Protecting 'the Investing and Usually Naïve Public': The Securities Act of Jamaica
| Author | Bryan Sykes |
| Profession | Justice |
| Pages | 296-328 |
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PROTECTING ‘THE INVESTING
AND USUALLY NAÏVE PUBLIC’:
The Securities Act of Jamaica
Bryan SykesIntroduction
According to US Circuit Judge Wilbur Clarke, ‘the fallacious theory
that Congress enacted existing securities legislation for the protection
of the broker-dealer rather than for the protection of the public’ was
to be rejected. He concluded that ‘[i]t has long been recognized by
the federal courts that the investing and usually naive public needs
special protection in this specialized eld’.1 So despite the controversy
in academic circles over whether it is advantageous to regulate the
securities market, 2 many governments have decided that it is desirable
to do so. e Jamaican government is no exception and in 1993 passed
the Securities Act.
e Act is the primary statute governing the issuing of, and dealing
in, securities in Jamaica and regulates all aspects of the securities
market, ranging from who can issue and deal in securities, to giving
the regulator enforcement powers. e statute also creates a number
of criminal oences and it is these oences which will be examined in
this chapter.
e oences reect the view that manipulation of the markets
by (a) the use of deceptive, fraudulent schemes and devices; (b) the
dissemination of false or misleading information; and (c) omitting
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Protecting ‘he Investing and Usually Naïve Public’
to state material facts is harmful and should be outlawed. e crimes
under the Act are designed to ensure that dealing in securities takes
place in a market free from manipulation and in an environment where
the market price of any security is the result of genuine (not contrived)
interaction between supply and demand. e Act therefore criminalises
activities such as (1) conduct intended or likely to create a false or
misleading appearance of active trading of a security;3 (2) conducting
two or more transactions with intent to induce other persons to sell,
purchase or subscribe for securities;4 (3) making or disseminating
information that is false or misleading in a material particular;5 (4)
making or publishing a statement or forecast which the maker knows to
be misleading, false or deceptive with intent to induce another person
to deal in securities;6 (5) circulating or disseminating of information
that the price of a security will or is likely to rise or fall;7 (6) employing
any device, scheme or artice to defraud any person in connection with
the purchase or sale of any securities;8 and (7) dealing in any securities
while in possession of information that is not generally available. 9
In addition to proscribing certain kinds of conduct, the Act seeks to
prevent the unscrupulous and the not-so-competent from working in
the securities market. In order to enhance the reputation and integrity
of the securities industry, prospective licenses must meet prescribed
minimum standards, that is to say, they must meet ‘t and proper’
requirements.10 Indeed, persons cannot act as investment advisers or
dealers in securities without the requisite licences.11
Cases from Australia, the United Kingdom and, in particular, the
United States of America will be utilised in examining the oences
created by the Act. ere is sucient similarity in the statutory
provisions of the US and Australia and those of Jamaica, at least at the
conceptual level, to permit cases from those jurisdictions to inform the
analysis of the Jamaican statutory oences.
A likely signicant issue in the interpretation and application
of sections 46–49 is the extent to which, if any, the legislators have
brought the jurisprudence developed by the US Courts into Jamaican
law since a reading of sections 9 and 10 of the US Securities Exchange
Act of 1934 reveals that the similarity in wording to sections 46–49 is
too close to be accidental. is fact, coupled with the discussion to
RISKY BUSINESS: Perspectives on Corporate Misconduct
298
follow about the meaning of securities, makes it possible to suggest
that the legislature intended to import the jurisprudence of the US. As
tempting as this conclusion is, caution should be exercised because the
Jamaican context may compel a dierent interpretation from that of
the US courts. Nonetheless, it is likely that US cases may prove quite
persuasive as has already occurred.
Structure of chapter
is chapter is divided into two parts. e rst deals with the
regulatory oences, that is, doing proscribed acts without the relevant
registration and licences. In this rst part, the main feature that will
be highlighted is the breadth of the denition sections which make
it dicult to engage in any kind of dealing in any type of security
without being licensed.
e second part deals with the more substantive criminal oences
which are all directed at preventing market manipulation in its
various guises. In discussing these oences a modied taxonomy of
Avgouleas12 will be used. It is not being said that this is the only way in
which the oences may be analysed but the classication permits easy
understanding, thereby enhancing an appreciation of the underlying
principles on which the oences rest, as well as the specic kinds of abuse
that the particular oence is targeting. Dr Avgouleas groups the oences
as follows: (a) information-based manipulation; (b) manipulations
based on articial transactions; and (c) price manipulations.13 e rst
two categories will be used with this modication: the expression false
transactions will be used to include Avgouleas’s categories (b) and (c).
Broadly speaking, false transactions cover instances where there is no
change in benecial ownership (Avgouleas’s articial transaction) as
well as transactions in which there is an actual change in benecial
ownership but these transactions are staged or ‘set piece’ transactions
designed to create a false or misleading impression with respect to the
market for the particular security, and to that extent are not real and
are therefore false. A transaction may be analysed, depending on the
circumstances, as either an information-based or a false transaction or
both. Indeed as will be shown, in any particular scheme, the perpetrators
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