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Untitled Document

JSDA Council Bulletin (January 01, 2005)

In an effort to promptly disseminate to our members, information on critical issues in the securities sector, we have developed a Bulletin. This will be a monthly publication highlighting issues from our Council Meeting. We hope you will find this useful and we look forward to your feedback. From the President’s Desk
Financial Services Commission
In contemplating the FSC’s Discussion Paper on ‘Guidelines on Audit Committees’, Council agreed to respond with a letter to the FSC citing issues relating to, inter alia, the definition of the term, ‘independent members of the Audit Committee.’ The letter will speak specifically to the implication that shareholders, and any other parties having any direct or indirect relationship with the company or its subsidiaries, should be excluded from membership. It was agreed among Council that a shareholder for example would be an ideal candidate for membership as he would be primarily concerned about the well being of such a company because of his vested interest. Members also found that the guidelines were not compatible with the Jamaican environment as they contemplate organisations which are much larger than any Jamaican company. Regarding the issue of the approval of employees of securities entities, it was agreed that a letter would be sent to the FSC requesting that a formal process be introduced where employees deemed qualified and having fulfilled the criteria be allowed to operate temporarily pending approval. The FSC responded in a letter dated December 24, 2004 to the JSDA’s request for a delay in the introduction of Section 3.4 of the Guidelines For Margin Requirements for Repo Agreements. Mr. Wynter referred to the more than 15 months of extensive consultation with members of the securities industry regarding the requirements of the guidelines and expressed disappointment in receiving what was termed an ‘eleventh hour submission.’ He highlighted the FSC’s mandate to protect investors by ensuring that securities dealers do not conduct their business in a manner that is unsafe or unsound and stated that the FSC was unable to agree to the request from the JSDA but they were however prepared to consider adjusting the formula by which the cap is determined. Council vowed to pursue negotiations to have the formula adjusted with a view to removing the cap once an appropriate capital adequacy model has been formulated. It was also proposed that the definition for the term ‘Funds Under Management’ be altered to reflect ‘all balance sheet assets and all other assets held in custody or managed on behalf of clients.’
Jcsd Fixed Income Project
The Central Securities Depository Consultative Group Meeting which was scheduled for December 10, 2004, was postponed until February 18, 2005.
Gct - Fund Under Management Services
Council examined a letter dated January 5, 2005 from the Tax Audit & Assessment Department reminding the membership of the treatment of supply of services by an investment or fund management operation. The letter advised that the management of clients’ funds is a taxable activity and specified that the definition of consideration for GCT purposes includes, ‘any payment made or any act or forbearance in respect of, in response to, or for the inducement of, the supply of any goods or services, whether by that person or by any other person’.
JEF – Draft Occupational Safety & Health Act (2004)
The Jamaica Employers’ Federation’s (JEF) submissions on the Draft Occupational Safety and Health Act with general observations, comments and recommendations were tabled. Council will review the document and respond to the JEF.
Market Analysis
A yield curve, developed from information gathered from eight (8) of the players in the market was generated by the Market Committee as shown in the graph below:
Council was informed that the Central Bank had reduced repo rates on December 28, 2004 and that there was a GOJ 15.75% two-year debenture being offered. The rate was perceived to be unattractive but based on the available liquidity in the market, it was considered that the offer may benefit from a $2 billion to $4 billion uptake.
Comparison between Recent and Current Issues
December 28-30, 2004                        January 13-18, 2005
Tenure - 39 months Tenure - 24 months
Maturity date - March 28, 2008 Maturity date - January 18, 2007
Coupon - 14.95% p.a. Coupon - 15.75% p.a.
Interest payment frequency – Qtrly. Interest payment frequency - Qtrly
Amount issued - $2.816 billion Offer volume - Unlimited

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