An investment advisor to the Securities Commission has asked the government to stop funding the Bahamas International Securities Exchange (BISX) – despite several interest groups requesting that funding continue – as the beleaguered exchange has proven to be a “financial failure” and is unable to generate meaningful revenue.
Shayne Davis, a registrant at the Securities Commission, said there is no legitimate reason why the government should continue to put public funds into another failed undertaking. He said the Minister of State for Finance James Smith should not be “seduced” by any arguments concerning the strategic importance of saving BISX.
“We already have several ‘strategically important’ national ventures which have cost the Bahamian taxpayer hundreds of millions of dollars over the years. And none of the private shareholders of BISX would support keeping any of those on the public dole,” he said.
“It is, therefore, duplicitous and hypocritical for them to propose that further public funds be wasted supporting BISX,” he added.
Mr Davis said the company should either liquidate or sell itself to another more capable group who could possibly revive it.
Mr. Davis said the concept of BISX has proven to be “fatally flawed” resulting in financial failure. He said the exchange has been unable to generate revenue because nobody needs it.
But there are those who disagree with him.
Minister of State for Finance James Smith told the Bahama Journal that Mr Davis’ statements “very misleading.”
Minister Smith reminded that the government recognised that BISX was in trouble, and as a result, put together a team to make recommendations to the government so that it can respond appropriately.
He said in the interim, the Central Bank, which assisted BISX to get started in the beginning, is simply keeping it afloat until the inquiry has been completed and the recommendations made. He said those findings will be made known in short order.
“So it’s not as though a decision has been made for the government to keep it afloat,” he said. “I think it’s very misleading. BISX’s basic problem is that the start-up cost was much too high and the level of activity in the local market is not sufficiently large to produce the kind of revenue to support BISX at this stage.
“But there are other ways and we’re looking to the report to say the way forward for BISX, whether it should stay in its current position, or whether it should be in another form or whether it should survive at all. But those answers will not be made until we’ve had the results of the recommendations of the study.”
However, Mr Davis expressed his concern that some of the individuals commissioned to prepare this report have already been on record supporting continued funding, in spite of “compelling arguments to the contrary.”
He said if private money cannot justify keeping the company alive, then there is no greater justification required of its request for funding from the government.
“Its private shareholders are unwilling to put sufficient additional equity into the company to keep it alive, and they have been unable to bring market activity to BISX sufficient to generate meaningful revenue,” he said.
However, Minister Smith pointed out BISX generates its own revenue, and said its shareholders have responded to the company’s financial woes by making more investments, as the original money is pretty much all gone now.
He said in the last few months, the Central Bank has been making some advances to BISX in order to keep it afloat.
For a number of years, BISX has been struggling to stay alive. BISX officials have said the exchange could collapse if the government does not offer financial assistance.
Officials had asked the government for $2 million to help support the exchange, but received significantly less that that.
The exchange had agreed to raise another $2 million.
By Rogan M. Smith, The Bahama Journal
