Over the last two years, there have been several high-profile cases of fraud and scamming at Jamaican financial institutions; the Stocks & Securities Limited (SSL) scandal being the most prominent one.

A year later, there appears to be little resolution on the matter and none of the perpetrators of the fraud that saw investors lose millions of dollars have been convicted.

The SSL case has devolved into uncertainty as to who is ultimately responsible for investigating the matter and dispensing justice. It has become a protracted affair characterised by bureaucratic blunders. It has been widely reported that sprint legend Usain Bolt lost some US$12 million invested in SSL.

Though he has vociferously demanded that he be recompensed, that doesn’t appear to become a reality any time soon. Bolt joins hundreds of other investors in SSL trying to recoup their money in a situation that continues to be opaque.

Last Friday, Justice Batts ruled that regulator, the Financial Services Commission (FSC), would no longer manage the SSL debacle and that instead the insolvent SSL will now be managed by the appointed trustee Caydion Campbell.

What this now means is that there is uncertainty as to how the Office of the Director of Public Prosecution (ODPP)now proceeds with the possibility of further delays as to a resolution.

This is a mess that reflects badly on Jamaica’s financial sector and weakens the potency of the FSC. 

Opposition Spokesperson on Finance, Julian Robinson is calling for the Government to intercede and protect investors. He has to be careful here because the State cannot be expected to utilise taxpayers’ money to bail out investors who willingly made investments in a financial institution and were defrauded. Jamaica does not have the capacity for that. In the 90s, FINSAC, a bailout of local financial players cost the country 40 per cent of its GDP and it has taken a generation for the scars to heal.

It is incumbent on the local finance and investment houses to be regulated by robust institutions that insist on the appropriate compliance and governance frameworks.

Two years ago, Bitcoin was all the rage and FTX headed by Sam Bankman-Fried was one of the most successful companies in that arena. It turned out, he didn’t know what he was doing and US$14 billion disappeared with a million customers losing out.

Bankman-Fried was sentenced to 25 years in jail and those investors who lost out got their money back from the company, not the Government. The FTX situation came to a speedy resolution and was not drawn out like Jamaica’s SSL case.

To date about 1,230 SSL accounts have been refunded to the tune of J$15.4 billion from local equity and fixed-income securities. Still, there are 200 accounts missing some J$3 billion, including Bolt’s money.

Minister of Finance Dr Nigel Clarke has made his position clear, declaring, “Any recovery could only come by way of identification and pursuit of the proceeds of the fraud in accordance with Jamaica’s Proceeds of Crime Act (POCA)”  

“It looks like depressed account holders will have to pursue civil suits.” 

Will this be a similar situation to FTX where the company itself has to make good with the investors? Jamaica cannot pick up the tab if it doesn’t know what transpired here and who exactly is culpable. That is yet to be determined. Did Jean Panton have accomplices? What exactly did the senior executives know? If this was a failure by senior management why should the Government have to fork out billions? Where were the auditors here and how was this allowed to occur for so long?

This is not a situation like where the federal government and former US Treasury Secretary Henry Paulson had to bail out banks during the global financial crisis of 2008 to the tune of US$700 billion ( Troubled Asset Relief Program) to protect the economy and prevent global financial collapse. Nor is it akin to last year, when the US Government rode in to the rescue of local banks like First Republic Bank, Silicon Valley Bank and Signature Bank.

Reflecting on the 2008 bailout, Paulson said: “What I never was able to make the public understand was that the rescues weren’t for the banks. They were for the public. Every rescue, every bailout we did, I have no regrets because it was better than the alternative…The money we put out, prevented a collapse.” 

On the SSL situation, Prime Minister Andrew Holness assessed the situation correctly while speaking at the January 2023 Jamaica Stock Exchange (JSE) Capital Markets Conference saying, “Government will not socialise any debt and we will not socialise the failure of our banks to be prudential and to protect customers. This would send a very bad signal to financial institutions that the Government will cover their negligence.”

Financial institutions that run aground due to their own making cannot cry to the government for a bailout. It jeopardises the financial well-being of the country. A small open economy like Jamaica, such actions would decimate its economy and excuse the failures of those who should know better. SSL is one rogue entity that was grossly negligent and should pay the price. The government cannot parachute it out of its problems. This is not where the entire sector’ comes under an existential threat which can harm the Jamaican economy.

Holness continued: “There will be absolutely no political interference, no political power, no association. We want to get to the truth of this matter, to uncover it and expose  those responsible  and bring them to account and to secure justice for the victims.”

It would seem some way off before justice is secured for the  SSL victims. No one is quite sure what exactly transpired at SSL. The truth is shrouded and the Government needs to be appraised of the facts and have a full account of the fraud and skulduggery that took place. It cannot be shelling out money wllly nilly for the egregious errors of those who managed and controlled SSL. 

The shadow finance minister Julian Robinson is rightly indignant about the SSL imbroglio. It is a farce, a stain on the country and it has taken a year and a half and there is no sight of retribution.

Commenting on the move by Justice Batts to remove the FSC from managing SSL and replace it with an SSL trustee, Robinson said: “In Jamaica today, the statutory regulator of the financial services industry has been removed from managing a company at the centre of a major fraud scandal. This decision to place SSL back under the control of a private sector insolvency practitioner who was appointed by the same individuals responsible for its control and mismanagement before the FSC stepped in, raises serious questions about the effectiveness of our regulatory system. 

“The Government needs to act quickly to address the situation. This ruling sends a troubling signal to financial markets and investors regarding the capacity of Jamaica’s regulatory framework to handle crises within the financial sector.

“We need to know what steps will be taken to protect investors in Jamaica and ensure that our regulatory bodies are equipped to prevent and manage financial crises effectively. The public deserves clarity and assurance that their investments are secure and that robust mechanisms are in place to uphold the integrity of our financial sector.” 

Robinson is right about the proper mechanisms being in place and that the regulators should be allowed to effectively do their jobs but ultimately the institution has the responsibility to safeguard investors’ funds. Here investors must do their due diligence on where they house their money.  

SSL was negligent and remiss in its duties and responsibilities and it was expected that the FSC would clean up its mess. This latest decision does make the FSC appear as a toothless tiger. It must seek further clarity as to whether the work it has done to date will count for nought.