NEW financial market regulations recently introduced by the Financial Services Commission (FSC) are already creating market momentum and receiving the thumbs up by CFA Society Jamaica, the umbrella body representing the island’s certified investment professionals.

CFA Society Jamaica promotes awareness and understanding of securities analysis, investing and the operation of the securities markets. Its members are recognised as ethical, knowledgeable members of the investment decision-making community.

As a professional organisation, the mission is to educate and inform investment decision-makers, promote ethical standards in the industry, and assist financial professionals in career development.

The society points out that as Jamaica inches closer to a post-pandemic rebound, it is characterising the most recent raft of FSC adjustments as particularly timely. The three key measures on which the association’s enthusiasm are predicated include expansion of the portfolio allowance in rated and listed instruments, increased allowance in foreign currency assets, and guidelines for conduct in relation to capital market issuances.

Most importantly, CFA Society Jamaica contends that the new regulations will be ushered in just in time for the anticipated peak in demand for access to funding. To complement the FSC reforms, the association of financial analysts is proposing an expansion of the definition of sophisticated investor to include individuals who demonstrate technical competence and experience in dealing with riskier investments, whether evidenced through professional certification or otherwise.

According to CFA Society Jamaica, “the proposed amendments will improve accountability within the investment landscape while diversifying the available range of instruments in local markets. In short, the reforms will support a more inclusive investment ecosystem that is aligned with developed capital markets rather than with nascent ones”.

Greater flexibility for fund managers

CFA Society Jamaica president, Brian Frazer explains that, “The increased allowance in rated and listed instruments and foreign-denominated currency assets will result in greater flexibility for fund managers to create portfolios that are more in line with their clients’ needs, for they can now incorporate further investments in corporate bonds and private equity — both of which have been shown to create significant value in more developed markets and both of which have become increasingly interesting to their local client base.”

Based on the behaviour of more mature markets, Frazer purports that the increased momentum being exhibited by the Jamaican market would be enhanced by the expansion of the class of the sophisticated investor, which would allow for the participation of a wider pool of technically adept investors. These investors would include CFA Charter holders, who can provide further perspectives and analyses on the assets. And, he intends to continue advocating for this change.

Beyond creative capital, the association posits that these reforms will usher in larger and more sophisticated issuances whilst promoting the advantage of local capital markets and providing opportunities to tap regional investors. This would allow Jamaica to maintain its lead as the market capital of the Caribbean.

While CFA Society Jamaica is pleased with the less restrictive approach by the regulators, it also applauds the concomitant guidelines that demand accountability in the issuance of investment instruments given. The CFA Society Jamaica president argues that both will augur well for Jamaica.

Frazer made the point that, “These adjustments allow capital to find its way more easily to companies to rebuild and retool — especially where a commercial bank loan is not the appropriate solution — thereby becoming a critical enabler to improvements in innovation and efficiency.”

Reforms strengthening Jamaica’s capital markets

He conceded that the reforms being implemented by the FSC are indeed strengthening Jamaica’s capital markets, noting that, “The provision of equitable access to business capital is a critical lever for growth. This can, however, only be achieved through the development of properly structured capital markets, the foundation of which is being strengthened by these reforms.”

Frazer posits that stronger technical capabilities, coupled with ethical practitioner behaviour, ensure that the public has confidence in the markets and that the best interests of investors and the wider society is served. “As we emerge from the COVID-19 challenge, companies will need more flexible forms of capital as they negotiate recovery and try to conserve cash flow to build back. We also expect to see an expansion of the digital economy that will need creative forms of financing,” Frazer said in conclusion.