltd.; Ishmael Lightbourne, PricewaterhouseCoopers; and Walter Wells, CIBC (Bahamas) Ltd.

New Directors elected were: John Delaney, Higgs & Johnson; Geoffrey Hooper, The Winterbotham Trust Company Ltd.; Pamela Klonaris, Callenders & Co.; Gregor Maissen, Credit Suisse (Bahamas) Ltd.; Brian Moree, McKinney Bancroft & Hughes; and Paul Moss, Dominion Management Services Ltd.

Special thanks were extended to the retiring Directors: Michael Barnett, Graham Thompson & Co.; Arthur Coady, Teekay Shipping Ltd.; Peter Cole, Nassau Underwriters Agency; Alyson Gibson, Gibson & Company; Mark Holowesko, Templeton Global Advisors; Anthony Klonaris, Callenders & Co.; Betty Roberts, SG Hambros Bank & Trust; and Wendy Warren, Cardinal International Corporation.

Vice Chairman Greg Cleare also reported on the Strategic Development Committee established to formulate a private sector plan for the continued growth, development and prosperity of the Bahamas' financial services industry. In particular, AGM attendees were presented with an overview of the Committee's work in providing industry input to the Bahamas Government on the legislative and regulatory changes expected to impact the financial services industry in the coming months.

The addendum of the Guide features Useful Contacts & Resources as well as miscellaneous Statistical Data.

The marketing plan for the Bahamas Financial Services Guide includes wide dissemination through BFSB's own resources, including its newsletter and www site. Additionally, contractual arrangements with a fulfillment house will ensure extensive distribution regionally and international, with prospective investors identified as the prime targets.

The Guide is being bundled with a CD-Rom of industry legislation. Given recent and proposed steps by The Bahamas to address concerns of the international marketplace, particularly with regard to a package of new and revised legislative initiatives, BFSB plans to release updated versions of the CD-Rom on a periodic basis. The next version of the CD-Rom should be available early in the New Year, and will be sold separately as well.

An integral component of BFSB's overall mandate of promoting the financial services industry in The Bahamas has been the development and publication of a "Guide to Careers in the Financial Services Industry".

The first copy of the Guide was presented to the Minister of Education & Youth at the beginning of summer. Since then, BFSB Directors and Members have been presenting copies of the Guides to secondary schools in New Providence and throughout The Bahamas. In addition to providing a general overview of the industry, the Careers Guide specifically identifies key positions in each of the industry sectors and lists the academic, technical and personal skills necessary.

The growth of The Bahamas' overall economy is placing new demands on the industry as workers are presented with more employment alternatives, and the pool of candidates possessing prerequisite skills is being reduced. It is BFSB's hope that the Guide will provide secondary students with detailed information on the broad range of excellent choices available and, more importantly, help them prepare for careers in the industry.