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Intermediaries Guide

The success of any financial market hinges on the strength of its technical, legal and regulatory foundation and the commitment of its participants. The Eastern Caribbean Securities Regulatory Commission (Securities Commission) regulates trading on the ECSE and protects the interest of the investor and the market.

The rules and regulations established by the Securities Commission for market operations are in accordance with internationally accepted guidelines.

Potential investors can access the Eastern Caribbean Securities Exchange through market intermediaries, firms licensed under the Securities Act to trade financial products on behalf of the investor. Intermediaries include broker-dealers, limited service brokers, financial advisers and custodians. All except financial advisors must be licensed as firms. The financial adviser may be an individual.

Trades executed on the Exchange will be processed at the Eastern Caribbean Central Securities Depository (ECCSD). The services offered at the ECCSD include transactions from trade date to settlement, and creation and management of settlement instructions for money and securities. In addition, custody services will be provided to those entities that wish to hold securities at the Depository for safekeeping on behalf of customers.

Another institution that supports the Exchange is the Eastern Caribbean Central Securities Registry (ECCSR). Its responsibilities include:

  • facilitating share transfers
  • recording the issuance of shares
  • maintaining the records of the owners of securities on behalf of issuers
  • processing of corporate actions
  • issuing proxy announcements/voting on corporate issues
  • mailing shareholders’ reports/notices
  • providing annual shareholder meeting support

An ECSE intermediary is a firm authorised by the Securities Commission to trade securities of listed companies on behalf of investors. Banks and non-bank financial institutions may become securities intermediaries. Other legal entities may also provide these services,but they are required to set up a separate business/subsidiary to specifically conduct securities business. Currently, ECSE intermediaries are either limited service brokers or broker/dealers.

Limited service brokers are authorised to handle all the functions necessary for securities trading, including:

  • funds collection
  • securities ownership verification
  • order placement and settlement for securities transactions

Limited service brokers facilitate transactions for investors but are not allowed to give advice or hold money on their behalf, except for settling transactions. They charge fees for their services.

Broker/dealers provide the following services in addition to those provided by limited service brokers:

  • actively study market fluctuations
  • evaluate new products
  • provide investment advice
  • conduct trading services
  • keep records of their clients’ holdings
  • set up and maintain accounts on behalf of their clients
  • help companies go public
  • determine the best method and time to issue securities

Broker/dealers and limited service brokers place orders to buy or sell securities for investors on the ECSE from 9:00 AM to 2:00 PM. At the end of the trading day, the ECSE executes an auction to determine the best price that allows the maximum number of securities to be traded. Any “buy” order that is below the range of the price established in the auction is not traded. Any “sell” order that is above the price is not traded. They are carried over to the next business day, unless specified as “day orders”. “Day orders” not traded on a given day are removed from the system.

An investor must provide the intermediary with “good funds” to place an order to buy securities on the ECSE. “Good funds” can take the form of cash, credit, or debit card. Once the intermediary has verified that the funds are available to cover the transaction, the purchase can be made. The intermediary then handles all the details of the transaction. Intermediaries are the best source of information for investors about the companies listed on the ECSE

To participate on the ECSE, an institution and its principals, management and staff must acquire a licence and certification to be administered by the Securities Commission, or its designate.

The broker/dealer is required to obtain a Broker/Dealer License and the limited service broker is required to obtain a Limited Service Broker License. Both licenses must be obtained from the ECSE. The intermediary must provide the ECSE with a description of the firm’s operational capabilities, back-office and supervisory procedures, training and operating manuals. The firm is also required to have designated individuals who are licensed to act on its behalf and provide market services.

Each intermediary must designate an individual (or individuals) as a licensed principal and a registered representative. One or more persons can be licensed to perform the functions of both the licensed principal and registered representative. The licensed principal shall represent, vote and act on behalf of the intermediary in all affairs of the Exchange. The licensed principal is also responsible for supervising activities of the firm and liable for all activities of the employees of the firm. The registered representative’s functions include the solicitation of customers, trading, underwriting of securities offerings, supervisory and back-office operations, research and training, and management or supervision of persons engaged in the aforementioned activities. If, however, the registered representative is employed by a limited service broker firm, their activities are constrained by the firm’s limited service provision.

Potential applicants must pass a Fit and Proper Persons test, and a Principal or Registered Representative examination. The objective of this test is to determine whether the individual is of sound character and will uphold the values and standards of the ECSE. Before taking the Principal or Registered Representative examination, individuals have the option to pursue a training course offered by the ECSE. Additionally, these individuals must disclose any past legal infringements, relationships with major shareholders and loans in excess of EC$100,000.

To participate on the Exchange, broker/dealers must satisfy a minimum total capital requirement of EC$1 million. In addition, the intermediary must meet a net capital requirement of at least EC$250,000 in cash or readily marketable securities. The net capital requirement is directly proportional to the volume of securities activity.

Limited service brokers must satisfy a minimum total capital requirement of EC$250,000 and in addition a net capital requirement of at least EC$125,000. The net capital requirement is also directly proportional to the volume of securities activity.

Intermediaries are required to have adequate computing facilities comprising a modern basic personal computer or desktop computer. The computer should have at least 128 megabytes of random access memory and at a minimum, an Intel Pentium processor with a speed of 400 megahertz. Some other basic requirements include the Windows NT 4.0 operating system, a V.90 modem, and a video interface with a minimum of 8 megabytes. For more details about the specified technology requirements, contact the ECSE.

Trading software will be installed and tested on the intermediary’s computer system. The intermediary’s staff will be required to undergo a systems certification-training programme provided by the Exchange for a fee.

Upon acceptance, each intermediary is required to enter into an agreement with the Exchange and the Central Securities Depository or a participant of the Depository. They must agree to abide by the rules and regulations of the Exchange and the Securities Commission, and pay all fees, dues and fines. Intermediaries must also disclose any form of sanction or negative publicity, litigation, and bankruptcy.>

Disclosure Requirements Intermediaries are required to provide the Exchange with the following info:

  • un-audited quarterly financial statements
  • audited annual reports and financial statement
  • Ad hoc reports advising of any changes

Each intermediary member of the ECSE is required upon entry to make a nominal capital investment in the Exchange. This investment constitutes an equity stake in the ECSE.

There are five categories of fees that apply to intermediaries. These are licensing fees, examination fees, training fees, membership fees, and transaction fees. The first three categories are collected on behalf of the Securities Commission.

Fines may be levied on intermediary members based on the level and frequency of violations of Exchange rules. All fees and dues are payable on a monthly, quarterly, or annual basis; fines are payable on demand.

There are five categories of fees that apply to intermediaries. These are licensing fees, examination fees, training fees, membership fees, and transaction fees. The first three categories are collected on behalf of the Securities Commission.

Fines may be levied on intermediary members based on the level and frequency of violations of Exchange rules. All fees and dues are payable on a monthly, quarterly, or annual basis; fines are payable on demand.

All intermediaries seeking membership in the Exchange are required to complete an application form prescribed by the Exchange. The legal intermediary’s chief officer must sign the application. The application form must include a description of the applicant’s operational capabilities and the applicant’s written supervisory procedures.

The Securities Regulatory Commission may apply caps on the commissions that brokers/dealers and limited service brokers can charge customers.

The Eastern Caribbean Central Securities Depository (ECCSD) holds securities as nominee on behalf of its participants. The Depository moves securities as instructed by participants to support their settlement obligations and other securities related activities.

To participate on the Exchange, broker/dealers must satisfy a minimum total capital requirement of EC$1 million. In addition, the intermediary must meet a net capital requirement of at least EC$250,000 in cash or readily marketable securities. The net capital requirement is directly proportional to the volume of securities activity.

Limited service brokers must satisfy a minimum total capital requirement of EC$250,000 and in addition a net capital requirement of at least EC$125,000. The net capital requirement is also directly proportional to the volume of securities activity.

An applicant for participation in the ECCSD is not required to be a member of the Exchange. To be considered for participation, the firm must qualify as at least one of the following:

  • a licensed broker/dealer or limited service broker in good standing with the ECSE;
  • a bank or any subsidiary which is subject to supervision or regulation by the Eastern Caribbean Central Bank;
  • a licensed investment company , a closed end mutual fund
  • a regulated financial institution, which demonstrates to the Board of Directors of the ECCSD that its business and capabilities are such that it could reasonably expect material benefit from direct access to the Depository’s services.

Applicants seeking to become a participant of the Depository must complete an application form and provide copies of the annual audited financial statement and most recent monthly financial statement. Each participant is also required to meet the following legal obligations:

  • provide three copies of a signed Participants Agreement which indicates that the participant agrees to be bound by the Rules of the ECCSD.
  • appoint a clearing bank to effect money settlement and provide three copies of a signed Clearing Bank Agreement. This agreement specifies the conditions the participant, the clearing bank and the Depository will follow relating to settlement activity with the Depository.
  • provide copies of the Resolution of the Board of Directors meeting, showing approval to become a participant of the ECCSD.

PDF Documents

Participants in the ECCSD must demonstrate that the entity can maintain sufficient liquid capital and make additional payments into a Participant Fund, based on the firm’s trading activity. The higher the trading activity, the greater the risk to the Depository, and the higher the required fund contribution by the participant.

Participants of the Depository are required to pay two sets of fees: (a) participant and account maintenance fees, and (b) transaction fees.

In addition, fines may also be imposed upon participants for violating the Rules and Procedures of the Depository. Fines are based on the level and frequency of violation.

In the event that an applicant is unable to meet any of the stipulated requirements, the services of a qualified Participant of the Depository can be utilised as a correspondent.

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