The lo­cal Se­cu­ri­ties and Ex­change Com­mis­sion on Mon­day sent the Busi­ness Guardian in­for­ma­tion on stan­dards to guide dis­clo­sure in the me­dia re­leas­es, ad­ver­tise­ments and pro­mo­tion­al ma­te­r­i­al of Col­lec­tive In­vest­ment Schemes (CIS) and mu­tu­al funds.

In or­der to keep mar­ket ac­tors abreast of reg­u­la­to­ry is­sues, the T&T Se­cu­ri­ties and Ex­change Com­mis­sion (TTSEC) takes this op­por­tu­ni­ty to pro­vide guid­ance on pub­lic an­nounce­ments and pro­mo­tion­al ma­te­r­i­al re­leased by CIS.

CIS are an im­por­tant com­po­nent of T&T's cap­i­tal mar­ket, ac­count­ing for $39.5 bil­lion, or 15 per cent, in funds un­der man­age­ment (FUM) out of a to­tal cap­i­tal mar­ket val­ue of $263.4 bil­lion, as at Jan­u­ary 31, 2013.

With­in re­cent times, the Com­mis­sion has found it nec­es­sary to re­mind var­i­ous CIS is­suers of the com­mis­sion's guide­lines in re­spect of state­ments con­tained in me­dia re­leas­es and ad­ver­tise­ments.

Our guide­lines on Pro­mo­tion Pre­sen­ta­tion Stan­dards for Col­lec­tive In­vest­ment Schemes have been pub­lished since 2005 and pro­mot­ers of CIS are en­cour­aged to ad­here to the stan­dards es­tab­lished for the pub­li­ca­tion of me­dia re­leas­es, ad­ver­tise­ments and pro­mo­tion­al ma­te­r­i­al ex­hibit­ing per­for­mance, which are the key mar­ket­ing tools in the pro­mo­tion of se­cu­ri­ties is­sued by CIS.

In fact, any dis­clo­sures made in these pub­li­ca­tions, ought to be fair and ac­cu­rate and per­sons who in­vest in these prod­ucts should be pro­vid­ed with all the nec­es­sary in­for­ma­tion that will en­able them to make in­vest­ment de­ci­sions that are suit­able to their in­di­vid­ual needs.

An in­vestor's search for in­for­ma­tion on an in­vest­ment prod­uct may be im­pact­ed by:

�2 the sig­nif­i­cant amount of time and mon­ey re­quired in in­for­ma­tion gath­er­ing;

�2 a lack of so­phis­ti­ca­tion nec­es­sary to per­form an analy­sis; and

�2 a dif­fi­cul­ty in un­der­stand­ing the tech­ni­cal jar­gon in a prod­uct of­fer­ing.

An in­vestor will more than like­ly re­ly on per­for­mance in­for­ma­tion pro­vid­ed in ad­ver­tise­ments and pro­mo­tion­al ma­te­r­i­al pro­vid­ed by CISs.

There­fore, in­com­plete, in­ac­cu­rate or mis­lead­ing state­ments pro­vid­ed in such pro­mo­tion­al ma­te­r­i­al can mean dire con­se­quences for in­vestors and clients of CISs.

In some cas­es, in­for­ma­tion pro­vid­ed may not be de­lib­er­ate­ly mis­lead­ing, but may be con­strued as such if oth­er crit­i­cal in­for­ma­tion is not pro­vid­ed in or­der for prop­er in­ter­pre­ta­tion of the re­turns used to eval­u­ate per­for­mance.

The Com­mis­sion's Guide­lines are con­sis­tent with in­ter­na­tion­al best prac­tice and have the fol­low­ing main ob­jec­tives:

�2 To de­vel­op rules for me­dia and oth­er re­leas­es that will pro­hib­it the pub­li­ca­tion of ad­ver­tise­ments that mis­lead po­ten­tial and ex­ist­ing in­vestors and/or omit rel­e­vant in­for­ma­tion; and

�2 To en­cour­age the stan­dard­i­s­a­tion of cal­cu­la­tion of per­for­mance of CISs in or­der to fa­cil­i­tate a more mean­ing­ful com­par­i­son and as­sess­ment of CISs across the coun­try.

Our ex­pec­ta­tion is that the adop­tion of those stan­dards will pro­vide po­ten­tial and ex­ist­ing in­vestors in CIS with an as­sur­ance that the dis­clo­sures in ad­ver­tise­ments and pro­mo­tion­al ma­te­r­i­al con­cern­ing scheme per­for­mance should be fair and ac­cu­rate. The com­mis­sion us­es sev­en gen­er­al stan­dards, de­vel­oped by the In­ter­na­tion­al Or­gan­i­sa­tion of Se­cu­ri­ties Com­mis­sions (IOSCO) as a ba­sis, but al­so draws up­on stan­dards of oth­er ju­ris­dic­tions and reg­u­la­to­ry bod­ies.

Sum­marised be­low are the gen­er­al stan­dards re­quired by the com­mis­sion (though pro­mot­ers are not pre­clud­ed from ex­ceed­ing those pre­scribed):

1. Fun­da­men­tal prin­ci­ples

These prin­ci­ples re­late to the con­tent of state­ments is­sued by pro­mot­ers of CIS, where the ma­te­r­i­al must be fair, ac­cu­rate and com­plete and there should be no mis­rep­re­sen­ta­tion of in­vest­ment per­for­mance. Pro­mot­ers should al­so give due re­gard to their au­di­ence and en­sure the suit­abil­i­ty of pro­mo­tion to that par­tic­u­lar au­di­ence.

2. Dis­claimers and lo­ca­tion of a prospec­tus

Me­dia re­leas­es and pro­mo­tion­al ma­te­r­i­al should con­tain a state­ment re­gard­ing the need to re­fer to a CIS's prospec­tus, which con­tains im­por­tant in­vest­ment in­for­ma­tion and where it can be found. Ad­di­tion­al­ly, present per­for­mance da­ta should con­tain a dis­claimer re­gard­ing the like­li­hood of vari­a­tion in per­for­mance of the fund over time.

3. Fees and ex­pens­es

In­vest­ment scheme per­for­mance in­for­ma­tion should be net of all fees and ex­pens­es (for ex­am­ple, man­age­ment fees) paid di­rect­ly or in­di­rect­ly by each in­vestor and should be dis­closed in pre­sen­ta­tion in­for­ma­tion.

4. Cal­cu­la­tion of re­turns

In­for­ma­tion is pro­vid­ed in the guide­lines on per­for­mance (gen­er­al, an­nu­alised and cu­mu­la­tive) re­turns that are ac­cept­able to be pub­lished and the form of such pub­li­ca­tion. There is a re­quire­ment for con­sis­ten­cy in the cal­cu­la­tion of the net as­set val­ue (which must be in ac­cor­dance with what is set out in the prospec­tus and same ac­count­ing prin­ci­ples used in de­ter­mi­na­tion of as­set and li­a­bil­i­ty val­ues in cal­cu­la­tion of net as­set val­ues), the use of stan­dard­ised for­mu­lae (re­turns cal­cu­lat­ed with use of method­ol­o­gy set out in prospec­tus) and the need for dis­clo­sure should there be any changes.

5. Rel­e­vance of per­for­mance da­ta

In a sit­u­a­tion where re­leas­es of per­for­mance in­for­ma­tion are pro­vid­ed to users, it should in­clude such in­for­ma­tion to the end of the most re­cent­ly com­plet­ed cal­en­dar quar­ter.

6. Con­sis­ten­cy of pro­mo­tions

In­for­ma­tion pre­sent­ed in me­dia re­leas­es and oth­er pro­mo­tions should be con­sis­tent with that of the prospec­tus filed with the com­mis­sion and should in­clude the in­cep­tion date of the scheme.

7. Bench­mark­ing

In­vestors should be able to de­ter­mine/eval­u­ate the per­for­mance and risks of the CIS through the use of bench­mark mar­ket in­dex con­sis­tent with the scheme's in­vest­ment poli­cies and ob­jec­tives. Should there be no bench­mark in­for­ma­tion avail­able, ad­ver­tise­ments may in­clude in­for­ma­tion on the per­for­mance of the mar­ket sec­tor con­sis­tent with the CIS' in­vest­ment poli­cies and ob­jec­tives.

An im­pli­ca­tion of the Se­cu­ri­ties Act 2012

In ac­cor­dance with sec­tion 90(1) of the re­cent­ly passed Se­cu­ri­ties Act 2012, if a com­pli­ance re­view (un­der Sec­tion 89) re­veals that a reg­is­trant or self-reg­u­la­to­ry or­gan­i­sa­tion, is com­mit­ting/con­tra­ven­ing or about to com­mit/con­tra­vene any pro­vi­sion of the Act, by-laws or guide­lines, the com­mis­sion may di­rect a per­son to take such mea­sures nec­es­sary to rem­e­dy the sit­u­a­tion.

Where the com­mis­sion is of the view that ad­her­ence to the guide­line is in the pub­lic in­ter­est, a per­son fail­ing to take mea­sures so di­rect­ed com­mits an of­fence and is li­able on con­vic­tion on in­dict­ment to a fine of $500,000 and to im­pris­on­ment for two years.

This ap­plies to per­sons who fail to com­ply with is­sued guide­lines of the com­mis­sion and does not ap­ply to draft guide­lines.

The com­mis­sion will con­tin­ue to pro­vide reg­is­trants with rel­e­vant up­dates on as­pects of the new act and their re­spon­si­bil­i­ties un­der the leg­is­la­tion.

We will al­so take the op­por­tu­ni­ty via this medi­um and oth­er pub­lic in­for­ma­tion chan­nels to re­mind reg­is­trants of ex­ist­ing pro­vi­sions and guide­lines to en­sure that ad­e­quate dis­clo­sure is made to in­vestors to en­able them to make in­formed de­ci­sions.