As the COVID-19 pandemic continues to negatively impact the lives and livelihoods of many, the financial stresses being faced by the citizenry remains a reality. The latest Economic Bulletin Volume XXIII No. 2 July 2021, published by the Central Bank of Trinidad and Tobago, listed a weak demand for labour, an increase in retrenchment notices and a rise in food inflation to 5.1% from 3.2% in January, 2021i. The protracted nature of the current crisis caused individuals and householders to re-assess their finances including short-term loan repayments, funding for education and long-term investments e.g., in home ownership or new vehicle purchases. Beginning this week, we share a three-part series on “Getting Started with Investing”. In this article, we look at diversifying financial portfolios to include investments in the local securities market..
This week’s article focuses on financial statements and how to analyse them. A company’s financial statements provide information on its performance and this information is valuable to different types of stakeholders. Management is interested in assessing the success of its strategies and plans relative to its past, as well as forecasted, performance and comparatively to its competitors’ performance.
Employees are concerned with the company’s financial success since this affects their bonuses, job security and compensation. Investors utilise this information to determine the expected return on their investments. Broker-Dealers and investment advisers use financial statements to guide recommendations made to clients about whether to buy or sell the securities, such as equities and bonds, issued by that company.
The Trinidad and Tobago Securities and Exchange Commission (TTSEC) is responsible for the regulation of the local securities industry. There are several components to regulation, all of which need to be addressed in an efficient and competent manner to ensure the orderly growth and development of the securities industry. Over the period 2018/2019 the TTSEC received 14 complaints from investors. Some of these complaints are provided in the checklist diagram below.
The success and stability of the securities market is largely dependent on confidence in the industry. Investors, market participants and all other stakeholders should feel a sense of confidence that the market is effective and fair such that everyone’s interests are adequately protected.
Why are capital markets important?
Capital markets play a vital role in an economy, by matching borrowers with savers and their own respective risk appetites for financial instruments, with an aim to produce a profitable investment opportunity for both parties. Essentially, these markets bring those who hold capital and those seeking capital together and provide a place where entities can exchange securities for capital. Capital markets are important because they finance the economy, support economic growth, aid in the promotion of financial stability and manage risk. This week’s article focuses on the importance of capital markets, and the role of the regulator.
Investor protection is at the core of securities regulation. Investor protection is the ultimate outcome when integrity in the marketplace is upheld. Several requirements contemplated by the Securities Act 2012 (SA 2012), and the Trinidad and Tobago Securities and Exchange Commission’s (TTSEC) guidelines and policies, centre around ensuring that market participants act in the best interest of their customers/investors.
Within the principle of investor protection, is the inherent rights and responsibilities of investors. It is important that investors understand these rights and responsibilities prior to, and during the course of, conducting transactions in the securities market. In this continuing article on the ‘rights of an investor,’ (the first part can be accessed via the following link: https://www.ttsec.org.tt/publications-and-research/?_sft_category=articles), we highlight some of these rights and responsibilities.