Jan. 24, 2006 — After a lull of more than a year, the establishment of a stock exchange in the U.S. Virgin Islands is once again receiving attention.
On Monday, Gov. Charles W. Turnbull issued an executive order creating a task force to study the feasibility of establishing the exchange.
In January 2005, members of the minority caucus put forth the idea as part of their economic agenda. Gov. Turnbull also mentioned the exchange's potential in his 2005 State of the Territory speech.
The idea has been promoted as a possible substitute for the flight of Economic Development Commission companies from the territory. Although government officials have tried to put a positive spin on changes to the EDC program, many companies in the program are leaving the islands. (See "Delegate Sends Hopeful Message About EDC Program".)
Kapok Management was the latest to announce its intention to depart. Kapok was the company that first drew federal attention to the possible abuse of the program. (See "IRS Agents Shut Down EDC Beneficiary Kapok".) Although there were no major convictions of partners in the operations, an accountant did plead guilty to charges. A source close to Kapok said that the taint of the investigation and the instability of the EDC program led to the company losing money and, in the end, its decision to leave the Virgin Islands. Kapok once had 30 full-time employees on St. Croix; the number of employees had recently dropped to 10.
Tom Bolt, an attorney whose firm represents EDC companies, is upbeat about both the proposed stock exchange and the EDC program.
Concerning Turnbull's executive order and Sen. Roosevelt David's advocacy in the former minority proposal, Bolt said Tuesday, "What they want to do is attract capital to the territory, which is good."
Bolt also doesn't see the end of the EDC program. He said, "When the regulations come through, we will have a stronger, better EDC program." He added, "I don't know anyone down here that wants to see a good part of our economy controlled by people vacationing down here."
The new EDC regulations are focused on tightening residency requirements and also determining what income is eligible as source income for companies. (See "Progress on EDC Hinges on Several Provisions".)
In his press release announcing the executive order, Turnbull said it is in keeping with his 2005 State of the Territory pledge.
"The creation and implementation of such an initiative may prove vital to the continued growth of our economy. The establishment of a stock exchange creates an environment for business, attracting investors and industries, which could be of immense economic worth to the territory," he said.
The press release adds, "The territory could easily become the financial capital of the Caribbean and position itself to be the financial leader of the region."
David said Tuesday that the stock exchange would function the same as the world's best known one – the New York Stock Exchange.
"It would have over-the-counter and Internet trading," he said.
He said that other small locations such as Bermuda, Barbados, Jamaica, Trinidad, Antigua, and St. Kitts have stock exchanges.
David said that all kinds of companies could trade on the exchange. He said this would include huge multinational companies as well as smaller V.I.-based ones.
David said the stock exchange would help solve some of the recent residency problems that arose with the EDC program.
"This would give the EDC companies the opportunity to generate their revenue here," he said.
He said he envisions that the stock exchange would be set up on St. Croix, mainly because it already is home to companies that provide high-tech communications.
The executive order states the task force will be composed of nine members, including the director of fiscal and economic recovery implementation, who shall serve as chairman. The governor will appoint, for a two-year term, the eight remaining members, who will be selected on the basis of their expertise — four members are to be residents of St. Croix and the four others will be residents of the district of St Thomas/St. John.
The task force will be charged with studying laws and regulations relating to the establishment of the stock exchange and will assist the governor in reviewing and researching all aspects of establishing an exchange.
The task force is to submit its report to the governor within six months.
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