CARICOM is to undertake a series of national consultations later this year on the development and regulation of a regional securities market. The objective is to develop by next year a single piece of legislation across CARICOM that will create an integrated capital market. This will require, according to officials, agreement by member states on the creation of a supranational securities commission able to regulate such activity.
The decision to move forward the long-discussed idea of a regional capital market follows the July 4-6 summit in Montego Bay, at which Heads of Government mandated the finalising of the necessary instruments and model securities legislation by July 2019.
Officials say that when CARICOM’s Council for Finance and Planning (COFAP) met in June, Ministers concluded that the absence of a single capital market within the region was holding back economic growth and governments and the private sectors ability to mobilise financial resources
At their summit, Heads of Government endorsed a recommendation put forwards by COFAP Ministers that CARICOM now develop a model securities market law and related regulations with the objective of creating a single legal market space.
To achieve this, Ministers and officials are proposing several measures to overcome the significant challenges expected to arise. These include an approach that will seek to align national securities laws and the creation of protocols enabling the passporting of transactions between member states.
At their June meeting, COFAP Ministers also considered other measures. These include common standards for regulatory matters relating to authorisation of issuers of securities; the licensing of market intermediaries; common standards for rules regarding the conduct of business; and prospectus disclosure rules. Also envisaged is an agreement on a supervisory authority’s powers to conduct inspections and investigations; rules for the registration of all securities prior to issue or them being traded; and the creation of a standardised approach towards enforcement.
At present, the most developed capital markets in CARICOM are in Barbados, The Bahamas, the Eastern Caribbean, Jamaica and Trinidad. These offer short and long-term fixed income securities, equities and collective investment funds. There are additionally small markets in Belize, Haiti, Guyana and Suriname, largely trading government securities. Officials note that for the most part Caribbean exchanges are essentially lacking liquidity because of their smallness, and that their combined market capitalisation is relatively low compared to that of other emerging markets.
However, achieving the regulatory alignments required to establish a regional capital market may prove challenging. Although agreed by Heads of Government as an essential element in stimulating future economic growth, in recent years CARICOM states have found it difficult to agree to the detail and implementation of any new pan-Caribbean arrangements especially if they require their own authorities to cede legal and supervisory authority to a supranational entity.
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