OPINION: Guyana Stock Exchange: too much accommodation made for public companies

Last Updated on Thursday, 1 February 2024, 14:59 by Denis Chabrol

by GHK Lall

I read the comments of Chairman Nikhil Ramkarran, in the article titled, “No public companies listed on cash-strapped Guyana Stock Exchange; Banks-DIH must first list on Stock Exchange to get additional benefits -GSE Chairman”, Demerara Waves, January 31).  Interesting was the first word that came to mind, with strange and intriguing following in quick succession.

Before proceeding, I inform readers that I have had exchanges with Mr. Ramkarran on a couple of occasions regarding the business of the people.  He is of sound mind.

Now I admit to being drawn to Mr. Ramkarran’s words, “There is no local company in Guyana that is officially listed on the stock exchange and that includes Banks DIH. All they are, is traded on the stock exchange.”  

Given access to trading rights, but not listed, is startling.  How could this be?  Who was/is using whom?  What was the thinking that led to such a condition? What I would call an accommodation that has now worked against the interests, possibly visions, of the sole local Stock Exchange?  There is a clashing gear somewhere in there; a gap of some considerable degree, at the very least.  Trading is a byproduct, one of the privileges of listing; and listing is a coveted badge that usually signals corporate arrival and standing.  I am taken aback that a company of the caliber of Banks-DIH, and other similarly situated business blue-chips in Guyana are operating on the Stock Exchange platform, but without the binding connection of listing.  Listing is what opens all doors, and there cannot be, or should not be any trading facility without listing.

What probably began as some sort of ‘friendly’ consideration (gentleman’s arrangement, maybe) to give local companies trading exposure, and some level of additional corporate credibility, has now run its course.  My humble recommendation to Chairman Ramkarran is that efforts be initiated to put a halt to that setting.  Under proper legal and regulatory, of course; and with timely and proper stakeholders’ consultations.  The Stock Exchange shouldn’t continue, as before.  Having said that, I think I have a fair understanding of why Guyanese companies have seized the opportunity to trade under the flag of the Guyana Stock Exchange, but balk at stepping forward and applying for listing.

The first has to do with money, as in fees that must be part and parcel of listing.  But surely, several million dollars (Guyana currency) cannot be a problem for the likes of Banks-DIH and its commercial peers, with me taking the liberty of including those entities lower on the corporate totem pole.  After all, no one is talking about mum and pops and corner shops, but prestige Guyanese companies of storied pedigree, and enduring power as proof.  My position is that money is not a problem that stands in the way of listing.  Being listed on the rolls of a Stock Exchange comes with other requirements and conditions, besides the payment of fees that can, at times, feel a tad on the heavy side.

There are reporting and disclosure requirements that are integral aspects of listing on a reputable Stock Exchange.  For example, listing requirements on the New York Stock Exchange (NYSE) were much more stringent than those of the National Association of Securities Dealers (NASD).  I point out that, in July 2007, the SEC approved the merger of the NYSE and NASD regulatory arms into what is now known as FINRA (Financial Industry Regulatory Authority).  For another example, the listing requirements of the blue-ribbon NYSE are higher and tougher than that of the Cincinnati Stock Exchange, or the Vancouver Exchange.  Here there is the Guyana Stock Exchange, and my second recommendation to Chairman Ramkarran is that it should remain that way: alone and head and shoulders over all others that may be contemplated.

Returning to reporting requirements, these routinely include (or ought to) components related to finances, corporate structure, and details about senior corporate officers.  In addition, internal control systems, contingency plans, audit reports, and a calendar that incorporates annual delivery and disclosures of material developments.  Public Companies is just what the name implies, one in which members of the public invest their trust, and their money.  Trading in the public domain on a Stock Exchange, a national one, is an extension of the responsibility due to those who already own shares, or are thinking of engaging in trading to obtain some and, hence, a partial ownership interest.

It is my belief that these filing and disclosure requirements are what is proving to be prohibitive to the step of listing on a proper Stock Exchange.  When the Securities Laws of 1933 and 1934 were first passed, the hue and cry was that it was the end of the world.  The stock promoters and boiler room operators and new issue solicitors were leery of any kind of oversight that would cramp their style and their club.  It is why I have difficulty in looking favorably at emerging development(s) about a separate stock exchange.  It is better to put heads together and work for a new and improved Guyana Stock Exchange that could serve as a standard and a beacon.

I think that some overhauling is needed.  But any company that wishes for an open market and open forum for its shares to trade, as in really trade freely, has to be listed first, deliver all that is required upfront, and adhere thereafter to all that was agreed to, all that stood above the signed dotted line.  The company has a prestige relationship.  The investing public, as such exists, is given some reassurance.  The final contribution on this issue about listing is simple.  Public companies are not what are called “Pink Sheets” business entities in America, nor are they ‘Penny Stocks.’  It is time that they conduct themselves in a different way.  The Guyana Stock Exchange may not be so cash-strapped at the end of all this.

A note to readers: I have authorized Dennis Chabrol and Demerara Waves to append what follows at the end of this article.

The contributor is a former Chartered Financial Analyst (CFA) charter holder, and also the one-time holder of the following Wall Street Securities credentials:

Series 3 -Futures

Series 4 – Options

Series 7 -Securities

Series 8 -Branch Supervision

Series 14 –Compliance Supervision

Series 24 –Securities Principal

Series 27 -Financial and Operations Principal

Series 52 –Municipal Securities

Series 63 -State Securities Regulations (Blue Sky regs)

Series 65 -Financial Investment Adviser