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BUSINESS GUARDIAN www.guardian.co.tt NOVEMBER 2013 • WEEK THREE
The buzz words in the lexicon of our leaders include economic
diversification, entrepreneurship, innovation, productivity,
economic growth and economic transformation.
They are all used to describe the contribution to our economy
of, say, a new mall, a restaurant, the huge and profitable
banking system, the current turnaround of our economy based
on the resurgence of the non-energy sector; confusion reigns.
We have a petroleum-based plantation economy in which the
energy sector earns 90 per cent of our foreign exchange and
generates the same percentage of government s income if you
include the petrochemical sector. The dependent onshore
sector entrepreneurs, in the main, via imports funded by the
earnings of the energy sector, provide for the creature comforts
of the population; from food, to motor cars to fine wines.
Diversification encompasses a multitude of interpretations.
For example, the new highway from San Fernando to Pt Fortin
will help to diversify the economy in the south since it will
provide the opportunity for new construction and the estab-
lishment of new businesses: restaurants, small shops and even
the expansion of our large and established businesses.
In fact, the move from oil to natural gas as the mainstay
of the energy sector is also classed as economic diversification.
In all of these cases, entrepreneurs are necessary and, as Jack
and Jill, entrepreneurs need investment, money from our
The financial market is said to be low risk and is not willing
to lend to either our small business people to start new busi-
nesses or even large, established enterprises. Hence, there is
the intent to create new mutual funds to support these busi-
nesses and special funds to help small start-ups.
The concern is that the energy---sector is not sustainable
from the positions of its depletion and because of our high
exploration and production costs we are likely to become
uncompetitive against the region s much cheaper shale gas
and oil producers---United States, Canada and Argentina.
The challenge that faces us is to generate new production
enterprises that can compete in the global market which in
the short term can complement the energy sector and in the
longer term replace it.
Diversifying the non-energy sector to meet this challenge
cannot be done, as is traditional, via construction, restaurants,
malls, imports distribution. Hence, we need to create a new
sector of our economy; we need to transform the economy
to include these new enterprises. This does not mean our
entrepreneurs should desist from building new housing estates
The first question then is: can our traditional entrepreneurs
and our commercial/industrial support systems respond to
this new demand? The pertinent requirement for any such
export company is that it has to be globally competitive and
today that means that the company s products/services have
to be different - the company has to compete on its technological
knowledge and its capacity to innovate. Both of our economic
sectors cannot be considered to be at the top of the emerging
In other words, our entrepreneurs, our people, in their
present state are incapable of responding to the demand to
create globally competitive companies. Hence, the need to
transform our economy to meet the demands posed by an
unsustainable energy-sector are separate and distinct from
continuing to improve the current non-energy sector via access
to funding or improving the local business environment.
Confusing the two by lauding the apparent improvement
of the current non-energy sector serves only to distract us
from the urgency of the transformation, from the urgency of
crafting the required intervention.
Mary K King
The Securities Act, 2012 has strengthened
the continuous disclosure requirements which
were established in the Securities Industry
Act, 1995, said the T&T Securities and
Exchange Commission (SEC).
In a statement, the SEC quoted Principle
16 of the Objectives and Principles of Securities
Regulation as made known by the International
Organisation of Securities Commissions, which
said: "There should be full, accurate and timely
disclosure of financial results, risk and other
information which is material to investors
The commission quoted Section 4 of the
Securities Act, 2012 to define material change:
"a change in the business, operations, assets,
ownership or affairs of an issuer, the disclosure
of which would be considered important to
a reasonable investor in making an investment
decision and includes a decision to implement
such a change made by the board of directors
of an issuer."
"Simply put, a material change is any change
that will affect the investment decision of a
reasonable investor. It is important to note
that this definition applies to all reporting
issuers, including collective investment
The SEC said it operates a disclosure-based
regulatory regime which focuses on the pro-
vision of information by reporting issuers to
the general public in order to allow investors
to assess the merit or demerits of any invest-
The SEC noted the distinction in determin-
ing materiality in the SIA, 1995 and SA, 2012.
Under the SIA, 95, a material change was
"... a change in the business, operations,
assets or ownership of an issuer that would
reasonably be expected to have a significant
effect on the market price or value of the secu-
rities of the issuer ..."
"When comparing the definition of a mate-
rial change under the SIA, 1995 and the SA,
2012, it is clear that the basis for determining
materiality has changed. The SIA 95 relied on
a significant effect on the market price or
value of the securities, while the SA, 2012
relies on the effect on the investment decision
of a reasonable investor.
"The definition of material change in the
SA, 2012 acknowledges that, while some
changes to the business, operations, assets,
ownership or affairs of a reporting issuer may
not result in a change of its securities price,
this does not negate the fact that such infor-
mation may affect an investor s decision.
"Since the threshold of what constitutes
materiality is decidedly lower under the SA,
2012, the standard now depends on the specific
set of facts involving the company.
The SEC said examples of material infor-
mation may include:
1) changes in corporate structure such as
changes to the board of directors or share
ownership affecting control of the company;
2) changes in capital structure such as div-
idend payments or planned repurchases or
redemptions of securities;
3) unexpected changes in the financial results
for any period;
4) changes in business and operations, such
as a significant change in capital investment
plans or any development, that affects the
company s resources, technology, products or
5) acquisitions/disposal of assets or acqui-
sitions of other companies; and
6) changes in credit arrangements, such as
the encumbering of the company s assets,
defaults under debt obligations or agreements
to restructure debt.
The commission said the aforementioned
list is not exhaustive and does not in any way
prohibit the commission from concluding that
an event, which has not been specifically stated
in the list, shall qualify as a material change.
Further details on the above listing can be
accessed via the commission s Web site:
The SA, 2012 allows the commission to
impose an administrative fine for the failure
to file or publish a document as required under
the Act. Section 156(2) provides for a fine of
$1,000 per day for each day the document
remains outstanding after the expiration of
the time prescribed (that is, seven days after
the occurrence of the change).
Given that the determination of a material
change includes a degree of subjectivity, the
commission encourages a proactive approach
towards the assessment of material changes.
Accordingly, where a reporting issuer is
uncertain whether a change is, in fact, material
or in circumstances where it believes that Sec-
tion 64(2) of the act is applicable, it can solicit
the commission s guidance by e-mailing such
queries to: firstname.lastname@example.org.
It must be underscored that the standard
of what constitutes materiality now depends
on an assessment of a specific set of facts rel-
evant to a reasonable investor s decision and
therefore will be determined on a case by case
basis, the SEC stated.
Call for urgent economic transformation
The SEC explains disclosure
of material change
Section 64(1) of the SA, 2012 states that
where a material change occurs, a reporting is-
(a) within three days of the occurrence of
the change, file a report with the commission
containing the nature and substance of the
(b) within seven days of the occurrence of
the change, publish a notice which discloses
the nature and substance of the change in two
daily newspapers of general circulation in T&T;
and(c) within seven days of the occurrence of
the change, file with the commission a copy of
the notice published in accordance with the
For the purposes of Section 64(1) (b) and
(c), the commission considers that a "Notice"
is any informational material which is pub-
lished at the request of the reporting issuer in
the exact form as drafted and issued for publi-
cation by the reporting issuer. This notice
should also be authorised by a senior officer of
the reporting issuer.
It should be noted that where a "media re-
lease" or an excerpt of a presentation/inter-
view by a reporter, journalist or other media
personnel relating to a material change is pub-
lished, the disclosure requirement of Section
64 would not be considered to be fulfilled.
Exemption to material
Subject to the commission's approval, a re-
porting issuer may not be required to comply
with the disclosure requirements of Section
In fact, Section 64(2) provides that a re-
porting issuer may not publish a notice re-
garding the material change if, within three
days of the occurrence of the change, it ad-
vises the commission of the material change
and its reasons for the non-publication of the
It should be noted that an exemption under
Section 64(2) will only be considered where
the reporting issuer is of the opinion that:
(a) the disclosure required under Section
64(1) will be unduly detrimental to its inter-
(b) the disclosure required under Section
64(1) will be unwarranted.
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