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The Revised Retail Repurchase (Repo) Agreement Reform

The Financial Services Commission (FSC) has enhanced the regulatory and supervisory framework which governs retail repurchase agreement (repo) transactions in Jamaica through the Securities (Retail Repurchase Agreements) Regulations, 2014. Specifically, effective August 17, 2015, all securities purchased under a retail repurchase agreement will be held in trust by the Jamaica Central Securities Depository Trustee Services (JCSDTS) Limited and not with securities brokers/dealers such as VM Wealth Management (VMWM).

According to the FSC this move which forms part of the Government’s National Reform Strategy is in an effort to reduce the risk of losses to retail repo clients in the event of a disruption in the functioning of the sector or the failure of a securities broker/dealer.

For clarity on the revised repo agreement we have provided a list of Frequently Asked Questions (FAQs). If you need additional information please contact any of our Client Relationship Officers or Wealth Advisors at 876-960-5000 or via email at advice@vmwealth.com.

FREQUENTLY ASKED QUESTIONS (FAQs):

    1. What is the revised retail repo agreement?

    The revised retail repo agreement is part of the Government of Jamaica’s (GOJ’s) financial sector reform strategy to reduce the risk of loss to clients who invest in retail repurchase agreements (repos), should securities dealers fail to repay client funds. This affects the treatment of the assets used to secure repo investments. Securities dealers such as VM Wealth Management will no longer hold securities; they will now be in the custody of an independent trustee Jamaica Central Securities Depository (JCSDTS) Trustee Services Limited. According to the Financial Services Commission (FSC) this decision is as a result of the Government of Jamaica’s national reform strategy, to reduce the potential risk of loss associated with retail repos, should there be disruption in the functioning of the sector or an individual entity. Under this revised structure, in the event of a disruption, the trustee will be able to liquidate the securities and use the proceeds to settle obligations of investors.

    1. How will the main regulations of the revised retail repo structure directly affect me?

    • As a result of the new regulations, all existing and new retail repo clients will be required to sign the revised Master Retail Repurchase Agreement (MRRA) which outlines the terms and conditions of the repo contract.

    • All retail repo clients must open accounts with the JCSDTS to facilitate the custody of the securities and provide us with a copy of their Government of Jamaica Taxpayer Registration Number (TRN), if they have not already done so, as this is mandatory for the opening of an account with the JCSDTS. If you do not currently have a TRN, please visit the Tax Administration Jamaica (TAJ) website at www.jamaicatax.gov.jm for information on how to get your TRN. Each client/s will be given a unique JSCSDTS account number which will be different from your VMWM retail repo account number. This JSCSDTS number will be unique account number which will enable you to independently monitor your transactions through the JSCDTS online portal.

      • Please note that if all requirements are not met in order to transition to this new arrangement by the due date of August 2015, your investment will be transferred to another Victoria Mutual Wealth Management Limited (VMWM) product

    • Minimum Transaction Size - investors now need to have a minimum of J$1,000,000 or USD $10,000 to invest in a retail repurchase (repo) agreement.

    • Funding currencies – retail repo agreements will continue to be facilitated in Jamaican (J$), United States (US$) and Canadian (C$) dollars, British Pounds (£) and Euros (€).

    • Only a maximum of four (4) persons, that is, 1 primary and 3 joint account holders can open a retail repo account. Presently no change has been made for retail repo accounts held in Canadian dollars, British Pounds or Euros, once your investment satisfies the minimum amount of J$1M or the foreign currency equivalent of US$10K

    1. When will this revised retail repo structure become effective?

    The transition of investors with retail repos to the new structure is slated for June 2015. The JCSDTS Limited will hold the assets in “trust” as of August 2015. All securities dealers must be compliant by August 31, 2015.

    1. Are there fees/charges associated with the revision?

    At this time there are no fees or charges as a result of the revision. However in the future there may be processing fees due to any impending charges imposed by the JSCDTS on securities dealers.

    1. Will the revised structure affect the interest I earn on my repo account?

    There has been no information stating that interest rates on repo accounts will be affected. However do remember that interest rates are usually affected by market conditions.

    1. I already have an Equity JCSDTS number. Why do I need a new one?

    The JCSDTS processes equity transactions separately from repo transactions and as a result you will need two separate numbers. Please bear in mind that your retail repo JCSDTS number will be linked to your retail repo account.

    1. Under the revised agreement in what types of securities will my money be?

    invested and can I choose the type security that my money is invested in?

    Your money will continue to be invested in securities as charted in the FSC’s regulations. However you will not be able to choose the type of security. You will be allocated the allowable GOJ and investment grade securities based on availability.

    1. Will the revised agreement affect where I get my retail repo account statement(s)?

    VMWM will continue to provide your account statements after it matures. Do remember, as mentioned in question 2, you will be able to access your account through the JCSDTS online portal.

    1. May I contact the JCSD Trustee Services with any questions or concerns that I may have about the management of my retail repo account?

    You may contact them at 967-3271 and ask for the JCSD Trust Services responsible for retail repos. Our Client Relationship Officers or Wealth Advisors are also available to at 876-960-5000 or via email at advice@vmwealth.comto answer any question/s concerning your account

    1. What if I do not want to be a part of the revised retail repo structure?

    If you do not wish to be part of the revised retail repo structure, you can choose to invest your funds in another VMWM product. You can to discuss your options with Client Relationship Officers or Wealth Advisors are also available to at 876-960-5000 or via email at advice@vmwealth.comto answer any question/s concerning your account.

    Please be advised that if you do not wish to be part of the revised retail repo structure, based on the regulations you cannot hold a repo account with a securities dealer.

  • Financial Services Commission Retail Repo Reform Fact Sheet
  • FSC Communique



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