Mauritius: Advice on Drafting Securities Law
A request for technical assistance was received from the Mauritius Financial Services Commission (FSC), with the support of the Ministry of Industry, Financial Services and Corporate Affairs, to assist in finalizing the drafting of a new Securities Act in September 2004. This proposed Act would provide the basis for strengthening the regulation and supervision of the stock exchange and the market-related infrastructure as well as the issue and trading of securities; allow for the introduction of collective investment schemes; and provide for improved licensing and regulation of securities intermediaries and market participants. These plans were in line with the recommendations made under the FSAP conducted in 2002-03 and the core principles and standards of IOSCO.
This project resulted in a new securities law which was passed by the Parliament in March 2005. FIRST was able to react very rapidly to the recipient’s urgent need to meet the parliamentary timetable. The project was approved within six working days of receipt of the proposal, the consultant was procured and started work the following week.
At the time of the securities market in Mauritius was a rather static one but efforts had been made in the previous years to stimulate the growth of the market with the introduction of the central depository and clearing system and the automated trading system. There were 42 listed companies with a total market capitalization of Rs61,143 million (US$2.1 billion) and 75 over the counter companies with a market turnover of Rs44 million (US$1.5 million). In addition, there were 287 collective investment schemes with a net asset value of US$12.3 billion.
The existing legal framework for the securities market was characterised by a multiple of provisions set out under the Stock Exchange Act 1988, the Companies Act 1984 and various regulations made under these Acts. When the Companies Act 2001 was enacted, the prospectus and other related provisions of the Companies Act 1984 dealing with securities were not repealed but were retained under the Companies Act 2001. The Mauritius Government, at that time, announced its intention to introduce a Securities Bill that would replace the Stock Exchange Act 1988 and would incorporate the prospectus and related securities provisions remaining in the Companies Act 1984.
In June 2004, the FSC prepared working documents containing inter alia detailed policy proposals for a securities bill and regulations for collective investment schemes. While preparing the working documents the FSC had due regard to the local market conditions, the recent recommendations of the IMF/World Bank FSAP Report and the need to align the legislative proposals with international standards and principles, in particular with the IOSCO Objectives and Principles.
The Ministry of Industry, Financial Services and Corporate Affairs then issued the working documents to the stakeholders and the industry at large though a public consultation. The consultation process ended on 2 August 2004 and all comments and suggestions received were collated and analyzed.
The FSC requested technical assistance of a legal expert from FIRST, in collaboration with the internal staff of the Commission and the Attorney General’s Office, to advice on the Securities Bill prior to the subsequent stage of tackling the regulations that need to be framed under the main legislation.
- It was possible to deliver effective and rapid results because the recipient (Financial Services Commission) of Mauritius was a committed, well managed regulator with a clear mandate to deliver legislation strongly supported at the Government level.
- The FSC had a clear idea of what it wished to achieve and had reacted positively to the diagnosis provided by the FSAP process of the previous year. The FSC took the initiative to present FIRST with a well argued and informative project application.
- FIRST was able to react very quickly because it had established a panel of pre-qualified consultants that included individuals and firms with strong experience in securities laws and regulations.