Annual Report 2003 - ECSRCprev.ecsrc.com/PDFs/ECSRC_Annual Report 2003.pdf · 2015. 5. 28. · > To promote the growth and development of the capital markets. MISSION STATEMENT To

Annual Report 2003

Eastern Caribbean SecuritiesRegulatory Commission

> To license any person engaged in securities business and to monitor and supervise the conduct of such business by a licensee;

> To promote investor protection through promotion of the highest standards of professionaland other activities within the securities market;

> To maintain effective compliance and enforcement programmes supported by adequatestatutory powers;

> To promote the growth and development of the capital markets.

MISSION STATEMENT

To ensure integrity, probity, efficiency and transparency in the operations of the Eastern

Caribbean Securities Market and its participants, while facilitating market development.

ANNUAL REPORT OF THE ECSRC19 OCTOBER 2001 – 31 MARCH 2003

THE PURPOSES OF THE COMMISSION

TABLE OF CONTENTS

Purposes of the Commission

Mission

Organizational Chart 2

Chairman's Remarks 3

Annual Report 4 > 15

Auditors Report 2002 17

Financial Statements 2002 18 > 21

Notes to the Financial Statements 2002 22 > 26

Auditors Report 2003 29

Financial Statements 2003 30 > 35

Notes to the Financial Statements 2003 36 > 39

Reporting Issuers 40

Licensed Market Participants 41

1

2


ORGANISATIONAL CHART

Monetary Council

Commissioners(5 members)

Secretary to the Commission

Market RegulationExamination and EnforcementCorporate Finance Legal Advisory &

International Affairs

Disciplinary Committee

3

CHAIRMAN'S REMARKS

On 31 March 2003, the Eastern Caribbean Securities Regulatory Commission(the Commission) completed its first eighteen months of operation. Duringthis period, the global securities market experienced many regulatory andsupervisory challenges. In particular, the issues of terrorist financing, financialfraud and money laundering posed tremendous challenges to both the marketand regulators. In the face of such challenges, securities markets demonstrat-ed great resilience and regulators confronted the issues with strong enforce-ment action and enhancement of standards and best practices.

The Eastern Caribbean Securities Market (ECSM) as the most recent emerging market was confrontedwith its own challenges. Created at the beginning of the 21st Century, following significant growthin emerging markets in the nineties, the ECSM was established with modern features to ensure that it was able to compete with other markets. Advanced technology, a T+1 settlement cycle, a centralised depository and dematerialised securities were issues that even some developed markets were still tackling. On the regulatory side, a framework compliant with international standards and best practices was implemented. Finding the right balance between market development and regulation has been a challenge.

The Eastern Caribbean Securities Regulatory Commission has changed the landscape of the securities market and the business culture of public companies in the Eastern Caribbean CurrencyUnion (ECCU). This is evidenced by the approach of public companies to corporate governanceissues and greater emphasis on public disclosure. Directors of companies are now more aware of their responsibilities and the establishment of a public disclosure regime, equal to those in developed markets, has made companies more cognisant of the need to provide relevant and timely information to shareholders. Investors are also demonstrating greater interest in the affairsof companies but greater effort is required to raise awareness through investor education.

The Commission intends to play a significant role in investor education through public forums, lectures to community groups and schools, media programmes and by providing information on its website (www.ecsrc.com). The Commission is also working assiduously to make the publicdisclosure information from companies accessible to the public via its web based database system,the Eastern Caribbean Securities Information Network (ECSIN).

The responsibilities of the Commission have been entrusted to five Commissioners includingmyself. I have been very fortunate to have the support of a group of Commissioners with a wealthof experience and tremendous commitment. My gratitude is extended to my colleagues for thesupport that they have provided so far and I look forward to their continued support. I also wishto thank the Eastern Caribbean Central Bank (ECCB) for the technical and administrative supportprovided to the Commission through the staff assigned to the Commission. Their efficiency and professionalism must be commended.As we move forward with the development of the market, we will continue to depend on the support and cooperation of all market participants. Our commitment to consult with all playersin the market will be maintained. We look forward to the year ahead as we continue our collectiveefforts to build an orderly, efficient and transparent capital market.

Crispin SorhaindoChairman

Errol AllenDeputy Charman

Crispin SorhaindoChairman

Calvin RodgersCommissioner

Mignon WadeSecretary

Dunbar McIntyreCommissioner

Charles BrisbaneCommissioner

ECSRC COMMISSIONERS

5

OVERVIEWThe Eastern Caribbean Securities Regulatory Commission (the Commission) was established on

19 October 2001, shortly after what can possibly be considered as one of the most catastrophic

event witnessed in modern times and during a period of economic downturn in the global

economy. Spawned in the aftermath of the events of September 11, 2001 and at a period

of global economic uncertainties, the Commission was immediately faced with the challenge

of developing a regulatory approach that would facilitate activity in an emerging market

while ensuring that regulatory standards and best practices were adhered to. Created as

the regional body under the Securities Act 2001 to regulate the securities market in the

Eastern Caribbean Currency Union (ECCU), the Commission was also faced with regulating

a market with an investment culture of “buy and hold.” The Commission therefore had to

formulate a regulatory philosophy and regime that would create a robust securities market

backed by investor confidence, while at the same time encouraging market growth

and development.

The five Commissioners appointed by the Monetary Council to carry out the duties of the

Commission as outlined in the Eastern Caribbean Securities Regulatory Commission

Agreement 2000, have pursued a regulatory posture that balanced regulation with market

development. Notwithstanding, activity in the market has progressed slowly due to a high

level of liquidity in a bank centric financial system. In the new year, the Commission

will institute a public awareness campaign designed to stimulate activity as well as educate

the market on the regulatory framework.

In the absence of its own staff, the Commission delegated its technical and administrative

operations to the Eastern Caribbean Central Bank. However, final action on all matters

related to the operations of the Commission remains the sole responsibility of the

Commission.


4

7

Disclosure

(i)Review of Prospectuses

Persons desirous of offering securities to the public are required to submit a prospectus to

the Commission for review prior to publication. During the review period, one prospectus

was submitted to the Commission but was later withdrawn.

(ii)Continuing Reporting Requirements

Public companies whether listed on an exchange or not, are required to submit periodic

filings to the Commission. These include an annual updated registration statement (RS-1),

an annual financial report (ECSRC-K) and a semi-annual financial report (ECSRC-SA).

In addition, the Commission intends to introduce a quarterly financial report (ECSRC-Q)

in the next two years. This is to allow those companies that do not currently produce quarterly

reports, to structure their accounting systems to do so. These reports will be filed in the

Commission’s database, the Eastern Caribbean Securities Information Network (ECSIN) and

made available to investors. These reports are critical since they provide information,

which investors can utilise to evaluate companies in which they have invested or in which

they are interested in investing.

During the review period, the level of compliance with the continuing reporting requirements

was unsatisfactory; most companies have been delinquent in filing their reports. However,

the Commission is cognisant that this new reporting regime is a shift in paradigm for

companies and therefore continues to provide assistance to ensure compliance.


6

The Commission’s first eighteen months of operation focused primarily on establishing its

organisational structure and internal procedures, finalising legislation and rules to make the

securities market fully operational, registering public companies and certifying and licensing

market participants. Administratively, emphasis was placed on training the staff assigned

to carry out the work of the Commission and developing a website.

CORPORATE FINANCE The Corporate Finance Division is responsible for registration of issuers, review of prospectuses

and filings of issuers and supervision of collective investment schemes. During the review

period, this Division focused primarily on registering issuers and reviewing filings.

Registration of Public CompaniesAs at 31 March 2003, 30 of the 39 public companies in the ECCU had registered with the

Commission (see Appendix I). Of the nine unregistered companies, three were non-profit

organisations. The Commission continues to work assiduously to ensure full compliance

with this requirement.


9

the rules as part of the ECSE’s operations. Notwithstanding, final responsibility for matters

pertaining to the RGSM rest with the RDCC.

MARKET REGULATION, EXAMINATION AND ENFORCEMENTThis Division is responsible for reviewing applications for licence from prospective market

participants, conducting on-site examinations of market participants, market surveillance

and enforcement and certifying of potential licensees.

Licensing of Market ParticipantsDuring the review period, the Market Regulation, Examination and Enforcement Division

was engaged in reviewing applications for broker dealer, principal and representative

licences. At 31 March 2003, the Commission had granted eight broker dealer, 16 principal

and 17 representative licences. As the table below shows, Antigua and Barbuda has the largest

number of market participants followed by St Kitts and Nevis. There are no licensees in

Anguilla and Montserrat. (See Appendix II for a detailed listing of market participants)

Licensed Market Participants As at 31 March 2003


8

Investment ManagementThe Securities Act 2001 empowers the Commission to regulate collective investment

schemes (CIS) in the ECCU. CIS include unit trusts, investment companies or mutual funds,

investment contracts, investment programmes or any similar arrangement/scheme.

To date the Commission has not licensed any collective investment scheme. Several persons

have indicated an interest in establishing CIS and discussion is continuing with such persons.

The Commission is also in contact with the Dominica Unit Trust Corporation, which was

established prior to the commencement of the Eastern Caribbean Securities Market (ECSM),

to bring it under the ambit of the Securities Act. Currently, the company is in the process

of completing its application forms for submission to the Commission.

The Commission has received requests from a number of foreign CIS to operate in the ECCU.

However, a regime does not exist currently for the licensing/authorisation of foreign

schemes; such companies can only operate in this jurisdiction by complying with the same

requirements as a domestic scheme. The Commission as part of the regulatory development

programme will consider the establishment of a regime for foreign CIS for the ECSM.

Regional Government Securities Market (RGSM)The Regional Government Securities Market (RGSM) was established in November 2002

with the launch of a Government of St Kitts and Nevis EC$75 million 10-year bond.

The primary regulator for the RGSM is the Regional Debt Coordinating Committee (RDCC),

which is comprised of the Financial Secretaries of the ECCU member governments.

However, the securities issued on the RGSM are listed on the Eastern Caribbean Securities

Exchange (ECSE) and traded on the secondary market, which is regulated by the

Commission. Consequently, the RDCC and the Commission have signed an agreement to

collaborate on the regulation of the RGSM. The Commission will assist the RDCC with the

review of prospectuses for securities issued on the RGSM to ensure that there is full disclosure.

The Commission also assisted with the review of the RGSM rules and granted approval of


CountryAntigua & Barbuda

Dominica

Grenada

Saint Kitts and Nevis

Saint Lucia

Saint Vincent andThe Grenadines

Total

Broker Dealer2

1

1

2

1

1

8

Principal5

2

1

4

2

2

16

Representative7

2

1

4

2

1

17

11

The examinations had an overall success rate of 85 per cent2; 86 per cent for principals and

80 per cent for representatives. At 31 March 2003, of the 66 successful candidates in the

programme, 33 applied for and were granted licences to operate in the ECSM: 16 principals

and 17 representatives. The graph below provides an analysis of examination performance

by territory.

LEGAL ADVISORY The Legal Advisory Division is responsible for providing advice to the Commissioners and

other Divisions on legal matters and interpretation and application of the securities legislation,

reviewing and drafting amendments to regulations, drafting Commission rules and

agreements and assisting with the review of prospectuses and SRO rules.

RegulationsDuring the review period, the Legal Advisory Division assisted with the review of the

Securities (Uncertificated Securities) Regulations. These Regulations established the regime

for the transfer of securities without a physical certificate. The Division actively participated

in the review of the Securities (Discipline) Regulations and the Securities Act 2001.


10

Self Regulatory Organisations (SROs)The Eastern Caribbean Securities Exchange (ECSE) and the Eastern Caribbean Central

Securities Depository, as self regulatory organisations, assist the Commission with the

regulation of their members. To ensure that these institutions have the capacity to undertake

their functions as self regulatory organisations, the Commission has been busy reviewing

their rules, operations and procedures manuals. The Commission was also engaged

in reviewing the procedures of the Eastern Caribbean Central Securities Registry (ECCSR).

In addition, the Commission has been collaborating with these institutions to improve their

internal structures to make them compliant with international standards.

On-Site ExaminationThe Commission is yet to commence its on-site examination programme of market participants

and self-regulatory organisations. However, the Commission has scheduled examinations

of all market participants and self-regulatory organisations for the new year. Examinations

will be conducted on a rotational basis initially and on a risk-focused basis subsequently.

Market Surveillance and Enforcement During the review period, the Commission was active in market surveillance and enforcement.

A number of persons, who were unfamiliar with the Securities Act 2001, were found to

have violated the Act. However, these persons were very co-operative and the matters

were resolved.

ECSM Certification ExaminationsAs part of the ECSM Certification Programme, the Commission conducted five sets of

examinations and two sets of supplemental examinations for persons desirous of becoming

principals and representatives in the Eastern Caribbean Securities Market. The certification

examinations were preceded by a four-day preparation workshop hosted by the

Commission. Of the 74 candidates who participated in the examinations, 33 were

prospective principals and 41 were prospective representatives.


ADMINISTRATION AND HUMAN RESOURCE DEVELOPMENT TrainingTo ensure that the market is effectively regulated, emphasis was placed on staff training.

The staff assigned to undertake the work of the Commission attended the following courses:

> The United States Securities and Exchange Commission’s International Institute for

Securities Market Development;

> The International Law Institute’s Securities Market Programme. Attendance at this

programme was funded by the Caribbean Programme for Economic Competitiveness

(CPEC) based in St Lucia;

> The Toronto International Leadership Centre’s Financial Sector Supervision Programme

for Securities Supervisors.

WebsiteDuring the review period, the Commission was engaged in designing its website with the

assistance of moonflies.com, a St Kitts and Nevis web development company. The website

provides information on the Commission, licensed market participants and registered

reporting issuers, guidelines for applying for licences and application forms, instructions for

filing reports electronically along with the reporting forms. The site also provides access to all

securities legislation and Commission rules. The site can be accessed at www.ecsrc.com

ECSINIn accordance with the principles of the International Organisation of Securities

Commissions (IOSCO), for a securities market to be efficient, information must be timely

and widely disseminated. To ensure that the ECSM satisfies this principle, the Commission

has established a database to provide information to the market. The database, which

is known as the Eastern Caribbean Securities Information Network (ECSIN), maintains

information on reporting issuers, which market participants as well as investors can utilise

to analyse performance of companies. ECSIN will be made accessible through the Internet.

Investors and prospective investors will be able to access information on companies,


12

The Securities (Discipline) Regulations and the Act were amended primarily to provide for

the establishment of an independent Disciplinary Committee appointed by the Monetary

Council and to allow the decisions of the Commission to be reviewed by the Court.

In addition, the Division drafted the Securities (Minimum Capital) Regulations, which

outlined the capital requirements for market participants.

RulesThe following rules were approved by the Commission:

> Securities (Accounting and Financial Reports) Rules No. 1 of 2002

> Securities (Registration Statement) Rules No. 2 of 2002

The Securities (Accounting and Financial Reports) Rules were established to strengthen the

Commission’s reporting regime. The Rules provide for the submission of annual, semi-

annual, quarterly and material change reports to the Commission. The Securities

(Registration Statement) Rules provide for the submission of a registration statement to the

Commission by persons offering securities to the public and by all public companies on

an annual basis.

In addition to these rules, the Commission drafted for comment by the market, the

Securities (Private Placement) Rules. The rules seek to establish a regime for the offering

of securities by private placement. The Securities Act 2001 provides for the exemption of

securities by private placement from the prospectus requirements. However, the Act did

not establish the modality for the granting of such exemptions. The Securities (Private

Placement) Rules are intended to provide specific procedures for persons issuing securities

by private placement. The Commission has received several comments on the rules and

these will be incorporated in the revised rules. The Commission will continue to pursue

its policy of consulting stakeholders in the future by requesting comments on draft rules

and legislation.


13


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at anytime and from anywhere in the world by visiting the Commission’s website.

Currently, ECSIN is available to broker dealers but will be made available to investors shortly.

Membership in International OrganisationsThe Commission was granted full membership in the Council of Securities Regulators of the

Americas (COSRA) in February 2003. COSRA is a grouping of securities regulators in

North, South, Central America and the Caribbean. It was formed in 1992 and is actively

involved in the maintenance of the integrity of securities markets through coordination of

and cooperation in market surveillance, and the enforcement of market laws and regulations.

As a member of COSRA the Commission will benefit from resource capacity building

opportunities and will be positioned to collaborate with other securities regulators, in

implementing international standards and receive general assistance with the development

of the regulatory framework for the ECSM.

The Commission is also pursuing membership in the International Organisation of

Securities Commissions (IOSCO). IOSCO is the international body, which sets regulatory

standards and best practices for securities markets. Its membership is diverse with members

from developed and emerging markets.

PROSPECTSThe 2003/2004 year of operations will be challenging for the Commission. The focus

for this year will be on the Financial Sector Assessment Programme (FSAP) to be conducted

by the International Monetary Fund (IMF) and World Bank in the ECCU in September 2003.

The FSAP will review the regulatory standards and best practices in the ECCU

benchmarked by international standards. It will provide the Commission with an opportunity

to assess the securities market against international standards and develop mechanisms

to correct any deficiencies identified.

The review of the Securities Act 2001 will be emphasised to fill the lacunas and correct the

anomalies observed in the legislation. The weaknesses identified need to be addressed

urgently to avoid regulatory contretemps as the market expands. The Commission will also

need to review the securities legislation, if the policy makers agree to the ECSE’s proposal

to list foreign securities and allow membership of foreign intermediaries. This is a fundamental

change, which will require a significant revision of the regulatory framework.

Critical to the work of the Commission is to ensure that the investing public is well

informed and aware of events occurring in the market. Consequently, the Commission will

undertake a public awareness campaign to familiarise the market with the regulatory

framework for the securities market. As part of this campaign, the Commission will launch

its Annual Investor Education and Protection Week in October 2003.

At the administrative level, the Commission will be conducting on-site examinations

of all market participants and enhancing its interface with public companies to ensure

compliance with the continuing reporting requirements. To ensure that the functions

of the Commission continue to be executed effectively and efficiently, the emphasis on

training will continue. The Commission also intends to complete a five-year strategic

development plan to guide its future operations, regulatory approaches and modalities.


EASTERN CARIBBEAN SECURITIES REGULATORY COMMISSION

AUDITORS’ REPORT

REPORT OF THE AUDITORS TO THE PARTICIPATING GOVERNMENTS

We have examined the balance sheet of the Eastern Caribbean Securities RegulatoryCommission as at 31 March 2002, and the related statements of income and expenditure,and cash flows for the period 19 October 2001 to 31 March 2002. These financial state-ments are the responsibility of the Commission’s management. Our responsibility is toexpress an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. TheseStandard require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includesexamining , on a test basis, evidence supporting the amounts and disclosures in the finan-cial statements. An audit also includes assessing the accounting principles used and sig-nificant estimates made by management, as well as evaluating the overall financial state-ment presentation. We believe that our audit provides a reasonable basis for our opinion.

At the balance sheet date, the Commission’s total liabilities ($481,183) exceeded its totalassets ($365,027) by ($116,156). However, as explained in Notes 2 (a) and 7 (c) fundingwill be provided by the Participating Governments to ensure the continuity of theCommission’s operations.

On this basis, in our opinion, these financial statements present fairly, in all materialrespects, the financial position of the Eastern Caribbean Securities Regulatory Commissionas at 31 March 2002, and the results of its operations and its cash flows for the period thenended in accordance with International Accounting Standards.

Pannel Kerr FosterChartered Accountants

BASSETERRE - St Kitts24 July 2003

16 17

ECSRC PRESS CONFERENCE10 OCTOBER 2003

18

ECSRC FINANCIAL STATEMENTS2002

BALANCE SHEET

AS AT 31 MARCH 2002(Expressed in Eastern Caribbean Dollars)

ASSETS Notes 2002

Accounts Receivable 27,875 Fixed Assets 4 144,000Intangible Asset 5 193,152

TOTAL $365,027

REPRESENTED BY:

LIABILITIES AND DEFICIT

Accounts Payable 21,000Due to Eastern Caribbean Stock Exchange 6 257,011Due to Eastern Caribbean Central Bank 7 203,172

481,183

Deficit for the Period (Page 3) (116,156)

TOTAL $365,027

The attached Notes form part of these Financial Statements.

Crispin Sorhaindo L Mignon WadeChairman Secretary

STATEMENT OF INCOME AND EXPENDITURE

FOR THE PERIOD 19 OCTOBER 2001 TO 31 MARCH 2002(Expressed in Eastern Caribbean Dollars)

INCOME

Fees 149,000

EXPENDITURE

Operating Expenses (Schedule I - Page 5) 115,922Administration Expenses (Schedule II - Page 5) 149,234

265,156

DEFICIT FOR THE PERIOD (Page 2) $(116,156)

19


SCHEDULE I

OPERATING EXPENSES

Workshop and Examinations 38,776Commissioners’ Fees 30,000 Commissioners’ Meetings and Seminars 26,206Services 14,580Due Diligence 6,360

TOTAL (Page 3) $115,922

SCHEDULE II

ADMINISTRATION EXPENSES

Depreciation 72,000Amortization of Intangible Asset 48,288Professional Fees 5,000Corporate Logo 6,750 Advertising 16,161Miscellaneous 1,035

TOTAL (Page 3) $149,234

1620


STATEMENT OF CASH FLOWS


SCHEDULES TO THE FINANCIAL STATEMENTS


CASH FLOWS FROM OPERATING ACTIVITIES:

Deficit for the period (116,156)Add (Subtract) non-cash itemsDepreciation 72,000Amortization 48,288

Accounts Receivable (27,875) Accounts Payable 21,000

CASH USED IN OPERATING ACTIVITIES (2,743)

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of fixed asset (216,000)Intangible asset (241,440)

CASH USED IN INVESTING ACTIVITIES (457,440)

CASH FLOWS FROM FINANCING ACTIVITIES:

Due to Eastern Caribbean Stock Exchange 257,011Due to Eastern Caribbean Central Bank203,172

CASH PROVIDED BY FINANCING ACTIVITIES 460,183

CASH AT END OF PERIOD -

21


2- SIGNIFICANT ACCOUNTING POLICIES (cont’d)Excess of Revenue:Any excess of Revenue of the Commission for any financial year over the sum properlychargeable to its revenue account for the year shall be applied by the Commission forthe purposes of the Commission.

Deficits:Where any deficits arise on the operations of the Commission or is budgeted for in theEstimates of Expenditure of the Commission the Participating Governments shall providea subvention to the Commission to meet the deficit in such proportionas may bedetermined by the Monetary Council.

Income and Expenditure:Income and expenditure items are accounted for in the financial statements on theaccrual basis of accounting.

Foreign Currencies:All amounts are expressed in Eastern Caribbean Dollars.

Foreign currency transactions are accounted for at the exchange rates prevailing at thedate of the transactions. Gains and losses resulting from settlement of such transactionsand from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of income and expenditure. Such balancesare translated at period-end exchange rates.

Amortization of Intangible Assets: (See Note 5)An intangible asset, representing costs incurred on consulting, training, start-up andgeneral development of the Commission, is being amortized equally over five accountingperiods commencing in the financial period 19 October 2001 to 31 March 2002 andending 31 March 2006.

1622


NOTES TO THE FINANCIAL STATEMENTS


1- INCORPORATION AND PRINCIPAL ACTIVITYIncorporation:The Agreement establishing the Eastern Caribbean Securities Regulatory Commission(ECSRC) was made on the 24 November 2000. The Agreement has legal effect in eachmember territory as an annexure to the Securities Act. The Securities Act which governsthe operations of the ECSRC (hereinafter called the Commission) was subsequentlypassed in each of the member territories during the year 2001.

Principal Activity:The principal activity of the Commission is to provide for the protection of investors insecurities by regulating the securities market, exchanges and persons engaged in secu-rities business, and by regulating the public issue of securities and to provide for relat-ed matters.

The Commission commenced activities on 19 October 2001.

2- SIGNIFICANT ACCOUNTING POLICIESGoing Concern Assumption: (See Note 7)These financial statements have been prepared on the basis of accounting principlesapplicable to a “going concern” which assumes that the Commission will continue inoperation for the foreseeable future and will be able to realize its assets and di chargeits liabilities in the normal course of operations.

During the period under review, the Commission incurred an operating deficit and thisposition is not expected to improve in the short to medium term. However, under article26 (5) of the Eastern Caribbean Securities Regulatory Commission Agreement, 2000, in theevent of a deficit the Participating Governments have co mitted to provide a subventionto the Commission to meet the deficit in such pr portion as may be determined by theMonetary Council. If the “going concern” assumption were not appropriate for thesefinancial statments, then adjustments would be necessary in the carrying values of assets and libilities, and the reported revenues and expenses.



23


5- INTANGIBLE ASSET (See Note 2(d)) (cont’d)Fair Value of Financial InstrumentsThe fair value of a financial instrument is the amount for which an asset could beexchanged, or liability settled, between knowledgeable, willing parties in an arms-length transaction.

The fair values of the financial instruments of the Commission are considered toapproximate their book values.

Credit Risk:Credit risk is the risk of loss arising from a counterparty to a financial contract failing todischarge its obligations. The maximum credit risk exposure of the financial assetsrecognised in the balance sheet is represented by the carrying amounts of the financialassets.

6- DUE TO EASTERN CARIBBEAN STOCK EXCHANGE ($257,011)The amount due to Eastern Caribbean Stock Exchange represents expenses incurred onbehalf of the Commission. No repayment terms have been agreed upon.

7- RELATED PARTY TRANSACTIONSDUE TO EASTERN CARIBBEAN CENTRAL BANK ($203,172)In addition to the amount due and reflected in the balance sheet, the Commission has entered into an agreement with the Eastern Caribbean Central Bank (ECCB) which took effect from 19 October 2001 and shall run for a period of five (5) years from the commencement date subject to renewal on such terms and conditions as may be agreed by the parties.

Under the terms of the Letter of Agreement, the ECCB has assumed the followingresponsibilities pursuant to Article 20 of the Agreement establishing the Commission

1624




2- SIGNIFICANT ACCOUNTING POLICIES (cont’d)Fixed Assets:Fixed assets are stated at historical cost. Depreciation is provided on the straight linebasis at rates estimated to write off the assets over their expected useful lives as follows:

Computer Software 33 1/3%

3- TAXATIONUnder the Eastern Caribbean Securities Regulatory Commission Agreement, 2000Article 34 (8) (a), the Commission is exempt from any form of taxation.

4- FIXED ASSETSComputer System - At Cost 216,000Depreciation for period (72,000)

Net book value (Page 2) $144,000

5- INTANGIBLE ASSET (See Note 2(f))Cost incurred 241,440Amortisation for period ( 48,288)

Net Balance at end of period (Page 2) $193,152

Financial Instruments:Financial instruments of the Commission consist of accounts receivable and accountspayable.



25

1626

and with the approval of the Monetary Council on 18 July 2003:

Provide the Commission with research and administrative facilities and perform a numberof other specified miscellaneous services;

Make its amenities available to the Commission to facilitate the conduct ofCommissioners meetings; and

Maintain an account to facilitate the financial operations of the Commission, and provide to the Commission such funding assistance as may be authorized by the Monetary Council.

27



AUDITORS’ REPORT

REPORT OF THE AUDITORS TO THE PARTICIPATING GOVERNMENTS

We have examined the balance sheet of the Eastern Caribbean Securities RegulatoryCommission as at 31 March 2003, and the related statements of income and expenditure,accumulated deficit and cash flows for the year then ended. These financial statementsare the responsibility of the Commission’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. These Standard require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An audit includesexamining , on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

At the balance sheet date, the Commission’s total liabilities ($611,859) exceeded its totalassets ($246,164) by ($365,695). However, as explained in Notes 2 (a) and 7 (c) fundingwill be provided by the Participating Governments to ensure the continuity of theCommission’s operations.

On this basis, in our opinion, these financial statements present fairly, in all materialrespects, the financial position of the Eastern Caribbean Securities Regulatory Commissionas at 31 March 2003, and the results of its operations and its cash flows for the year thenended in accordance with International Accounting Standards.

Pannel Kerr FosterChartered Accountants

BASSETERRE - St Kitts24 July 2003

28 29

FOR THE YEAR 31 MARCH 2003(Expressed in Eastern Caribbean Dollars)

1 April 2002 19 October 2001 to to

31 March 2003 31 March 2002INCOME

Fees 61,250 149,000

EXPENDITURE

Operating Expenses (Schedule I - Page 6) 185,501 115,922Administration Expenses (Schedule II - Page 6) 125,288 149,234

310,789 265,156

DEFICIT FOR THE YEAR/PERIOD (Page 2) $(249,539) $(116,156)


1630

ECSRC FINANCIAL STATEMENTS2003

BALANCE SHEET

AS AT 31 MARCH 2003(Expressed in Eastern Caribbean Dollars)

ASSETS Notes 2003 2002

Accounts Receivable 29,300 27,875 Fixed Assets 4 72,000 144,000Intangible Asset 5 144,864 193,152

TOTAL $246,164 $365,027

REPRESENTED BY:

LIABILITIES AND DEFICIT

Accounts Payable 20,665 21,000Due to Eastern Caribbean Stock Exchange 6 293,370 257,011Due to Eastern Caribbean Central Bank 7 297,824 203,172

611,859 481,183

Accumulated Deficit (Page 4) (365,695) (116,156)

TOTAL $246,164 $365,027


Crispin Sorhaindo L Mignon WadeChairman Secretary

31


BALANCE SHEET

FOR THE YEAR ENDED MARCH 2003(Expressed in Eastern Caribbean Dollars)

1 April 2002 19 October 2001to to

31 March 2003 31 March 2002

CASH FLOWS FROM OPERATING ACTIVITIES:

Deficit for the period (249,539) (116,156)Add (Subtract) non-cash itemsDepreciation 72,000 72,000Amortization 48,288 48,288

Accounts Receivable ( 1,425) (27,875)Accounts Payable ( 335) 21,000

CASH USED IN OPERATING ACTIVITIES (131,011) (2,743)

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of fixed asset - (216,000)Intangible asset - (241,440)

CASH USED IN INVESTING ACTIVITIES - (457,440)

CASH FLOWS FROM FINANCING ACTIVITIES:

Due to Eastern Caribbean Stock Exchange 36,359 257,011Due to Eastern Caribbean Central Bank 94,652 203,172

CASH PROVIDED BY FINANCING ACTIVITIES 131,011 460,183

CASH AT END OF PERIOD - -


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STATEMENT OF ACCUMULATED DEFICIT



31 March 2003 31 March 2002

BALANCE - At beginning of period (116,156) -

DEFICIT FOR THE YEAR/PERIOD (249,539) (116,156)

BALANCE - At end of year (Page 2) $(365,695) $(116,156)



STATEMENT OF CASH FLOWS

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1- INCORPORATION AND PRINCIPAL ACTIVITYIncorporation:The Agreement establishing the Eastern Caribbean Securities Regulatory Commission(ECSRC) was made on the 24 November 2000. The Agreement has legal effect in eachmember territory as an annexure to the Securities Act. The Securities Act which governsthe operations of the ECSRC (hereinafter called the Commission) was subsequentlypassed in each of the member territories during the year 2001.

Principal Activity:The principal activity of the Commission is to provide for the protection of investors insecurities by regulating the securities market, exchanges and persons engaged in securitiesbusiness, and by regulating the public issue of securities and to provide for related matters.

The Commission commenced activities on 19 October 2001.

2- SIGNIFICANT ACCOUNTING POLICIESGoing Concern Assumption: (See Note 7)These financial statements have been prepared on the basis of accounting principlesapplicable to a “going concern” which assumes that the Commission will continue inoperation for the foreseeable future and will be able to realize its assets and dischargeits liabilities in the normal course of operations.

During the period under review, the Commission incurred an operating deficit and this positionis not expected to improve in the short to medium term. However, under article 26 (5) of theEastern Caribbean Securities Regulatory Commission Agreement, 2000, in the event of a deficitthe Participating Governments have committed to provide a subvention to the Commissionto meet the deficit in such proportion as may be determined by the Monetary Council.

If the “going concern” assumption were not appropriate for these financial statements,then adjustments would be necessary in the carrying values of assets and liabilities, andthe reported revenues and expenses.

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SCHEDULES TO THE FINANCIAL STATEMENTS


SCHEDULE IOPERATING EXPENSES


31 March 2003 31 March 2002

Workshop and Examinations 12,402 38,776Commissioners’ Fees 60,000 30,000Commissioners’ Meetings and Seminars 32,933 26,206Travel 9,647 -Services 67,330 14,580Miscellaneous 3,189 -Due Diligence - 6,360

TOTAL (Page 3) $185,501 $115,922

SCHEDULE IIADMINISTRATION EXPENSES


31 March 2003 31 March 2002

Depreciation 72,000 72,000Amortization of Intangible Asset 48,288 48,288Professional Fees 5,000 5,000Corporate Logo - 6,750Advertising - 16,161Miscellaneous - 1,035

TOTAL (Page 3) $125,288 $149,234


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2- SIGNIFICANT ACCOUNTING POLICIES (cont’d)Fixed Assets:Fixed assets are stated at historical cost. Depreciation is provided on the straight linebasis at rates estimated to write off the assets over their expected useful lives as follows:Computer Software 33 1/3%

3- TAXATIONUnder the Eastern Caribbean Securities Regulatory Commission Agreement, 2000 Article 34 (8) (a), the Commission is exempt from any form of taxation.

4- FIXED ASSETS 2003 2002Computer System - At Cost 216,000 216,000

Depreciation - brought forward 72,000 -Charge for period 72,000 (72,000)

Balance carried forward 144,000 72,000

Net book value (Page 2) $72,000 $144,000

5- INTANGIBLE ASSET (See Note 2(f)) 2003 2002

Cost incurred 241,440 241,440Amortisation to date (96,576) ( 48,288)

Net Balance at end of period (Page 2) $144,864 $193,152

Financial Instruments:Financial instruments of the Commission consist of accounts receivable and accountspayable.

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2- SIGNIFICANT ACCOUNTING POLICIES (cont’d)Excess of Revenue:Any excess of Revenue of the Commission for any financial year over the sum properlychargeable to its revenue account for the year shall be applied by the Commission forthe purposes of the Commission.

Deficits:Where any deficits arise on the operations of the Commission or is budgeted for in the Estimates of Expenditure of the Commission the Participating Governments shallprovide a subvention to the Commission to meet the deficit in such proportionas maybe determined by the Monetary Council.

Income and Expenditure:Income and expenditure items are accounted for in the financial statements on the accrual basis of accounting.

Foreign Currencies:All amounts are expressed in Eastern Caribbean Dollars.

Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of income and expenditure. Such balances are translated at period-end exchange rates.

Amortization of Intangible Assets: (See Note 5)An intangible asset, representing costs incurred on consulting, training, start-up and general development of the Commission, is being amortized equally over fiveaccounting periods commencing in the financial period 19 October 2001 to 31 March2002 and ending 31 March 2006.

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Under the terms of the Letter of Agreement the ECCB has assumed the followingresponsibilities pursuant to Article 20 of the Agreement establishing the Commissionand with the approval of the Monetary Council on 18 July 2003:

Provide the Commission with research and administrative facilities and perform a numberof other specified miscellaneous services;

Make its amenities available to the Commission to facilitate the conduct ofCommissioners meetings; and

Maintain an account to facilitate the financial operations of the Commission, and provide to the Commission such funding assistance as may be authorized by theMonetary Council.

1638




5- INTANGIBLE ASSET (See Note 2(d)) (cont’d)Fair Value of Financial InstrumentsThe fair value of a financial instrument is the amount for which an asset could beexchanged, or liability settled, between knowledgeable, willing parties in an arms-length transaction.

The fair values of the financial instruments of the Commission are considered to approximate their book values.

Credit Risk:Credit risk is the risk of loss arising from a counterparty to a financial contract failing to discharge its obligations. The maximum credit risk exposure of the financial assets recognised in the balance sheet is represented by the carrying amounts of the financial assets.

6- DUE TO EASTERN CARIBBEAN STOCK EXCHANGE $293,370 (2002 = $257,011)

The amount due to Eastern Caribbean Stock Exchange represents expenses incurred on behalf of the Commission. No repayment terms have been agreed upon.

7- RELATED PARTY TRANSACTIONS DUE TO EASTERN CARIBBEAN CENTRAL BANK $297,824 (2002 = $203,172)

In addition to the amount due and reflected in the balance sheet, the Commission has entered into an agreement with the Eastern Caribbean Central Bank (ECCB) whichtook effect from 19 October 2001 and shall run for a period of five (5) years from the commencement date subject to renewal on such terms and conditions as may be agreed by the parties.

39

40

AnguillaNational Bank of Anguilla Ltd Anguilla Mortgage Company LtdNational Investment Company Anguilla Ltd

Antigua and BarbudaAntigua Printing & Publishing Ltd.Antigua Commercial Bank

Commonwealth of DominicaDominica Coconut Products LtdDominica Electricity Services Ltd (DOMLEC)Dominica Brewery & Beverages LtdDominica Unit Trust Corporation

GrenadaGrenada Electricity Services Limited (GRENLEC) RBTT Bank Grenada Limitedonas Browne & Hubbard LimitedGrenada Breweries LimitedNational Commercial Bank of GrenadaLimitedGrenada Co-operative Bank Ltd.

MontserratBank of Montserrat Limited

Saint Kitts and NevisS L Horsford & Company LtdEastern Caribbean Home Mortgage Bank(ECHMB) St Kitts-Nevis-Anguilla Trading &Development Company Ltd Cable & Wireless St Kitts & Nevis LtdSt Kitts-Nevis-Anguilla National Bank LtdCarib Brewery (St Kitts & Nevis) LimitedCarib – Com LtdBank of Nevis LtdRBTT Bank (SKN) Ltd

Saint LuciaEast Caribbean Financial Holding CompanyLtd. (parent)St Lucia Cooperative Bank Ltd Windward and Leeward Breweries LtdSt Lucia Electricity Services Ltd (LUCELEC)

Saint Vincent and the GrenadinesSt Vincent Brewery Ltd


APPENDIX I

Registered Reporting Issuers as at 31 March 2003


APPENDIX II

Licensed Market Participants as at 31 March 2003

Antigua BarbudaInvestment Bank

Antigua CommercialBank

National MortgageFinance Company of Dominica

Republic Finance and Merchant Bank

Bank of Nevis

St Kitts Nevis AnguillaNational Bank

Bank of St Lucia

National CommercialBank (SVG)

Jo-Anne LovellF L Thomas AnthonyCarolyn Philips

M Bernard GardnerGeoffrey Joseph

Ralph Blaize Al Anselm Monelle

Darrell Nunes

Rawlinson IsaacHanzel Manners

Arthur AnthonyGallowayWinston Hutchinson

Sharmaine RosemondJean Francois SonSon

Keith InnisJacqueline Quashie

Jo-Anne LovellF L Thomas AnthonyCasroy James

Dorothea Blackman-BrowneOsmond GoreBarbara MartinSharon Nathaniel

Marilyn Edwards Dawn Yankey

Tarlie M Francis

Hanzel MannersLisa Jones

Desilu Smithen Marlene Nisbett

Trevor LamontagneSharmaine Rosemond

Nandi Williams

Antigua & Barbuda

Commonwealthof Dominica

Grenada

St. KItts & Nevis

St. Lucia

St. Vincent &the Grenadines

Country Broker Dealer Principal Representative

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Documents

Annual Report 2003 - ECSRCprev.ecsrc.com/PDFs/ECSRC_Annual Report 2003.pdf · 2015. 5. 28. · > To promote the growth and development of the capital markets. MISSION STATEMENT To