Editorial | SSL arrests not for the money

In parsing the circumlocutory remarks of bosses at the investigative agencies that were involved in last weekend’s choreographed arrest of three former officials of Stocks and Securities Limited (SSL), it is possible to conclude that, at some time in the future, other people will join Jean-Ann Panton in being charged for actually stealing money from clients of the collapsed brokerage house.

In February 2023, nearly three years ago, Ms Panton, who was a senior client services manager at the company, was charged with several counts of theft, forgery and falsification of accounts.

To be clear, this is not what happened with respect to SSL’s founder and principal Hugh Croskery; Mr Croskery’s daughter, Sarah Meany; and SSL former CEO and Mr Croskery’s one-time business partner, Zachary Harding.

The accusations against them are essentially for technical breaches relating to how they functioned in the securities sector, such as not having a dealer’s licence to operate in the securities sector; issuing securities without applying to do so, or registering the specific security with the FSC; dealing in foreign currency or foreign currency instruments without the imprimatur of the central bank; and, in Mr Harding’s case, failing to lodge the charter, names of directors and beneficial owner(s) of his Barbados-registered investment firm, Delta Capital Partners, with Jamaica’s Registrar of Companies, as is required by the island’s Companies Act.

These claims, if true, would be significant breaches. Yet, it would say as much, or perhaps more, about the incompetence and failures of the regulatory system in which SSL operated as it does about the trio who have been charged.

MORE EMBARRASSING

Indeed, the situation would be more embarrassing for the fact that for more than a decade before SSL’s implosion towards the end of 2022, the company was under active scrutiny, and at times tutelage, of the Financial Services Commission (FSC) because of its poor financial health and lax internal controls. In other words, any such flouting of the rules should have been obvious to the regulators.

In that regard, last weekend’s events should bring renewed focus to former Finance Minister Nigel Clarke’s promise of a so-called twin-peaks approach to the regulation of the securities sector. The Bank of Jamaica (BOJ), the central bank, would regulate the prudential side of all banking and finance/securities-related businesses, while the FSC would be transformed to a Financial Services Conduct Authority (FSCA), overseeing market conduct and consumer protection.

Since Dr Clarke announced this approach in 2023, the BOJ and the FSC have cooperated on the oversight of the securities sector, ahead of the new regulatory arrangement being put fully into place.

This newspaper assumes that either the draft bill, or the drafting parameters for the legislation, has been shared with the securities sector for their input before the law goes to Parliament.

But this matter is not only between the Government and securities companies and their dealers. Consumers, including tens of thousands of small investors and pensioners, whose money will fall under the new regulatory scheme, are also critical stakeholders. The Government, the BOJ and the and the FSC have an obligation to fully engage consumers on what is proposed and to get their feedback. Consumers ought not to be left with a fait accompli after Parliament approves the legislation.

OWN LOGIC

What happened at SSL is its own logic for consultation and transparency.

At the time of its collapse, SSL was a relatively small player in Jamaica’s securities market, managing around two per cent (J$29 billion) of the industry’s funds. Two years ago, the Financial Investigation Division (FID), an agency of the finance ministry that probes financial crimes, reported that the theft from clients had reached US$30 million (J$4.8 billion), or three times the estimated sum.

While much, understandably, has been said about the US$6.2 million in principal that has been stolen from athletics star Usain Bolt, over 200 others were victims of the thievery, including pensioners and little old ladies who had trusted the company with their savings and depended on the interest incomes for their livelihoods.

Early in the piece, Ms Panton confessed to skimming from 39 accounts whose paper value was around J$700 million. She estimated her theft at around 20 per cent of their value, or J$140 million. Ms Panton acknowledged that other pilfering would have brought her total fraud to around J$250 million.

If she told the truth, and nothing changed since December 2023, when the FID, gave the latest figures for the embezzled amount, Ms Panton would have accounted for five per cent of the stated loss. Put another way, there is another 95 per cent of the stolen US$30 million for which the thieves are yet to be identified, or if they have been, to be charged.

Jamaicans are keen to know who the culprits are, and more importantly, to see them brought to justice.

Although he did not make the promise specific to this case, they will also hold Keith Darien, FID’s director of investigations, to his word. He said: “We will continue to work strategically, with our partners, to follow the facts, pursue the proceeds of crime, and prosecute financial crime in the courts in keeping with the rule of law.”