With both lead principals of Alliance Investments Management and Alliance Financial Services, Peter and Robert Chin having to go before the court to face criminal charges will investors scurry to withdraw their money thus impacting the viability of the Alliance brand?

The Chin brothers were due to be in court yesterday with the Crown laying its case but the date has now been pushed back to January with the Chins having their bail extended.

The accusations laid at both Peter and Robert Chin has elicited much chatter in business circles and speculation abounds as to what led to Alliance running afoul of the Bank of Jamaica Act, The Proceeds of Crime Act and other alleged breaches. 

Why weren’t certain foreign currency transactions correctly and fastidiously processed in accordance with regulatory requirements?

Investment and banking houses are built on reputation. Reputation is a vital component of a finance entity’s ability to inspire trust and improve customer retention rates.

“Character is like a tree and reputation like a shadow. The shadow is what we think of it; the tree is the real thing,” wrote Abraham Lincoln.

And so it goes for finance houses.

“The big lesson I learned: Don’t get complacent despite a successful track record. No one or no unit gets a free pass,” James Dimon, chairman and CEO of J.P. Morgan Chase, told the Wall Street Journal.

It must be made clear that Alliance Investments and Alliance Financial Services are two separate businesses operating in separate spheres. Alliance Investments is a licensed securities dealer.

If as the Chin brothers say, Alliance Financial Services met all requirements and didn’t knowingly commit any malfeasance then they must move quickly to ensure they are exonerated. The longer this drags out, the less confidence will be reposed in Alliance and investors demanding their money could create a run on the investment arm.

Lawyers will of course advise not to say anything that may incriminate or prejudice the case.

The Chin brothers built a good business and must do their utmost to protect it and those under their charge.

Any opportunity they get, they must protest their innocence if right is might.

Ross P. Buckley and Justen Nixon wrote: “The law is the dominant framework within which transactions occur. However, another important framework is that of reputation and the need all businesses have to enhance and preserve it.

“Reputation can be built through constant adherence to a mode of conduct or through the advertisement of particular qualities. Reputation need not have any correlation to actual past performance, although often it does.”

“In commercial transactions, parties may have an established history of dealings which leads each to form views of the others’ character. This continuing relationship may result in the establishment of trust, or an understanding between the parties with each being able to  rely on the other party to do what is necessary  to ensure the success of the transactions.”

The Bank of Jamaica moved quickly to suspend Alliance Financial’s remittance and cambio operations no doubt perturbed by the criminal charges brought by the Financial Investigations Division (FID).

This is a big blow to Alliance and other operators in that space will come under greater scrutiny.

If Alliance committed minor infractions or failed to meet the myriad rules and obligations common to finance houses, then by all means it should be fined, sanctioned and allowed to continue its business.

If that is not the case and this proves to be a case of conspicuously intolerable activity, then the law must prevail. The Proceeds of Crime Act must be seen to be effective and not just another inconsequential piece of legislation.

The IMF, in its latest Article IV Mission Statement on Jamaica, warned that the supervision of financial institutions needs to be strengthened.

It wrote: “Risks arise from concentrated ownership, related party and large group exposures and off-balance sheet positions. Even with proper separation between bank and nonbank group members, direct and indirect exposures could be a source of contagion.”

“Strong efforts are needed to finalise adoption of a legislative framework for the special resolution regime for the orderly resolution of distressed financial institutions and group-wide supervision and continue advancement with data gathering and analytics particularly of inter-institution linkages and cross-border exposures,” the IMF argued.