An explanation of the new Jamaica Stock Exchange Private Market platform

An explanation of the new Jamaica Stock Exchange Private Market platform

Friday, January 15, 2021

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On Monday, January 11, the Jamaica Stock Exchange (JSE) launched its Private Market platform.

Since then many individuals have been asking about this new initiative by the JSE. m.

The Jamaica Observer's Business Report sought and quickly received a reply from the JSE to its questions about this new innovation.

Published below are questions on the Private Market platform which are answered by the Managing Director of the JSE, Marlene Street Forrest and her team-members.

1. What is the Private Market?

The Private Market facilitates trading of private securities (bond or equity) not listed on a public exchange, between investors qualified to trade those securities. These investors are largely identified as accredited investors but may include other qualified investors. Private Markets have been in Jamaica for some time. The Jamaica Stock Exchange is now offering its trading platform for the efficient execution of private trades.

2. Who can invest in the Private Market?

Private Market assets are usually available to investors of high net asset value, who are able to tolerate higher levels of investment risk, described as accredited investors. There can be other qualified investors as mandated by the terms of the security and in accordance with the Exempt Distribution Guidelines.

3. Who can raise funds on the Private Market?

Private or public companies in good standing with all regulatory and tax authorities can apply to the Financial Services Commission (FSC), through their broker for permission to issue securities.

4. What kind of investments are available on the Private Market?

Private securities usually take the form of bonds or equities.

5. Can an issuer who issues securities in the Public Market also issue and list securities on the Private Market?

There are publicly traded companies who may from time to seek to raise capital privately, through brokers. These companies can list those securities on the Private Market.

6. Before the JSE Private Market, how were these securities traded?

Brokers who arrange private market deals trade and settle these securities between themselves and their investors “over the counter” using transfer forms executed by the purchaser and the seller.

7. Why will the Private Market not be visible to all investors?

Based on the FSC Exempt Distribution guidelines, private securities are available to qualified investors only. Issuers of these securities choose the route of exempt distribution to conduct their capital raising activities privately, for strategic reasons. Not all securities listed on the Private Market require that only accredited investors can participate given that minimum purchasers and highly rated issues do not require the investor to be accredited.

8.Who determines if I am an accredited investor eligible to invest in certain private investments?

Licensed securities dealers/brokers will conduct the assessment in accordance with the FSC's Exempt Distribution guidelines.

9. What are the benefits to investors?

a) Greater price discovery that can increase liquidity of the security

b) Trades are done electronically by the broker eliminating the need for transfer forms

c) Immediate access to a wider pool of private securities

d) Greater visibility of private trades executed

10.What are the benefits to the broker?

a) Access to reliable trading and pricing information

b) Visible platform promoting secondary market liquidity

c) Opportunities to deepen relationships with new and existing investors

d) Efficient tracing of changed shareholder positions arising from sale of the fixed

e) Elimination of transfer forms

11. How does trading private securities help the economy?

a) It unlocks capital previously not liquid

b) Creates employment and increase opportunities for wealth creation

12. If I have private bonds not listed on the exchange, can I sell them on the exchange?

Once the securities are registered with the FSC, then the securities dealer/broker can apply to the JSE to list the securities on the platform. Thereafter, bids and offers for the security can be posted, and when there is a match, a trade will occur.

13. How can I log on to the Private Market portal of the JSE?

If you are an accredited investor or a qualified investor, your broker will assist with the initial registration process. Thereafter, you will have your own access via a secure password.

14. If I want to raise money for my company on the Private Market, where do I begin?

Begin by having a conversation with a broker who will guide you through the requirements.

15. What is the minimum amount that can be invested in the Private Market by an accredited investor?

JMD 10,000,000 or USD equivalent.

16. What are the FSC Exempt Distribution Guidelines and what do the guidelines cover?

The Exempt Distribution Guidelines are issued by the FSC and represents the governing document of issuing and trading of certain types of securities. It speaks to the compliance requirements for the broker, the issuer, and the investor, and details all the governance requirements for private securities, including registration, marketing, compliance and reporting responsibilities.

17. Are there any tax advantages to the private market?

All existing Jamaican tax laws will also apply to Private Market transactions done on the JSE platform. If a private equity transaction is effected, transfer tax is due and payable. Any tax treatment that currently exist when securities are traded “over the counter” will apply to Private Market transactions executed on the platform.

18. Can private securities be traded online via JTrader?

The JTrader online trading platform facilitates all retail investors. Private trades by accredited investors or other qualified investors cannot be facilitated on the platform at this time.

19. Who can trade private securities on the JSE Private Market platform?

Currently all broker/dealers that are approved by the Jamaica Stock Exchange can trade private securities on this platform.

20. Will digital assets be traded on the Private Market platform?

Initially digital assets will not be traded on the platform, but as the market develops and satisfies all the regulatory requirements, those securities deemed eligible will be considered.

21. Where do accredited investors and other qualified investors get information on private securities? Are prospectuses issued?

Under the FSC's Exempt Distribution Guidelines, issuers of private securities are not required to issue prospectuses to accredited investors and other qualified investors. Arrangers of private securities — securities dealers/brokers –will issue relevant details on private securities to the investor and load the information on the JSE's Private Market portal for viewing by accredited or other qualified investors.

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