PRODUCTIVE Business Solutions (PBS) and IronRock Insurance Company (ROC) are the latest entities to have trading in their shares suspended as the Jamaica Stock Exchange (JSE) tightens the leash on companies breaching its rules. Both entities were suspended because their financial statements are late.

The suspensions, which took effect Tuesday July 2, were implemented for the audited financials of both companies being more than 90 days late. That apart, IronRock’s first-quarter report is also more than 45 days late as well.

The audited financials of both companies for the end of their financial year on December 31, 2023 were due on March 30, 2024, while IronRock’s first quarter report was due on May 15. The suspension means no one can buy or sell the affected shares until they have submitted their late financials and the JSE advises that their shares can be traded again. Otherwise, both companies continue to operate as normal.

While the disclosure posted on the JSE website simply stated, “suspended trading in the shares of Productive Business Solutions Limited (PBS)”, a post to users of jtraderpro.jamstockex.com, a JSE proprietary trading platform, stated that the suspension applies to all classes of shares for PBS. As a result, apart from ROC and PBS’s ordinary shares being suspended, PBS9.75, PBS10.50 and PBS9.25, which are preference shares, cannot be traded as well.

IronRock has attributed the delay in filing its audited financials to the implementation of IFRS 17, a new accounting standard for recognising insurance activities and which took effect in January 2023, replacing the old rules under IFRS 4. Its disclosure noted, “This further delay is due in large part to additional processes and to the late completion of our audit and actuarial valuations, which were affected by the implementation of IFRS 17.”

IronRock anticipates filing its audited financials and unaudited first-quarter report by July 12, and annual report by August 16. IronRock’s late filing also has put it in breach of Section 26 (1) (a) of the Insurance Act, which also stipulates filing audited financials — certified by its independent auditor and actuary — within 90 days to Financial Services Commission (FSC).

Of the three general insurance companies on the JSE, only Key Insurance Company Limited was able to submit its audited financials in the stipulated timeline required by the JSE and FSC. General Accident Insurance Company Jamaica Limited’s audited financials were submitted on May 2. Several other general and life insurance companies, along with insurance brokers, have also been late in preparing their audited financial statements within the statutory timelines.

With respect to PBS, it hasn’t given any further context about what’s causing it’s delay. The firm is expected to publish its audited financials and annual report by the end of this month. PBS’s 9.75 per cent Jamaican-dollar preference share has a maturity date of July 31, totalling $2.58 billion (US$15.43 million). Its subsidiary PBS Technologies (Trinidad) Limited was also reaffirmed by Caribbean Information & Credit Rating Services Limited (CARICRIS) on July 2 as ‘good’, or CariA, for a US$40-million bond issue.

The suspension of IronRock and PBS makes this the fourth and fifth companies suspended by the JSE for breaches in 2024, a new record. iCreate was the first company suspended by the JSE on January 18, its second suspension in under six months, for several breaches. The company was admitted back to trading on June 19, after spending 152 days suspended — just 28 days short of automatic delisting.

EduFocal Limited’s and Equityline Mortgage Investment Corporation’s shares were suspended on June 4 due to their audited financials being 90 days late beyond the February 29 due date. Both companies’ securities were readmitted back to trading on June 21.

Equityline’s series A deferred shares were set to mature on June 30 and be delisted from the JSE, which would reduce the number of companies to 103 and number of listed securities to 152. It is yet to be seen how EduFocal and IronRock’s junior market tax remission will be affected by the suspension of their ordinary shares.

The 2016 junior market tax amendment stipulates that any Jamaica Stock Exchange Junior Market company whose shares are suspended or delisted before the end of 15 years shall immediately become liable to pay all income tax it would have been liable to pay from the time of initial admission, had it not been granted the incentive.

Another Junior Market company which announced an extension notice is Caribbean Cream Limited (Kremi) whose audited financials were due on April 29. The company has now committed to July 28 for submitting its audited financials, a day before the 90-day threshold which would cause it to be at risk of suspension. It has also set August 29 as the day to submit its first-quarter financial statements, the last day before a suspension. The annual report should be submitted by September 30. The company attributed the delay in completing its audit to the implementation of a new enterprise resource planning software.

Medical Disposables & Supplies Limited, Radio Jamaica Limited, Access Financial Services Limited, and Proven Group Limited have also declared delays in submitting their audited financials for the financial year ended March 31. All companies aim to submit their financials in July.

Prior to the pandemic most companies submitted their audited financials and annual reports on time to the exchange, which had a near 100 per cent compliance rate. Now, more than half of the companies on the JSE within the last two years have indicated delays in submitting their audited financials on time due to a variety of reasons. The biggest reason stems from a shortage of auditors — accountants who specialise in auditing — independent valuators, actuaries — professionals who review the books of insurance companies and approve the methodology — combined with a wide range of regulatory and accounting changes.

An audit to prepare financial statements is not an isolated event but relies on several external parties to provide confirmation of certain information in order to sign off on the numbers. This will also be combined with site inspections and testing different controls to ensure that the auditor meets their requirements to complete an audit.

If a company has a subsidiary and that business has a delay, the consolidated financial statements cannot be completed. This situation can be made even more complicated by acquisitions, change of auditors, and reliance of independent external reports — which can all slow down the process. The shortage of auditors has made the process to complete an audit even longer, depending on the scope and complexity of the business(es).

Some partners at accounting firms have advocated for the JSE to consider reverting to the 90-day timeline for submitting audited financials, something which is currently in place in Trinidad and Tobago. They note that the timeline for submitting audited financials is too short due to the changing standards and payment of taxes in March, a situation which has detracted new individuals from joining the profession.

The JSE used to have a set deadline of 90 days after a financial year for audited numbers to be submitted. This changed in May 2009 when the JSE allowed companies to either submit their audited financials in 60 days, or submit an unaudited fourth-quarter in 45 days and audited financials in 90 days. Most companies began to make changes to their reporting period to the 60-day timeline in the subsequent years, but many firms have resisted changing to 45/90 due to not wanting differing numbers.

VM Investments Limited announced on Monday that it will be switching to 45/90 for its 2024 audited financials, following two years of late audited submissions. This complements the move for VM Wealth’s unit trust funds to move their financial year end to May 31 to take pressure off internal resources.

“Arising from the discharge of the abovementioned regulatory activities, the Jamaica Stock Exchange is satisfied with the state of compliance to the rules of the exchange by member/dealers and listed companies as at the end of the month January 2024. The exception, however, relates to the timely filing of audited and annual reports by listed companies and member-dealers, which is a matter that is being reviewed by the JSE. It is expected that the review will be extended to our external stakeholders in 2024 to inform recommendations to address the concern,” stated the January 2024 JSE regulatory report.

JSE had not suspended iCreate until August 2023 for the late submission of its audited financials which were due from March 2023, despite it having been in breach of the 90-day period from June 2023. Seprod Limited, whose audited financials for the same reporting period were late, submitted its audited financials in August 2023 and was not suspended for the same breach. In 2023 JSE also terminated the member-dealer agreement of Stocks & Securities Limited (SSL). Since 2024 JSE and its regulatory arm have taken a more stringent approach to dealing with different breaches.

“It is definitely a problem with the audited financial statements. We have rules governing the filings of these statements and you would have seen where we have suspended companies that have not filed within time and within the extended period,” said JSE Managing Director Marlene Street Forrest at the company’s annual general meeting on June 20, in response to a query by a shareholder.