JSE sells three seats

Source: Financial Gleaner, June 22, 2001

THREE JAMAICAN companies, Grace, Kennedy & Company, Dehring, Bunting & Golding, and Capital & Credit Merchant Bank have been offered a seat on the Jamaica Stock Exchange (JSE) and could start operation as members of the council, as early as August - September. The companies were each offered one share of the JSE.

So said chairman of the JSE and managing director of Alpha Financial Services Roy Johnson at a press briefing on the trading floor of their Harbour Street, Kingston office.

However, only Capital & Credit Merchant Bank, through Ryland Campbell, received its share certificate which showed a par value of $200. Neither the JSE nor the individual new members would give the final price of the seat, which in other countries is a negotiated price over and above the par value of the share. This premium portion of the price of the seat may vary from one member to another.

DB&G had been to court over the issue of a seat on the JSE. In October 1992, DB&G wrote to the JSE seeking corporate membership for DB&G Securities. They also applied on behalf of Lexington Securities in February 1993. However, they questioned the JSE requirement that new members should have capital amounting to more than $20 million and petitioned the Fair Trading Commission. But at the end of January this year, the Court of Appeal handed down a landmark ruling that the Jamaica Stock Exchange was governed by the Securities Act and so the FTC had no legal right to interfere with its decision to increase its share capital to new members by $20 million.

CURRENT COST

Nonetheless it is believed that the current cost of a seat on the JSE will be higher than the $7.9 million paid by the last company, Alpha Financial Services in 1994. In addition, Alpha contributed $3.9 million to the compensation fund.

Mr. Johnson told the Financial Gleaner, "The announcement of the offer and acceptance of the three seats means that the new entrants have six months within which to commence operations but some could start as early as August - September".

Mr. Johnson said, "The new members are at different states of readiness and we do want a seamless start-up, no disruption in the market, no cannibalisation of staff from the brokerage houses".

Under company law, the JSE membership is limited to 20 companies or brokerage houses. Currently, 11 seats have been issued. Of the issued seats, 10 are brokerage houses, of which six are active and four are failed ones, whose shares are being held in trust by the JSE for sale subsequently, and it is those four seats that the JSE has offered to the three companies, with Jamaica Money Market Brokers (JMMB) tipped to get the other seat, a leading JSE source said.

REMAINING SEATS

The remaining seat was sold to an individual who subsequently died but by which time, the JSE rules had changed barring individuals from membership. Consequently, that share still exists and the JSE cannot acquire it.

The announcement of new members by the JSE yesterday, came as the stock market continued its bull run, with the index shooting up 1,300 points on trading of $113 million and a volume of 22 million shares. This followed a 1,512.39 points movement on Wednesday, crushing speculation that the market moved on news of the announcement of three new members. It is believed however, that the entry of new members is an indication that the stock market is in a dynamic mood and could influence trading.

The JSE, a not-for-profit company, is moving to demutualise its operations, which will see several changes in its structure. These include the separation of ownership from management, a change from 'not-for-profit' to 'for-profit', meaning that the JSE can distribute its profits to its shareholders, and unlimited membership. Mr. Johnson said, "We intend to demutualise the JSE and list it on the stock market, so that more Jamaicans can buy shares and participate in the company".

The JSE in its annual report for the year 2000, posted an operating loss before tax of $9.57 million, up on the previous year's loss of $1.39 million. Both cess and fee income rose coming from a combined total of $12.58 million in 1999 to $17.83 million in 2000. Expenses rose from $52.53 million in 1999 to $56.89 million last year. These resulted in a loss of $39.06 million before investment and other income last year, compared with $39.95 million in 1999. But with investment and other income (interest income) down from $38.55 million in 1999 to $$29.49 million last year, operating loss before tax was higher in 2000 at $9.57 million compared with approximately $1.4 million in 1999. The net surplus of the Group amount to $17.02 million up on $5.35 million in 1999. Of the surplus, $26.14 million belongs to the parent company and a negative $9.12 million for the subsidiary.

At its 24th annual general meeting yesterday, all six shareholders/members of the JSE who were retiring were re- appointed. They are Roy Johnson, chairman: Audrey Richards, deputy chairman; Christopher Berry, Hugh Croskery, Rita Humphries-Lewin, and Ed McKie. Retiring directors eligible for re-election to the three non-seatholders' seat are Caryl Fenton, Alvaro Casserly, and John Issa.