Correction & Clarification

The statement should have read that total securities distributed in United States currency went from US$47 million in 2007 to US$247 million in 2008.

A regulator's suggestion that a relaxation of the rules relating to private-securities placement on the Jamaican market might have led to a sharp uptick in business is being questioned by some of the largest players in the market.

"I haven't seen any marked increase in transactions," said Anya Schnoor, CEO of Scotia DBG, the investment bankers. "I am not sure if (George Roper) is talking about numbers of transactions or volume. There have been a few large transactions (during last year) but I don't think those arose because the guidelines were relaxed."

Roper is the deputy executive director of the Financial Services Commission (FSC), the agency that regulates Jamaica's securities industry. In a speech last week, he credited the FSC's rule change for a near tripling, between last July and November, to J$4.9 billion of the value of placement on the markets.

US currency distributions

A similar trend, Roper told a recent round table organised by the American Chamber of Commerce of Jamaica (AmCham), was apparent with United States currency distributions, rising from US$47 million, during July to November 2007, to US$247 million for the corresponding period in 2008.

"I believe also that, with the release of the Exempt Distribution Guidelines, the gears of accessing capital were able to move more efficiently," Roper said at the round table. "This was indeed timely as it provided much-needed funds to firms when the world was experiencing a credit crunch."

Among the rule changes to which Roper referred was the removal of limits on the number of persons who can be involved in the private placement of an issue.

Prior to last year's rule change, private placements were limited to 50 people and the security was not traded.

Issues involving more than 50 people were considered public placements, for which the issuer had to provide a prospectus - publishing a minimum of 500 - and engage in other expensive undertakings.

"I believe that this decision was appropriate and, to date, we see indications of success," Roper said.

That success, however, was not immediately apparent to the National Commercial Bank (NCB) and its financial markets subsidiary NCB Capital Markets.

"We ... have not seen any increase on our side," said group spokesperson, Sheree Martin.

Speaking specifically of NCB Capital Markets, Martin said: "We have not done anymore deals than usual. We haven't seen any changes."

However, more fundamentally, Schnoor, who is also president of the Jamaica Securities Dealers Association, does not believe that the FSC's rule changes went far enough.

"I don't really think it was a relaxation," she said. "The major part of it is the definition of a sophisticated investor and an accredited investor and I think that is something that we believe should be lowered even further."

One of Schnoor's specific concerns was the FSC definition of a sophisticated investor as someone with a net worth of at least $50 million.

"It does not cover the majority of people who will be interested in investing," she said.

Schnoor said a formal submission was made last year to the FSC for this to be lowered but it was rejected.

Under the related FSC regulation that is of concern to Schnoor, a person participating in an issue under the accredited investor option must have a net worth of $50 million or $10 million annual income before taxes. Corporations in this category are required to have net assets greater than $250 million.

The FSC, at the time it unveiled the rules, said the approach was in line with what was being done in the US, Canada and Trinidad and Tobago.

In Trinidad and Tobago, individuals using this option must have TT$500,000 net financial assets. In the United States, the requirement is US$1 million in net assets.