The Fidelity Group of Companies will continue to list mutual funds on the Bahamas International Securities Exchange, despite the exchange’s $2.3-million dollar loss over two years, and its need for a monthly government “life support” injection of $50,000.
Amid reports that the future of the exchange is uncertain, Fidelity does not believe BISX will fail.
Over the past six months, some of BISX’s 45 shareholders invested $125,000 in the exchange, but with little expectation of repayment in the foreseeable future.
Taking a positive approach, Fidelity vice-president Jim Graham said not only does his company believe that BISX will get “back on track,” but that the mutual funds on the market are steadily growing.
He said there are companies listed on the exchange that continue to do well.
There are 18 companies on the exchange, with a capital of $1.4 billion.
The exchange is a 100-per-cent private-sector entity, launched at the beginning of 2000 with $5 million of private capital funding.
Before October, 2002, the only public-sector financial support provided to BISX was a credit of $213,250, in December, 1998, by the Central Bank of The Bahamas to finance the development of computer software applications, and a Government grant of $72,500 that year for the same purpose.
According to financial experts, BISX has been struggling for some time and it appears the board is no closer to developing a plan that will stabilise it.
Negative reports about BISX began surfacing when start-up costs and losses during its first two years of operations resulted in it approaching the Government in mid-2001 to provide substantial financial assistance.
However, in its newsletter, Fidelity Forum, released March 18, Fidelity also pointed to financial loss and incompetence.
Minister of State for Finance Senator James Smith, in an effort to address trestructuring and refinancing of BISX, got the Central Bank of The Bahamas last March to commission a study by capital-markets experts to review all aspects of its operations, reassess the exchange’s viability, and identify public policy measures necessary to enable BISX to become viable. A committee was then appointed to quantify what public-sector support would be needed for the future of the stock exchange.
The committee has until month’s end to submit its report to Senator Smith.
“One thing is clear, the committee’s task is not to save BISX (or its wealthy shareholders), but rather to save a system of trading securities, an essential element for an active capital market,” Fidelity said.
It said a continuation of BISX, the only exchange licensed by the Bahamas Securities Commission, may or may not assure that objective.
Whatever solution the committee ultimately puts forward, “its creation emphasizes that the Government is committed to creating a viable capital market, as necessary both for our domestic economy and our reputation as an international financial centre,” Fidelity said.
Fidelity also recommends:
* A change in the way bonds and treasury bills are offered to the public, so that they would initially be sold to broker/dealers for onward distribution to customers, and then traded on the exchange.
* Adopt a quote-driven trading system, similar to that provided by a few of the broker/dealers prior to the inception of BISX.
* Assuring that when public companies (BaTelCo and others) are privatised, a large portion of their shares or bonds will be distributed through broker/dealers to the public and listed for trading on the exchange.
* Relaxation of exchange control to permit Bahamians to buy high-grade foreign securities through the mechanism of Bahamian Depository Receipts that could be traded on the exchange.
* Initiate an aggressive campaign at the ministerial level, to visit the U.S. Securities & Exchange Commission, the New York Stock Exchange, the London Stock Exchange, and similar bodies in Canada and elsewhere to set up arrangements for trading foreign securities with international counterparts, which has always been a key objective of BISX but has never been realised.
By Lisa Albury, The Nassau Guardian
