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Editorial | Independent oversight of SSL probe

Published:Thursday | February 9, 2023 | 12:27 AM

As revelations continue to dribble from the files of the Financial Services Commission (FSC) about the scandal at the brokers Stocks and Securities Limited (SSL), three things are increasingly apparent.

First, unlike what may have been initially assumed, the FSC’s investigative staff were not a bunch of wilful or rumpled incompetents. For at least a dozen years, they produced for their bosses reams of reports identifying dodgy accounting and other management practices at the company.

Second, which is related in part to the first observation, while the issues may, at points, overlap, it is important to analyse events at the brokers as two distinct strands. The alleged massive theft from clients’ accounts, to which an employee purportedly confessed, is separate from the years-long operational infractions by the company that were flagged by regulators. The one should not be conflated with the other to create a grand muddying of the waters.

Finally, notwithstanding the criminal investigations that are supposed to be done by various law-enforcement agencies into SSL’s affairs, there is need for an independent oversight body to guarantee the transparency of the process, and that matters which may not be strictly criminal with respect to the evolution of the affair, are not, for whatever reasons, overlooked.

This would be in keeping with the promise by Nigel Clarke, the finance minister, that “no stone will be left unturned” in getting to the bottom of this matter, regardless of where the trail leads.

Much of the focus on SSL has centred on the January revelation that as part of an internal inquiry, a former senior staff member admitted to syphoning off around 20 per cent of the value of nearly 40 accounts that she managed. Given the reported amounts those accounts should have held, the theft would have amounted to approximately $150 million.

Separately, the Jamaican athletics icon Usain Bolt claimed the theft of US$12.7 million ($1.9 billion) from the account of a company he owns. Two relatively recent former CEOs of the investment house denied all knowledge that Mr Bolt, or any entity of his, was an SSL client. However, in their statement last week, the directors of SSL appeared to imply that they were aware of Mr Bolt as a client.

These reported thefts (or investments losses) and who, if anyone, did the thieving, is one side of the SSL ledger, the facts of which can be resolved by a robust forensic audit. Dr Clarke has said that such an audit will be commissioned.

But there is an equally important element of the SSL puzzle, which goes to the heart of regulation and good governance, that also needs unravelling.

Documents released by Minister Clarke and others that have otherwise seeped out of the FSC and/or other places, show that at least since the first half of the 2000s SSL was a “problem institution” for regulators, as a 2017 report branded the company.

Indeed, in early 2009, the FSC reprimanded SSL for seemingly having, between 2007 and 2008, used clients’ funds to purchase at least three companies for its account; for having on its books a wide mismatch between recorded client liabilities and the underlying instruments with which they were supposedly backed; and for generally poor record-keeping by the company.

A similar problem with off-balance sheet assets and liabilities was flagged in 2010 with respect to repurchase agreements, leading to a directive to the SSL that it stop accepting new repo business.

Extrapolating from these reports, in 2013 SSL faced a liquidity/solvency crisis, which, allied with the regulator’s long-standing concern about its management, caused the FSC to bar it from soliciting new business or dealing in securities. Apparently, it somehow won a reprieve, and two years later ostensibly reorganised itself. This included converting some client assets into preference shares.

However, by 2016 the company had an accumulated deficit of $1.5 billion, causing its auditors to raise questions about its ability to continue as a going concern. In 2017 – when that audit report was available – the FSC threatened to again yank SSL’s licence, but didn’t fulfil the threat.


In 2019, the FSC was again worried about SSL solvency, even as its inspection suggested that the company’s record-keeping remained a mess. However, SSL was allowed to continue. Its clients remained in the dark about the regulator’s concerns.

The FSC, on the face of it, has regulatory independence. However, the minister of finance gives policy directions to its board of commissioners. And critically, by law all reports of inspections of security firms, and recommendations therefrom, must be forwarded to the minister. This, presumably, is meant to help the minister to fashion policy directives for commissioners and the securities industry.

Unfortunately, a 2020 report on SSL, Dr Clarke reported, was not brought to his attention, until he recently personally retrieved it from a cabinet among five years of files.

The SSL matter straddled two political administrations and three finance ministers over four terms.

There are reasonable questions to be asked of what these ministers knew, when they knew it, and if the FSC commissioners were dilatory in their regulatory responsibilities. And if they were, why?

Obviously, the FSC’s foot soldiers did their jobs. The commissioners cannot claim they were kept in the dark. That is why an independent group that gets to the heart of this damning failure in oversight and governance is important.