JAMAICA’S Junior Market listings are facing increasing regulatory scrutiny as delayed audits and repeat compliance failures expose stark disparities with larger peers, new data show, testing the stock exchange’s balancing act between market integrity and nurturing small-cap growth.

November 2024 enforcement records released by the Jamaica Stock Exchange (JSE) last month expose stark disparities between the junior and main markets, with smaller firms accounting for three-quarters of delayed financial filings despite constituting just 38 per cent of listed entities.

Andrae Tulloch, chief regulatory officer at the JSE’s Regulatory and Market Oversight Division (RMOD), speaking to reporters at the Jamaica Observer Business Forum in January, acknowledged the compliance issues, especially as it relates to Junior Market-listed companies.

“One of the significant challenges…is the…delays in the filing of auditing financial statements,” Tulloch pointed out.

Junior Market entities accounted for 75 per cent of all late financial submissions in November 2024.

Of the eight companies across both the Junior and Main Markets that were late in submitting their audited financials and/or annual reports for the month, six were from the Junior Market. These include EduFocal Limited, Medical Disposables & Supplies Limited, MFS Capital Partners Limited, Tropical Battery Company Limited, Express Catering Limited, and Fontana Limited.

By the end of November, two of these companies — Express Catering Limited and Fontana Limited — had rectified their breaches by submitting their audited reports on November 25 and November 29, respectively. However, four Junior Market companies — EduFocal Limited, Medical Disposables & Supplies Limited, MFS Capital Partners Limited, and Tropical Battery Company Limited — remained in breach at the close of the month. Since then, all have rectified the identified breaches except MFS which, up to February 27, 2025, was the only company yet to sort out its compliance issues.

In addition to the Junior Market breaches, two Main Market companies — Pulse Investments Limited and NCB Financial Group Limited — also failed to meet their audited financial reporting deadlines. These delays have contributed to broader concerns about timely compliance with regulatory requirements, which the JSE continues to address through enforcement measures and collaborative efforts with stakeholders.

The JSE acknowledges that while unaudited reports are generally submitted on time, audited financials pose a greater challenge due to their reliance on third-party verification processes. The exchange has emphasised its commitment to working with listed companies, especially those on the Junior Market, to improve compliance rates and ensure market integrity.

“From the regulator’s standpoint, we’re unable to eliminate it totally. However, through constant engagement, we have seen where there have been improvement in companies who have been under the whip, and we expect to continue that continuous engagement through our orientation sessions, through our reminder letters, through our engagement with them when we’re seeing that they are in problems to have a discussion to say what is really happening,” Tulloch noted.

He went on to suggest that part of the solution to the problem may mean Junior Market companies have to change their financial year to periods in which audit firms are less busy.

“It might be an issue now with the stakeholders looking at how they structure their year-end, how they entice additional persons to enter the audit profession,” Tulloch said, seguing into a broader issue — the lack of adequate auditors or availability of accountants in Jamaica to audit the companies on time. The Institue of Chartered Accountants of Jamaica (ICAJ) has noted the problem in previous reports in the
Jamaica Observer and also suggested that the JSE could vary the reporting time for companies to help compliance.

“I do believe there is a big problem with the accounting community. I know [Jamaica Observer] has been reporting on it. And I know the ICAJ recognises it. There is a challenge [with getting auditors], and I think the people who suffer are the smaller companies and the more complicated companies,” Steven Whittingham, chairman of the JSE, chipped in.

“The smaller companies are the ones that are on the fringes that are impacted,” he added.

The records show Junior Market companies averaged 14.5-day delays in submitting required disclosures — more than double the 6.2-day lag recorded by Main Market counterparts. Nearly half (43 per cent) became repeat offenders within a 12-month period, compared to 17 per cent of larger firms. EduFocal Limited, a Kingston-based education technology provider, exemplifies systemic challenges, having failed to resolve annual report deficiencies since April 2024 despite multiple enforcement actions.

Tulloch, who was speaking ahead of the February 18 release of the JSE’s Monthly Regulatory Report for November 2024, said the exchange is “committed to engaging” offenders and has started research to determine some of the causes of the compliance breaches, but added that preliminarily, it is down to a number of factors.

“The combination of factors includes possibly [issues with] internal processes at listed companies, issues in terms of audit resources, issues in terms of the growth of the accounting and auditing standards,” Tulloch added.

Four Junior Market firms endured suspensions last year for breaches — double the Main Market’s tally — while 73 per cent of November’s 26 regulatory breaches involved smaller entities, according to the JSE’s Monthly Regulatory Report for November 2024.

Overall, timely filing rates declined slightly for unaudited reports going down from 95 per cent in 2023 to 87 per cent in 2024, while audited report compliance improved to 67 per cent from 40 per cent.

Tulloch said the exchange is working “to alleviate this issue” — referring to regulatory breaches — though he admits to being “a bit more lenient” than regulators in other jurisdictions and outlined, “I’m not sure how much more the stock exchange can do.”

Still, he pointed out that since the RMOD was created as an independent arm and “there has been a significant increase in the compliance level for listed companies and member dealers in respect to their filings.”

“So it’s for us to now continue to safeguard that and work on improving that situation. We’re seeing, since the turn of COVID, that there has been a deterioration. So it’s for us to investigate and have that sort of discussion with our stakeholders to see how can we arrest this.”

A possible reason for there being more breaches on the Junior Market than Main Market may also come down to Junior Market companies facing no monetary fines for breaches of JSE Junior Market rules.

Productive Business Solutions Limited (PBS), a listed company subject to Main Market rules, was fined $5,000 every day its audited financials were late during 2024. Based on the report being 227 days past due, PBS was subject to a fine of $1.135 million. It also faced a $5,000 a day fine for every day its annual report was late as well. PBS was suspended from trading between July to November 2024 for its late audited financials.

In contrast, MFS Capital, Kintyre Holdings (Ja) (formerly iCreate), and EduFocal Limited, companies that have been suspended and have submitted their audited numbers late over the last two years, have not paid a fine for the late submission of their financials or any other JSE rule breach. ISP Finance Services Limited, another Junior Market-listed company, faced no monetary fine for submitting its 2022 annual report in January 2024 when it was due from April 2023.

The JSE’s Regulatory Report only indicates the listed breaches for Junior Market Companies, while Main Market companies are written up and fined under the relevant JSE rules for their breaches. JSE Managing Director Marlene Street Forrest had told this publication in June 2022 that the JSE was considering the imposition of fines for Junior Market companies related to any breach of the rules. The latest publicly available JSE Junior Market rule book does not stipulate any fines for companies listed on that market.

November 2024 enforcement records released by the Jamaica Stock Exchange (JSE) last month expose stark disparities between the junior and main markets, with smaller firms accounting for three-quarters of delayed financial filings despite constituting just 38 per cent of listed entities.