Johnson and the Stock Exchange of BVI

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JOHNSON v. TRINIDAD & TOBAGO STOCK EXCHANGE

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Citation # TT 1989 HC 39

Country Trinidad and Tobago

Court High Court

Judge Hosein, J.

Subject Company law

Date April 14, 1989

Suit No. 6147 of 1988

Subsubject Securities regulation - Stock exchange refused to register appellant as a stock broker

- Appellant failed to sit and pass an examination set for him - Appeal - Whether stock

exchange had discretion to determine suitability for registration - Securities Industry

Act, 1981, ss.16, 18 - Finding of court that as the appellant met the requirements for

registration under ss. 16, 18 it was incumbent on the stock exchange to cause theappellant to be registered as a stockbroker subject to payment of the required fees.

Full Text Appearances:

Dr. F.H.W. Ramsahoye, Q.C. and Mr. Cowie for the applicant

Mr Ewart Thorne, Q.C., and Miss Simon for the respondent

HOSEIN Z. :- The securities Industry Act, 1981 (the Act) provides for establishment of

a StockExchange of Trinidad and Tobago and the regulation thereof, the

consolidation of the law with respect to the securities industry and for matters in

connection therewith.

By an originating summons dated the 29th November, 1988, filed pursuant to section

24 and section 75 of the Act, the applicant appeals against the refusal of the Stock

Exchange of Trinidad and Tobago (the StockExchange) to register him as a Stock

Broker contained in its letter dated 24th October, 1988.

Under the provisions of the Act, there is a list of approved Stock-Brokers set out in

the Third Schedule thereto, who, at the commencement of the Act are to be deemed

the initial registered Stock-Brokers, and among whom are one Patrick Kangalloo and

Winston Padmore who at all material times were registered Stock-Brokers and

members of the Board of Directors of the StockExchange (the Board).

NSON v. TRINIDAD & TOBAGO STOCK EXCHANGE - CariLAW... http://carilaw.cavehill.uwi.edu/results.aspx?AC=GET_RECORD

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The applicant's for application for registration as a Stock-Broker was made pursuant

to section 16 of the Act.

By section 16(1) which is itself subject to the provisions of the Act, the application has

to be made in writing and has to be proposed and seconded by two (2) members of

the Board (5.16(2). In the instant case the plaintiffs application was proposed and

seconded by the said Kangalloo and Padmore. Sub-section 3 is not applicable in this

matter; Sub-section 4 provides that:

It shall be in the application whether the applicant has professional or business

connections or substantial shareholding in any banking institution, insurance

company, management company of mutual funds, or trust company, and the Board

shall take such matters into account in determining whether or not to grant the

application".

By sub-section (5) it is stipulated that: where the Board is satisfied that the applicant

has complied with the requirements of this section and of any rules made under this

Act and is a suitable person to be registered, the Board shall cause the applicant to be

registered as a Stock-Broker, and shall upon payment of the prescribed fee issue to

him a licence to trade in the prescribed form.

Apparently, no rules have been made under the Act. Sub-section (6) provides that a

licence issued under section 16 shall be valid for one (1) year and shall be renewable

upon application.

By subsection (7), where the Board refuses to register an applicant, it shall notify the

applicant in writing of the reasons for so doing.

In this case the reason for refusal to register the applicant was his failure to sit and

pass an examination which the Board proposed to set for him subsequent to his

application. See the Boards letter dated the 24th October, 1988. in the Boards letter

of the 10th May, 1988 the Boards stance is made clearviz.,

.. the Board is of the view that an applicant for registration as a Stock-Broker who

fulfils one or other of the requirements of section 18 (f) might still be rejected by the

Board under section 16 (5) on the grounds that he may not be suitable person for

registration because of his lack of competence in relation to matters in which a Stock-

Broker is required to be versed.

A perusal of section 16 reveals that it deals broadly with the procedure for registration,

whereas section 18 prescribes the qualifications for registration. It is to be noted that

both sections are stated to be subject to the provisions of the Act and are accordingly

subject to the provisions of each other.

The difficulty which has arisen in this case lies in the relationship between section 16

(5) and section 18 (f) and in particular raises the question whether suitability under

section 16 (5) is to be evaluated by reference to section 18 of the Act itself or could beextended by an uncontrolled discretion vested in the StockExchange.

Before examining the submissions made by Counsel on both sides, it is convenient to

set out in full the text of section 18:

18. Subject to the provisions of this Act, every application for registration as a Stock-

Broker shall:

be a citizen of and ordinarily resident in Trinidad and Tobago, and shall be at least

twenty-one (21) years of age;


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be of good character;

not have external interests direct or indirect which may conflict with the conduct and

integrity of his business as a Stock-Broker;

intend to practise as a Stock-broker; as his prime occupation;

not be a person who has been suspended from dealing on or expelled from the

Trinidad and Tobago StockExchange or any otherStockExchange;

have had experience acceptable to the Board as a dealer in securities, or shall have

worked in an appropriate capacity in the office of a Stock-broker for at least three (3)

years, or shall be a person having qualified in any examination set by the Board or

having a recognised qualification in economics banking, law, accountancy, business

administration or secretarial practice and has also had at least two (2) years

experience in the office of a Stock-broker;

not have had a receiving or bankruptcy order made against him which remains

undischarged.

Dr. Ramsahoye for the applicant submits that suitability within the meaning of section16(5) is confined to the Board satisfying itself in its judgment that subsections (a) to

(g) of section 18 have been complied with by the applicant and that his connections in

terms of section 16 (4) would not disqualify him.

Attention was drawn to an earlier letter dated 15th February, 1985 from the Board

(See A.J.2) to the applicant in which he was notified that there was no failure on his

part to comply with section 18 (f) even though there were deficiencies in his

conversancy "with the principles and practice of investment counselling, the economy

and its impact on the market, member companies' operations as well as the principles

and practice of portfolio management." While that letter was in connection with an

earlier unsuccessful application by the applicant for registration, in the present appeal

there is nothing to show that the Board was relying on any failure of the to comply with

the provisions of section 18 and in particular subsection (f) thereof, and the matter has

proceeded on the basis that the applicant had satisfied that sub-section.

The next submission made on behalf of the applicant is that if the expression "suitable

person to be registered" under section 16 (5) involves additional qualifications to

those set out in section 18 (a) to (g), then that would be an invalid interpretation

because of the principle generalia specialibus non derogant. The argument ran that

Parliament had provided by section 18 (f) the various alternative qualifications which

it considered sufficient for registration. One alternative is an examination set by the

Board under section 18 (f) and it was not competent for the Board under section 16

(5) to purport to set an examination to determine suitability for registration if the

applicant has satisfied any one of the alternatives under section 18 (f), and is not

disqualified by section 16 (4) .

Further, it was submitted on behalf of the applicant that suitability has two elements,

namely, competence and good character and these are provided for in section 18.Thus for example, if a person has been suspended from dealing on or expelled from

the StockExchange or any otherstockexchange, he would be unsuitable (See

section 18 (e)).

It is clear, argued Counsel, that section 18 (a), (b), (c), (d), (e), (f) and (g) were what

Parliament had in mind as to suitability. Thus in October, 1988 the StockExchange

had no right to require the applicant to write an examination for two reasons:

there was no examination in existence at the date of his application;


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the applicant had an alternative qualification, namely he had worked in an appropriate

capacity in the office of a Stock--broker for at least three (3) years (See the second

alternative in section 18 (f) and paragraphs 1 to 7 of the applicants affidavit filed on

the 20th January, 1989. )

It was therefore submitted that the devising of an examination was ultra vires and was

based on a misunderstanding of the Act as is reflected in the penultimate paragraph of

the StockExchange letter of the 10th May 1988. A fortiori where the applicant had

previously applied and had not failed under section 18 (f) which itself provides for

examination but which at date of his present application was non-existent. Further, it

was argued that if section 16 (5) were to allow the Respondent to expand upon

section 18, the criteria for registration would become uncertain. The discretion of the

Board under section (16 (5) is to ascertain suitability by considering whether the

requirements in section 18 have been satisfied in their proper judgment. It is beyond

the power of the Board to extend the elements of suitability beyond those committed to

the Board by section 18 of the Act.

Mr. Thorne for the defendant argues that the provisions of section 18 of the Act

contain positive and negative aspects. The positive aspects are the minimum

qualifications required of an applicant in order that he be registered as a Stock-

broker. These are sub-sections (a), (b), (c), (d) and (f) of section 18. If an applicant is

disqualified by any one of the negative provisions of sub-sections ( c ) , ( e ) and ( g ),he may not be registered. With regard to sub-section ( f ) , Mr. Thorne concedes that

the qualifications stipulated therein are not cumulative, so that one of those would do.

However, says Mr. Thorne, the fulfilment of the affirmative stipulations of section 18

does not entitle the applicant to registration since section 18 itself is subject to the

provisions of the Act and consequently, subject to section 16. He draws attention to

sub-sections (1), (2), (3) and (4) of the section which deal with procedural matters.

Sub-section (5), however requires two things:

compliance with section 16 and any Rules made thereunder; and

that the applicant be a suitable person to be registered

It is not until the Board is satisfied of both that the Board shall cause an applicant to

be registered.

In this case there is no issue on the first requirement. Mr. Thorne contends that

section 16 (5) imposes a duty on the Board to ensure compliance as to formal

requirements, and a duty to assure itself of the suitability of the applicant and makes

section 18 (which would include the affirmative group of qualifications) subject to that

requirement of suitability. He agrees that an essential element of suitability is

competence but disagrees with Dr. Ramsahoye in so far as it appears to be suggested

by the applicant that section 18 is exhaustive of the elements of suitability and further

disagrees that all aspects of unsuitability are provided for in section 18. He argues the

terms of section 18 are different form the terms in which section 16 is cast, and

submits that section 16 (5) provides (unlike section 18) for specific and fully advertent

task of assessment and adjudication by the Board. It is said that in carrying out this

task the applicant's knowledge was found to be deficient in certain areas and he

stresses that the Board must ensure that stockbrokers let loose on the public arecompetent. Further, he points out that section 18 does not say where the Board is

satisfied as does section 16, nor does section 16 say where the applicant is

suitable by reference to section 18.

Even though the applicant has satisfied section 18 (f ), says Mr. Thorne, it would be a

dereliction of the Boards duty not to ensure that he is a suitable person to be

registered under section 16 (5). There is no provision for interview but the Board

conducted one since it must have discretion to determine suitability.

Finally, Mr. Thorne submits that suitability under section 16 (5) denotes suitability in all


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respects and does not refer only to qualifications under section 18 (f).

In my view, section 18 stipulates the qualifications for registration. I agree with Mr.

Thorne that the section deals with two types of requirements: first, there are positive

requirements and secondly, there are negative ones which would serve to disqualify

an applicant. But when one looks at the substance of the whole section, it is correct to

say that it deals with matters of competence of an applicant on the one hand, and

matters of character on the other. Dr. Ramsahoye says that matters in aggregate are

definitive if the suitability of an application for registration under section 16 (5) the

Board is given discretion to go outside the ambit of section 18. With great respect, I do

not agree with Mr. Thorne. It was very difficult to contemplate aspects of suitability

that are not comprised within section 18. In any event, Parliament has, in its wisdom,

stipulated in section 18 the qualifications sufficient for registration as a Stock-broker

which an applicant must have.

Section 16 is subject to the provisions of the Act and is accordingly subject to section

18 which itself is subject to section 16 and the provisions of the Act. Thus in my view,

suitability for registration under section 16(5) is referable and subject to section 18

and it is not open to the Board so to apply section 16 (5) to introduce or demand

qualifications dehors section 18. If that were permissible, it would mean that the Board

could, in a case where an applicant did not have one of the alternative qualifications

provided for in section 18 (f), set an examination for him under that sub-section todetermine qualification and another under section 16 (5) to determine suitability.

Both sides agree that while there is no specific provision for interview, the Board

vested with the power of adjudication and consequently it would have the power to

interview an applicant to see whether the procedural and other requirements of

section 16 have been met. Thus for example, the Board will have to determine the

matters in section 18 (c) by reference to section 16 (4) and viceversa, in order to

adjudicate upon matters in both sub-sections.

In my view, once an applicant has satisfied the provisions of section 18, once he has

one of the alternative qualifications in section 18 (f) ( and is conceded by Mr. Thorne

that the applicant has worked in an appropriate capacity in the office of a Stock-

broker for at least three (3) years), and once he is not disqualified by section 16 (4)

and has satisfied the other procedural requirements of section 16, then the Boardshall cause such applicant to be registered as a Stock-broker, and shall (upon

payment by him of the prescribed fee) issue to him a licence to trade in the prescribed

form. With reference to such an applicant it is not competent for the Board to set an

examination under section 16 (5) to determine suitability. When therefore, by letter of

the 24th October, 1988 the Board required the applicant to sit and pass such an

examination, it was, in my view, acting ultra vires by reason of misunderstanding and

misapplication of section 16 (5).

I agree with and uphold the submissions and arguments of Dr. Ramsahoye.

To construe section 16 (5) so as to give to the Board the power to set examination

there under notwithstanding that an applicant had one of the qualifications under

section 18 (f) would, in my view, not only conflict with the maxim generalia specialibus

non derogant, but would also render uncertain the qualifications for registration thatan applicant must have and further would give to the Board an uncontrolled discretion

not intended by the Act.

To my mind, the applicant having the qualifications for registration under section 18

determined the question of suitability for registration and having satisfied the other

requirements of section 16, it was incumbent upon the Board to cause the applicant to

be registered as a Stock-broker subject to the payment of the required fee and I so

direct.

It follows that the appeal succeeds. The Respondent must pay the appellants costs to


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Johnson and the Stock Exchange of BVI