THE ANALYSTS of Taking Stock with Kalilah Reynolds say that while the Financial Services Commission’s (FSC) proposed amendments to the ‘Guidelines for Issuers of Securities’ are well intentioned, they will pose some problems for investors.

The Guidelines govern how companies and/or brokers develop, register and sell securities to finance their operations.

Among the FSC’s proposed amendments is a stipulation that will require public offers to remain open for at least three business days before closing. This comes against the backdrop of some IPOs in recent years, opening and closing on the same day.

The most recent example is EduFocal, which closed in just one minute.

EduFocal is the latest company to list on the Jamaica Stock Exchange’s Junior Market. The company’s relatively small offer closed early after being 230% oversubscribed. 

Wealth Advisor at Ideal Securities Brokers Limited, Orick Angus, noted that when offers open and close quickly, that gives fewer investors a chance to participate. He agreed that more investors should be given a chance to participate in offers, but said he does not believe having a mandatory open window is the right way to do so.

He said that keeping offers open longer will increase the number of investors, thereby decreasing the allocation of shares each investor is likely to receive.

The analyst recommended that more time be given between the publishing of the prospectus and the opening date of the offer. 

“I think a longer lead up time (to opening day) could make a huge difference,” said Assistant Manager of Private Equity at PROVEN Management, Julian Morrison. 

“We have to ensure that investors have the time to, not just to get the information but to digest the information because investing is heavily knowledge based,” he added.

Morrison said that investors should be given enough time to do their own research to not only understand the price of the stock they are buying, but also the industry that the company is in. 

Morrison also said that offers closing quickly should not be seen as a bad thing, as it indicates high demand which is most likely spurred by investors’ confidence in the company.

Angus added that a longer lead up time would also give brokers time to adequately assess the offer, so that they can advise customers in the best way.

No reserved pool for brokers‘unfair’

Meanwhile, another controversial proposed amendment would be to restrict brokers from having a reserved pool in the offer for both themselves and their clients.

However, some brokers have argued that this would not be fair.

Morrison said that while he understood the FSC’s likely intention to create an equal playing field where no investor has an advantage, he does not agree with the proposal.

“The fact of the matter is, if a broker is going to do the work to arrange and structure an offer, they should be able to, if they so choose and if their risk committee approves, be given the opportunity to participate in the offer,” Morrison said.

The FSC’s proposals are not set in stone as yet and the agency will be taking feedback until Friday, April 8. 

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