Home' Trinidad and Tobago Guardian : June 13th 2013 Contents JUNE 2013 • WEEK TWO www.guardian.co.tt BUSINESS GUARDIAN
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The local Securities and
Exchange Commission on Mon-
day sent the Business Guardian
information on standards to guide
disclosure in the media releases,
advertisements and promotional
material of Collective Investment
Schemes (CIS) and mutual funds.
In order to keep market actors abreast
of regulatory issues, the T&T Securities
and Exchange Commission (TTSEC)
takes this opportunity to provide guid-
ance on public announcements and
promotional material released by CIS.
CIS are an important component of T&T s
capital market, accounting for $39.5 billion,
or 15 per cent, in funds under management
(FUM) out of a total capital market value of
$263.4 billion, as at January 31, 2013.
Within recent times, the Commission has
found it necessary to remind various CIS
issuers of the commission s guidelines in
respect of statements contained in media
releases and advertisements.
Our guidelines on Promotion Presentation
Standards for Collective Investment Schemes
have been published since 2005 and promoters
of CIS are encouraged to adhere to the stan-
dards established for the publication of media
releases, advertisements and promotional
material exhibiting performance, which are
the key marketing tools in the promotion of
securities issued by CIS.
In fact, any disclosures made in these pub-
lications, ought to be fair and accurate and
persons who invest in these products should
be provided with all the necessary information
that will enable them to make investment
decisions that are suitable to their individual
An investor s search for information on an
investment product may be impacted by:
• the significant amount of time and money
required in information gathering;
• a lack of sophistication necessary to per-
form an analysis; and
• a difficulty in understanding the technical
jargon in a product offering.
An investor will more than likely rely on
performance information provided in adver-
tisements and promotional material provided
Therefore, incomplete, inaccurate or mis-
leading statements provided in such promo-
tional material can mean dire consequences
for investors and clients of CISs.
In some cases, information provided may
not be deliberately misleading, but may be
construed as such if other critical information
is not provided in order for proper interpre-
tation of the returns used to evaluate per-
The Commission s Guidelines are consistent
with international best practice and have the
following main objectives:
• To develop rules for media and other
releases that will prohibit the publication of
advertisements that mislead potential and
existing investors and/or omit relevant infor-
• To encourage the standardisation of cal-
culation of performance of CISs in order to
facilitate a more meaningful comparison and
assessment of CISs across the country.
Our expectation is that the adoption of
those standards will provide potential and
existing investors in CIS with an assurance
that the disclosures in advertisements and
promotional material concerning scheme per-
formance should be fair and accurate. The
commission uses seven general standards,
developed by the International Organisation
of Securities Commissions (IOSCO) as a basis,
but also draws upon standards of other juris-
dictions and regulatory bodies.
Summarised below are the general standards
required by the commission (though promoters
are not precluded from exceeding those pre-
1. Fundamental principles
These principles relate to the content of
statements issued by promoters of CIS, where
the material must be fair, accurate and complete
and there should be no misrepresentation of
investment performance. Promoters should
also give due regard to their audience and
ensure the suitability of promotion to that
2. Disclaimers and location of a
Media releases and promotional material
should contain a statement regarding the need
to refer to a CIS s prospectus, which contains
important investment information and where
it can be found. Additionally, present per-
formance data should contain a disclaimer
regarding the likelihood of variation in per-
formance of the fund over time.
3. Fees and expenses
Investment scheme performance informa-
tion should be net of all fees and expenses
(for example, management fees) paid directly
or indirectly by each investor and should be
disclosed in presentation information.
4. Calculation of returns
Information is provided in the guidelines
on performance (general, annualised and
cumulative) returns that are acceptable to be
published and the form of such publication.
There is a requirement for consistency in the
calculation of the net asset value (which must
be in accordance with what is set out in the
prospectus and same accounting principles
used in determination of asset and liability
values in calculation of net asset values), the
use of standardised formulae (returns calculated
with use of methodology set out in prospectus)
and the need for disclosure should there be
5. Relevance of performance data
In a situation where releases of performance
information are provided to users, it should
include such information to the end of the
most recently completed calendar quarter.
6. Consistency of promotions
Information presented in media releases
and other promotions should be consistent
with that of the prospectus filed with the
commission and should include the inception
date of the scheme.
Investors should be able to determine/eval-
uate the performance and risks of the CIS
through the use of benchmark market index
consistent with the scheme s investment poli-
cies and objectives. Should there be no bench-
mark information available, advertisements
may include information on the performance
of the market sector consistent with the CIS
investment policies and objectives.
An implication of the
Securities Act 2012
In accordance with section 90(1) of the
recently passed Securities Act 2012, if a com-
pliance review (under Section 89) reveals that
a registrant or self-regulatory organisation, is
committing/contravening or about to
commit/contravene any provision of the Act,
by-laws or guidelines, the commission may
direct a person to take such measures necessary
to remedy the situation.
Where the commission is of the view that
adherence to the guideline is in the public
interest, a person failing to take measures so
directed commits an offence and is liable on
conviction on indictment to a fine of $500,000
and to imprisonment for two years.
This applies to persons who fail to comply
with issued guidelines of the commission and
does not apply to draft guidelines.
The commission will continue to provide
registrants with relevant updates on aspects
of the new act and their responsibilities under
We will also take the opportunity via this
medium and other public information channels
to remind registrants of existing provisions
and guidelines to ensure that adequate dis-
closure is made to investors to enable them
to make informed decisions.
SEC publishes guide for mutual funds
On March 28, the National Flour Mills (NFM)
chairman s report, along with the company s
audited financial statements for the year-
ended December 31, 2012, were posted on
the T&T Stock Exchange Web site.
The document, which was signed by the company s erstwhile
chair, Jacqueline Burgess, reported to shareholders and other
stakeholders that "the board had agreed to a dividend payment
of 8 cents per ordinary share."
However, to date, more than two months later, the necessary
ex-record, ex-dividend and, most importantly, dividend-pay-
ment dates to give effect to this decision are yet to be published
either on the TTSE Web site or in the print media.
On May 3, I wrote to the TTSE inquiring about this curious
situation. On May 7, I received a response indicating that a
letter was sent to the NFM chair in this regard, but since then
I have heard nothing further from the TTSE.
However, well-placed sources at NFM are suggesting that
the dividend has to be approved by shareholders at an AGM,
but no date has as yet been announced. Prior to this, a special
shareholders meeting is also expected to be convened to elect
a new board of directors but again no date has as yet been
What are the facts?
According to my research Rule -- 603 (communication of
"(1) Every listed company shall notify the Stock Exchange,
no later than five days following the board meeting at which
the decision was taken, of all dividend payments, profit
announcements, rights or bonus issues, acquisition or sale of
assets, significant changes in share ownership or control and
any other information necessary to enable share/stockholders
to appraise the position of the company.
(2) The information regarding the listed company shall be
communicated to the general public within five working days
of the board meeting via one of the leading daily newspa-
(4) Any decision which requires ex-condition dealing in a
security shall be communicated to the Exchange not later than
seven business days before the record date."
However, unfortunately there is a loophole. According to
Rule - 203 (ex-condition dealing) (iii) "On receipt of official
information cancelling the declaration of a dividend, any notice
posted making the security ex-dividend under this rule shall
automatically be cancelled and be deemed to have been void
and of no effect...."
It therefore seems to me that if, for whatever reason, the
in-coming "new NFM board" is in disagreement with the 8
cents per share dividend declared by the outgoing board, they
can in fact amend or rescind that decision and inform the
Stock Exchange accordingly.
I hope for the shareholders sake that my interpretation is
wrong, but even if is, the following questions still arise: Why
is it taking this long for NFM to announce a payment date
for its dividend?
Why is NFM suggesting that there has to be an AGM to
approve the dividend when there is no legal requirement for
them to so do? Why does a new board have to be elected
before the AGM when both objectives can be achieved simul-
taneously at this forum? Can anyone tell us what the real
reason for this inordinate delay is?
Minority shareholders advocate
Is NFM about to renege on its 8¢ dividend?
Any disclosures ought to
be fair and accurate and persons
who invest in these products
should be provided with all the
necessary information that
will enable them to make
investment decisions that are
suitable to their individual needs.
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