THE Unit Trust Market should open up by December this year, although the securities dealers sector will come under increased regulation under reform measures outlined by the Government last week.

In his memorandum of Economic and Financial Policies tabled in Parliament on Tuesday, Finance Minister Audley Shaw indicated that the Government, as part of its plans to strengthen the country’s financial system, would be implementing recommendations made by the International Monetary Fund (IMF) as far back as 2006.

“The Government is taking steps to shift risks to investors by encouraging the development of collective investment schemes, including amending the Unit Trust act. The amendments to this Act will come into effect by December 2010. Thereafter, the existing freeze on new registrations of unit trusts and new unit trust products will be lifted,” the Minister said in the document.

Mayberry Investments CEO Gary Peart said this revision will be a welcome change, not only by spreading the risks, but in creating more opportunities within the sector. This, he said, will open opportunities to invest in international trusts and establish unit trusts within Jamaica.

“If you can regulate the system and create opportunities then no problem,” Peart said, adding “What we welcome is that in the letter of intent it indicates that the Unit Trust Act will be in place by the end of the year. We are looking forward to that because it is risk sharing.”

Financial analyst Sushil Jain said the only concern with the stipulated measure is the timing. He said the Unit Trust Act is a ‘shelf document’ which is applicable in almost any financial framework and should be implementable within the shortest time.

“All this is fine except the time frame. I think the time frame should have been much shorter. They should do it, but I don’t know why they are taking so long that they will amend the Act by December 2010. They have been working on that for as long as I can remember,” Jain argued.

However, Peart believes the act will be passed right on time. “No I don’t think it has taken too long. What is good is that there are timelines because it tells us that it will be with us sooner than later,” he said.

Until March 2012, when the draft regulations for the operations of the sector will be ready, no new licences will be issued to security dealers whose business is based on repos and other short-term liabilities, unless they are already a part of an existing firm or coming from a merger or acquisition. According to the letter of intent, the move is a means to “strengthen its ability to withstand shocks going forward” by shifting some of the risks from the institution to the investor.

In addition to expanding the roles of the Financial Services Commission (FSC) and the Bank of Jamaica (BOJ) and strengthening their supervisory roles within the sector, other amendments will see the financial institutions observing stronger capital adequacy standards. Supervisors will also be charged with taking ‘prompt corrective action’ against weak entities.

These and other regulatory requirements are necessary precursors to the government’s access to a 27-month Stand-By Arrangement (SBA) with the IMF. The arrangement would see Jamaica accessing through to March 2012, US$1.3billion.