On De­cem­ber 17, 2024, the Trinidad and To­ba­go Se­cu­ri­ties and Ex­change Com­mis­sion (TTSEC) post­ed, on its web­site, a cir­cu­lar let­ter to re­port­ing is­suers, bro­ker deal­ers, in­vest­ment ad­vis­ers, un­der­writ­ers and self-reg­u­la­to­ry or­gan­i­sa­tions reg­is­tered un­der the Se­cu­ri­ties Act 2012.

The cir­cu­lar let­ter was cap­tioned ‘TTSEC fee re­vi­sion’ and in it, the Com­mis­sion said it “pro­pos­es to is­sue an amend­ment to the Sched­ule 1 of the Se­cu­ri­ties (Gen­er­al) By-Laws 2015 and Sched­ule 1 of the Se­cu­ri­ties (Col­lec­tive In­vest­ment Schemes) Bye-Laws 2023 (the fee sched­ules).”

In the let­ter, the TTSEC stat­ed, “The amend­ments to the fee sched­ules seek to ad­just fees that al­lows the Com­mis­sion the ca­pa­bil­i­ties to dis­charge its func­tions un­der Sec­tion 6 of the Se­cu­ri­ties Act 2012 (“the Act”).

“The Com­mis­sion here­by pro­vides no­tice that the draft fee sched­ules are now avail­able for pub­lic com­ment. This amend­ment is be­ing pro­posed un­der sec­tion 148 of the Se­cu­ri­ties Act, Chap­ter 83:02 of the Laws of the Re­pub­lic of Trinidad and To­ba­go.”

The TTSEC cir­cu­lar let­ter refers to sec­tion 6 of the Se­cu­ri­ties Act 2012, which out­lines the func­tions of the TTSEC as in­clud­ing to:

(a) ad­vise the Min­is­ter (of Fi­nance) on all mat­ters re­lat­ing to the se­cu­ri­ties in­dus­try....

(j) cre­ate and pro­mote such con­di­tions in the se­cu­ri­ties in­dus­try as may seem to it nec­es­sary, ad­vis­able or ap­pro­pri­ate to en­sure the or­der­ly growth, reg­u­la­tion and de­vel­op­ment of the se­cu­ri­ties in­dus­try and to fur­ther the pur­pos­es of this Act.”

In all, the TTSEC has 11 func­tions. The two func­tions cit­ed here are note­wor­thy for the pur­pose of this com­men­tary—the Com­mis­sion is man­dat­ed, by statute, to ad­vise the Min­is­ter of Fi­nance on all mat­ters re­lat­ing to the se­cu­ri­ties in­dus­try and the body is al­so man­dat­ed, by statute, to pro­mote the con­di­tion to en­sure the or­der­ly growth of the se­cu­ri­ties in­dus­try.

As part of its man­date “to ad­vise the Min­is­ter of Fi­nance on ALL mat­ters re­lat­ing to the se­cu­ri­ties in­dus­try,” one imag­ines that the TTSEC will ad­vise Mr Im­bert that the three main in­dices of the T&T Stock Ex­change de­clined last year, which was the third year of de­creas­ing val­ue for lo­cal­ly list­ed stocks.

Sec­tion 148 of the Se­cu­ri­ties Act is al­so im­por­tant, as it out­lines, “The Min­is­ter (of Fi­nance) may, on the rec­om­men­da­tion of the Com­mis­sion, make by-laws...pre­scrib­ing the fees payable to the Com­mis­sion, in­clud­ing those for fil­ing, for ap­pli­ca­tions for reg­is­tra­tion or ex­emp­tions, for trades in se­cu­ri­ties, in re­spect of au­dits made by the Com­mis­sion, and in con­nec­tion with the ad­min­is­tra­tion of this Act.”

So, as I un­der­stand it, it is the re­spon­si­bil­i­ty of the TTSEC to make rec­om­men­da­tions to the Min­is­ter of Fi­nance on the amend­ments to the by-laws in­creas­ing the fees payable by the par­tic­i­pants in the se­cu­ri­ties in­dus­try. But it is the re­spon­si­bil­i­ty of the Min­is­ter of Fi­nance to ap­prove those rec­om­men­da­tions.

What fee in­creas­es are pro­posed?

The TTSEC pro­pos­es to more than TRIPLE most of the fees that par­tic­i­pants in the se­cu­ri­ties in­dus­try must pay.

For ex­am­ple, the au­tho­ri­sa­tion, reg­is­tra­tion and re­new­al fees for reg­is­trants, in­clude:

* The cur­rent fee of a re­port­ing is­suer is $8,000. The TTSEC pro­pos­es to more than triple that fee to $24,800 in years one and two, and in­crease the fee to $25,600 in years three to six and to $30,000 in year sev­en and go­ing for­ward;

* The cur­rent fee of a bro­ker deal­er is $25,000. Un­der the TTSEC pro­pos­al, that fee more than triples to $77,500 in years one and two, $80,000 in years three to six and $93,750 from year sev­en;

* The cur­rent fee for a bro­ker deal­er/un­der­writer is $30,000. In the first and sec­ond years, that fee goes to $93,000, from the third to sixth years, it goes to $96,000 and in the sev­enth year, the fee goes to $112,500.

The TTSEC pro­pos­es that the fee for the Trinidad and To­ba­go Stock Ex­change (TTSE) should al­so more than triple: The TTSE cur­rent­ly pays an ini­tial fee of $50,000 and a re­new­al fee of 0.02 per cent of the val­ue of trans­ac­tions based on au­dit­ed fi­nan­cial state­ments. The se­cu­ri­ties reg­u­la­tor pro­pos­es that the lo­cal stock ex­change should pay $155,000 ini­tial­ly and 0.062 per cent of the val­ue of trans­ac­tions to re­new.

Even though the T&T Stock Ex­change is push­ing hard to pro­mote SMEs to list, the TTSEC pro­pos­es to in­tro­duce new fees for SMEs fil­ing a prospec­tus or an in­for­ma­tion mem­o­ran­dum of $17,500 and $10,000 re­spec­tive­ly.

The TTSEC al­so pro­pos­es to im­pose the fol­low­ing new fees:

* Shelf reg­is­tra­tion and lim­it­ed of­fer­ing fees (fil­ing of base prospec­tus)—$54,250 in years one and two, $56,000 in years three to six and $65,625 in year sev­en.

* In­spec­tion and ex­am­i­na­tion fees—Be­tween $327 and $566 per hour in the first two years

* New su­per­vi­so­ry fees (reg­is­trants)—Be­tween $1,000 and $10,000 a year for the first two years

* New su­per­vi­so­ry fees for Col­lec­tive In­vest­ment Schemes (mu­tu­al fund com­pa­nies)—For en­ti­ties with as­sets un­der man­age­ment of over $3.5 bil­lion, such as the Unit Trust Cor­po­ra­tion, the fee for the first two years would be $150,000 a year, years three to six $262,500 a year and from year $285,000

TTSEC’s jus­ti­fi­ca­tion

The TTSEC presents a ta­ble com­par­ing the per­cent­age of the op­er­a­tional ex­pens­es from fee rev­enue in 14 ju­ris­dic­tions, in­clud­ing T&T.

The Com­mis­sion makes the point that cur­rent fee rev­enues cov­er about 15 per cent of its op­er­a­tional ex­pens­es, which means the Com­mis­sion re­quires a gov­ern­ment sub­ven­tion to cov­er 85 per cent of its op­er­at­ing bud­get.

“With the ex­cep­tion of Sin­ga­pore (18 per cent), all the oth­er ju­ris­dic­tions were able to cov­er be­tween 70 per cent and 100 per cent of their re­spec­tive op­er­at­ing bud­gets,” from fees, ac­cord­ing to the TTSEC.

“This in­cludes The Ba­hamas, which cov­ered 80 per cent of its op­er­a­tional exapens­es from fee rev­enue in 2019; Ja­maica, which cov­ered 100 per cent of op­er­a­tional ex­pens­es with fee rev­enue in fis­cal 2020 and Bar­ba­dos, which cov­ered 100 per cent of op­er­a­tional ex­pens­es with fee rev­enue in 2020.”

The TTSEC al­so presents a ta­ble com­par­ing the fee amounts, covert­ed to US dol­lars, charged by reg­u­la­tors in the re­gion, The Ba­hamas, Ja­maica and Bar­ba­dos, as well as Botswana, “which is sim­i­lar in stature to Trinidad and To­ba­go.”

Is fee hike jus­ti­fied?

1) Be­fore an­swer­ing that ques­tion, it would be im­por­tant for the TTSEC to tell the pub­lic whether the Min­is­ter of Fi­nance sig­nalled to the Com­mis­sion that the sub­ven­tion for the loal se­cu­ri­ties reg­u­la­tor is go­ing to be re­duced in the fu­ture.

If there was no sig­nal from Mr Im­bert, why this rush to triple the fees of many of the par­tic­i­pants in the lo­cal se­cu­ri­ties mar­ket?

If there was a sig­nal from the Min­is­ter of Fi­nance, why was this not for­mal­ly an­nounced by him or by the TTSEC?

2) Has the TTSEC done a study on the im­pact of the pro­posed tripling of most of its fees on the se­cu­ri­ties in­dus­try? If, for ex­am­ple, the fees paid by bro­ker deal­ers go from $25,000 to $77,500 ini­tial­ly, plus the new reg­is­trant su­per­vi­so­ry fee ini­tial­ly set at $10,000, are the bro­ker deal­ers go­ing to in­crease their fees?

And what im­pact would in­creased fees—it cer­tain­ly would not on­ly be the bro­ker deal­ers—have on in­di­vid­ual in­vestors’ will­ing­ness to buy lo­cal­ly list­ed stocks, in a stock mar­ket that has de­clined for the last three years?

Shouldn’t the TTSEC, along with oth­er mar­ket ac­tors, be look­ing to pro­mote greater in­ter­est by in­di­vid­ual in­vestors?

3) The TTSEC re­ceived a gov­ern­ment sub­ven­tion of $42 mil­lion in the fi­nan­cial year end­ing Sep­tem­ber 30, 2021 and in 2022, the sub­ven­tion was $37.10 mil­lion. This sug­gests that the ex­ist­ing fees gen­er­at­ed $7.53 mil­lion in 2021 and $6.72 mil­lion in 2022.

But the TTSEC’s 2022 an­nu­al re­port al­so in­di­cates that the body col­lect­ed $8.84 mil­lion in ad­min­is­tra­tive fines in re­la­tion to 120 con­tra­ven­tions of the se­cu­ri­ties laws. Does the mon­ey from the ad­min­is­tra­tive fines go to the Con­sol­i­dat­ed Fund and if those fines were re­tained by the TTSEC, would it need to triple most of its fees?

4) Ac­cord­ing to the Com­mis­sion’s 2022 an­nu­al re­port, the Com­mis­sion’s cash re­serves at the end of Sep­tem­ber 2022 to­talled $80.43 mil­lion. As­sum­ing that its cash re­serves would have in­creased in its 2023 and 2024 fi­nan­cial years—we are in 2025 and the TTSEC’s 2023 an­nu­al re­port has not been pub­lished as yet—can’t the TTSEC draw down its cash re­serves to buffer the the tripling of most of its fees?

In all the cir­cum­stances, the pro­posed fee hike is not jus­ti­fied and should be re­sist­ed.