THE suspension of online trading for investors with equity accounts at Stocks and Securities Limited (SSL) was the “prudent” thing to do, according to Marlene Street Forrest, managing director of the Jamaica Stock Exchange (JSE).

Street Forrest also said the suspension was to protect the exchange from being personally responsible for any liabilities that may be incurred from online trading through accounts at SSL.

“We suspended online trading in SSL because SSL requested that we suspend trading,” Street Forrest told the Jamaica Observer in an interview on Thursday.

“The temporary manager is very mature to have asked for that suspension, which is prudent and the right thing to do,” she added, indicating that the JSE did not arrive at that decision unilaterally.

Street Forrest said because online trades are executed directly by the investor, allowing trading by way of that medium to continue would usurp the directives of the Financial Services Commission (FSC) for all transactions in SSL accounts to be approved before they are executed.

“SSL got a directive from the FSC that every transaction that goes through that brokerage must be approved by them. Online trading does not allow for that. FSC cannot approve online trading because it is activated [directly] by the customer,” she explained.

Street Forrest continued: “Say I wanted to sell my shares, I don’t have to have funds in my account to sell my shares. But if I put through one million shares to be sold at $30 each, that’s $30 million, right? If somebody buys those shares, SSL is due to collect on behalf of the investor and to pay out since that trade was executed using SSL online. And so it now impacts on JCSD [Jamaica Central Securities Depository], in terms of settlement time, which is T+2. SSL would need to pay out those funds when they didn’t give any authorisation for those transactions to take place.”

T+2 refers to the two-day period in which transactions on the JSE are settled.

She said while the temporary manager cannot control the online trading, he could be faced with making payouts for transactions he did not authorise.

“No approval is being given for that because it’s going through an automatic processing. That cannot be good. And we also don’t want the contagion and the risk at the end of T+2, and we don’t have money to settle the net to pay,” she continued.

“If SSL has a net to pay, they have to pay. And if they don’t have it to pay, we are going to have to find it to pay. The exchange would have to find it to pay, and we don’t want to put ourself in that position.”

Street Forrest said though online trading of shares held through SSL accounts has been suspended, “trading has not stopped”. She, however, admits that she is unsure if trades are still being executed by SSL.

SSL issues reported

Meanwhile, the JSE managing director said as issues were uncovered with SSL, especially its regulatory filings as a member dealer of the stock exchange, those issues were not only flagged but also reported.

“They were flagged. They were fined for some late submissions and other things,” Street Forrest pointed out without elaborating, but indicated that such action was standard procedure.

“Where there is a non-compliance in anything — so I’m not talking about SSL [alone] now. I’m talking about any member-dealer or listed company. We also report that to the FSC,” she added.

Asked directly if the JSE reported SSL breaches to the FSC, Street Forrest replied, “I’m not gonna answer that question; I’m gonna just say overall, generally and consistently, where there is non-compliance, we inform the FSC.”

“Any non-compliance that RMOD [Regulatory and Market Oversight Division] picks up on and writes to the the broker, the FSC is informed.”

However, she steered clear of blaming the FSC for not taking action.

“There’s no need to pull anymore coal on top of their head, there’s no need for that. I would just want to ensure that people understand our system, not FSC system or what FSC does with a broker,” Street-Forrest concluded.