Questions require answers

The news that investors, including sprint legend Usain Bolt, have had their accounts raided at Stocks & Securities Limited (SSL), is alarming and has placed Jamaica’s  financial sector under the spotlight.

The international media is having a field day with world renown news organisations questioning the competence of Jamaican institutions.

A manager at Nat West in London told Our Today: “It’s inconceivable that Jamaicans of high net worth could invest with a non-AAA rated institution. Did SSL abide by compliance regulations? Were strong policies put in place? Usain Bolt must be inconsolable. This sounds like the Bernie Madoff of Jamaica.”

A well respected and leading business personality in Jamaica said: “There is a lot of talk and speculation out there and we will just have to wait for the facts to come out.

“It’s like a plane crash  – everything is hunky dory, until the crash, then everyone wants to know why did the plane crash? Who is responsible? You just have to wait till the black box is accessed and the investigators conduct thorough investigations.”

Still, a number of questions remain.

How were investors fleeced of their money at SSL? Who is advocating on their behalf? The Private Sector Organisation of Jamaica (PSOJ) has yet to make a statement and neither have any of the finance and business associations – the silence is deafening.

Kevin Tomlinson, of Business Recovery Services, has been put in place by the Financial Services Commission (FSC) to act as temporary manager. He has a very good reputation and is expected to do a very good job here.

Jamaicans will look at this and say, ‘if the great Usain Bolt can be in this predicament, what about little old me? These institutions cannot be trusted, and I am better off putting my money under the mattress-it’s safer there’.

With fraud taking place at Sagicor, NCB and now SSL, can Jamaican institutions be trusted?

In large part, yes. The larger the entity, with hundreds of people working there, the more it is prone to unscrupulous behaviour which is difficult to detect.

Other investors who have money at SSL will now be anxious and may very well decide to pull their funds, causing a run. Confidence is the watchword of finance houses and, once that goes, it’s all over.

Most investment houses ensure they have Blanket Bond Insurance from Lloyds of London to cover unforeseen events and give comfort and assurance to their investors. Did SSL have this in place

Segregated accounts should be distinct from clients’ accounts with the two never co-mingling.

Hugh Croskery, the face of the company, has a reputation as an honourable man, a man of his word. He built the brand on an ‘old school’ mantra which younger finance professionals deemed anachronistic.

He, together with chairman Jeffery Cobham, must come out with a fulsome statement, assuring investors and the Jamaican public that every effort will be made to get the investors their money back, even if personal assets have to be divested to make good. It is the right thing to do.

If an investor gives you their money in good faith, you are duty bound to see to it that, when required, it can be accessed readily.

How deep does SSL’s capital adequacy issues run and what did its managers past and present know? The level of culpability must be brought to light. Those who knew cannot now say, ‘I’m not with SSL’ and so absolve themselves.

The FSC must now scrutinise issues of capital adequacy.

The reason it has appointed a special auditor is because it is not satisfied with how the company is being run and its capital levels.

If SSL had the money to fix  this and cover the investors who had money stolen, they would have done so and avoided the public furore.

As it stands, it can’t. This will besmirch the brand and those associated with it.

Jean-Ann Panton has admitted stealing money, but not from Bolt and not the sums mentioned in the press. Something is awry here. She was also stealing after her father died.

Why were SSL’s compliance officers and auditors asleep at the wheel? Why didn’t the executive team and directors hold them to account?

This is a damning indictment on woeful mendacity and corruption at a Jamaican investment company.

It needs to be cleared up expeditiously and other security dealers should be calling for this because it is likely to bring on a contagion.

Risk ratios are instructive here.

In Jamaica, capital to total assets should be six per cent. Capital to adjusted assets should be 10 per cent.

The FSC’s average benchmark as it pertains to capital/risk weighted assets is 14 per cent.

As of June 30, 2022, there were 37 companies licensed as securities dealers. Of those 37, how many have adequate capital ratios?

There are many fine institutions in Jamaica that are not a part of this mess and will be distancing themselves from this drama. Mayberry has capital of J$20 billion and a capital risk  ratio of around 24 per cent.

Barita has one of the highest at 37 per cent, way above the average.

The SSL imbroglio demonstrates that quantitative and qualitative analysis is needed in Jamaica.

Investors must do their research and verify whether the investment house they will be giving their money to is well capitalised and its personnel are of sound character.

What is now clear is that the controls in place at SSL were weak.

The Jamaica Stock Exchange is yet to make a public comment. It must demand the capital levels of all brokerages that are listed.

The Securities Act states that a brokerage dealer must have cover insurance but does not stipulate the percentage of the account or amounts. This will have to be addressed.

It’s a pity what happened to Bolt here. Up to the 31st of October 2022, he had a balance of US$12.8 million in his account at SSL, only to discover it was depleted, leaving him with just US$12,000.

It would be interesting to find out how much capital SSL had when Bolt initially placed his money with it. This speaks to the issue of research.

What we are seeing in Jamaica is a growing trend of professional young women in finance houses defrauding their employers. Some say this is due to the “skyboxification” now taking place, everyone wants the glamourous life and they are prepared to resort to nefarious acts to get it.

Finance houses will now have to be more judicious in who they employ and keep an eye on their character traits.

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