Regulatory Developments in Trinidad and Tobago Securities Law | RBTT Investor Forum 2008

1. Regulatory Developments in Trinidad and Tobago RBTT Investor Forum December 11 – 12, 2008 Osborne Nurse, Chairman and CEO Trinidad & Tobago Securities & Exchange Commission

2. Objectives • The revised securities law in Trinidad and Tobago is designed to achieve the following major objectives as set out in the IOSCO Principles of Securities Regulation: • The protection of investors • Ensuring that markets are fair, efficient and transparent • The reduction of systemic risk: • “Systemic risk captures the importance of ensuring that participants in the securities market, broker-dealers, custodians, reporting issuers and others remain solvent and capable of fulfilling their functions in securities trading and the settlement process” (Extract from Stikeman Elliott Report December, 2005)

3. The Current Regulatory Challenge "Today, we are continuing to build on that essential premise: that investors have a right to know the truth — and the risks — about the securities that trade in our public markets. Never in this agency's history has this fundamental mission been more relevant, and more urgent. The current credit crisis has shown the importance of transparency to a healthy marketplace — and how costly hidden risk can be.“ Christopher Cox, Chairman, USSEC - Opening Remarks at Roundtable on 10/08/08

4. Structure of the Securities Act (SA) • The SA is structured as follows: • A Principal Act (SA) • General By-Laws (governing day to day operations) • Specific By-Laws governing collective investment schemes, take-overs and the issuance of prospectuses • The power to issue other By-Laws as well as Guidelines from time to time

5. Areas of change • Substantial Changes: • Commission given increased capacity and responsibilities are clearly and objectively stated • Increased supervisory and enforcement powers • Insider Trading enforcement improved and Reporting Regime is instituted • New Investor Rights • Sanctions and Penalties significantly increased

6. Increased capacity of the Commission • Commission may be strengthened by appointment of three temporary Commissioners to facilitate the fair discharge of its adjudicative function • The Commission’s power to review, approve and regulate take-overs, amalgamations and all forms of business combinations under the SA is clearly stated

7. Power to make By-Laws and Orders By-Law making power extended to allow the Commission to make urgent by-laws to regulate conditions that the market requires as a matter of urgency for ninety days Additional power to order a cease trade for non compliance or contravention of the SA or by-laws by a reporting issuer

8. Supervision & Enforcement • On site inspections of Self Regulatory Organizations (SROs) and Market Actors • Power to enter a place of business of a SRO or Market Actor and examine and review books, records and documents • Sharing of information with local and foreign regulatory authorities • Ongoing supervisory and compliance powers over market actors and reporting issuers similar to those which it has over SROs

9. Stronger Sanctions • For: • Misrepresentation in filing of documents and the failure to register under the SA • Failure to disclose information as a reporting issuer-directors and senior officers may also be held liable if a reporting issuer fails to disclose • A director or senior officer to be disqualified by order of the Commission for a period not exceeding five years • An auditor to be sanctioned for making a false or misleading audit report and barred for a period not exceeding five years

10. larger Penalties • Administrative penalty increased from $50k to $500k for breaches or contravention of the SA or By-Law. • Penalty of $1000.00 a day for each day that the document is not filed may be imposed for late filing of same • These penalties can be imposed by an order of the Commission without a hearing, but the person does have the right to request a hearing after the document has been filed.

11. Insider Reporting Regime • Persons required to report are those connected to reporting issuers (“connected persons”) for example: • A director or senior officer of the reporting issuer or of an affiliate or • A person that beneficially owns securities carrying more than 10% of the votes • A person who is an expert retained or hired by the reporting issuer • A person contemplating or proposing whether alone or with another, to make a take over bid for any securities of a reporting issuer, or amalgamation, merger or similar business combination of the reporting issuer or any affiliate

12. Insider Reporting Regime • Insider reports to be filed with the Commission which must make the information publicly available as soon as possible • All connected persons must report to the Commission and to the reporting issuer within five business days of becoming connected and on every subsequent trade in securities • This obligation to disclose relates to all securities including convertible securities, rights issues and third party derivatives

13. Insider Trading offence simplified • Prohibition on connected persons to: • directly or indirectly • buy sell or otherwise trade in securities of such reporting issuer • with knowledge or possession of undisclosed price sensitive information, however obtained, until such information is generally disclosed • Prohibition on tipping • Removal of Commission’s burden to prove intent • Exceptions also simplified: • Liquidator or receiver • ESOPS

14. Investors’ Rights of Action • Investors given a right of action for: • damages against the responsible persons, including: • the reporting issuer, • its directors, experts, • promoters and • other persons who sign certificates • misrepresentation in offering documents other than the prospectus

15. The Benefits of the SA The benefits will: • Bring securities regulation in line with best international practice • Create a strong market that protects and attracts domestic and international investors • Ensure that the Trinidad and Tobago International Financial Centre or TTIFC operates in a fair, transparent and equitable market • Improve the independence of the Commission for effective supervision and enforcement of the securities market