Mon | Dec 11, 2023

Editorial | Publish all FSC/SSL reports

Published:Thursday | February 2, 2023 | 12:30 AM
Dr Nigel Clarke, minister of finance and the public service.
Dr Nigel Clarke, minister of finance and the public service.

Between Dr Nigel Clarke’s tactical release of information and leaks by other sources, Jamaicans are facing an olfactory assault from a swampy management culture at Stocks and Securities Limited (SSL) and a spectacular failure of regulation that caused the quagmire to persist long after it should have been drained.

The upshot: it appears that many people who assumed it safe to invest their cash via SSL are likely to lose a chunk, if not all, of their capital.

This uncertainty is deepened by the absence of clarity about SSL’s finances and the accounting methods it employed in its operations. For example, there is need for an explanation for a more than $3.8-billion difference in the company’s statement of the value of its clients’ off-balance sheet portfolio at the end of September 2019, compared to the adjusted figure reported by an auditor the Financial Services Commission (FSC) sent in to review its books. Almost all the discrepancy was in the value of its equity portfolio.

There are questions of whether SSL communicated to clients about the value of their individual accounts on the basis of the value it posted for the assets on its balance sheet.

Although Dr Clarke, the finance minister, argued that SSL accounted for a mere two per cent ($29 billion) of Jamaica’s $1.45-trillion securities industry and posed little systemic threat to sector, there is no doubt that the scandal at the entity continues to cause reputational damage to financial markets, which, if it persists, and people lose confidence, could lead to contagion.

In this regard, the authorities have taken two important steps. The FSC sent a manager into SSL, effectively taking control of the company; and the Government has asked international partners for assistance in conducting a forensic audit and a fraud investigation at the company.


Dr Clarke must immediately do two more things. As is allowed by the Securities Act, he should cause to be published all the reports compiled by the FSC on SSL; and for the regulator, including former executive directors and chairmen of its board of commissioners, to explain why they didn’t take more definitive action against the firm when it became clear that it was a perennial “problem company”. SSL’s financial accounts – going back to 2016, when, with an accumulated deficit of $1.5 billion, its auditors raised doubts about its ability to continue as a going concern – should also be published.

Next, Dr Clarke should signal the Government’s plans for SSL, which, given that Prime Minister Andrew Holness has ruled out a state bailout of investors, can only be winding-up of the company, or cobbling an agreement – if that is possible – for some other firm to purchase its salvageable accounts and other assets. There is no basis for the firm’s return to its former owners for liquidation.

SSL became a public issue last month when it was revealed that a long-time employee had admitted to siphoning off around 20 per cent – approximately $150 million – from the client accounts she managed. It was also disclosed that US$12.7 million, or J$1.9 billion (apparently in principal and interest), was swiped from an account owned by Jamaica’s iconic track athlete Usain Bolt, which turned the matter into an international news story. Surprisingly, two recent CEOs claimed not to have known that Bolt, or any entity he owned, was a client of SSL, although his account would have been one of the company’s largest.

What has also come to light, starting with this newspaper publication of an early 2017 FSC internal chronicle of SSL’s regulatory breaches and its efforts to force the company into compliance, was that SSL’s problems were long-term and almost perennial.


The FSC’s synopsis was part of the regulator’s documentation to support its intention to yank SSL’s licence, which it did not do. Four years earlier, in 2013, it had suspended SSL from soliciting new business or dealing in securities; demanded that the company keep better records; and that it inject capital to support liabilities and show the assets it used to collateralise its off-balance sheet portfolio.

In 2015, SSL supposedly reorganised itself to inject liquidity. That included converting some of its bond obligations to “equity preference shares”.

But its management failures, including the intermingling of client and company money, persisted. Indeed, its operational failures were again full-blown by 2019, although its books were in a state for the FSC-approved auditor to properly assess its accounts. By then, it was apparent that SSL was again in need of capital, which it is not clear it received. It seems questionable that the company could meet prudential ratios.

Put another way, the SSL issue is all too murky. The dribble of information does nothing to help clarity or enhance understanding.

The 2019 report that contains this data is possibly among those that, as is required by law, the FSC sent to Minister Clarke, which he did not see and was not aware of until a personal search of the filing cabinets unearthed the document.

That oversight by Dr Clarke’s staff, and perhaps the ministry office registrar and records clerk, caused the minister to miss important information that might have helped to inform policy directives to the FSC commissioners. It has happened! The next best thing is full transparency along the lines we suggested.