‘No reason to suspend licence’

Regulators disclosed Wednesday that they found no reason to suspend or revoke the licence of Stocks and Securities Limited (SSL) even after the Financial Services Commission (FSC) noted concerns about the investment firm's culture of non-compliance and mismanagement of clients' funds.

The watchdog's executive director, Everton McFarlane, said prior to last Thursday's explosive revelation of a multibillion-dollar fraud scheme, SSL was being monitored by the FSC according to all its protocols.

“We would have, at that point, no reason to suspend or cancel the licence,” McFarlane asserted at a press conference at the EXIM Bank's Hope Road offices.

At the same time, he sought to deny that it had extended a “rope of mercy” to SSL, which was flagged in FSC's 2017 report as a “problem institution”.

McFarlane argued that SSL was presented with particular requirements to satisfy certain obligations to prevent the suspension of its licence and suggested that those conditions were met.

“Their licence was not suspended,” he said.

McFarlane insisted that there was no reason to presume that the same issues flagged had persisted over the years and resulted in the embezzlement scam that defrauded sprint legend Usain Bolt and dozens of other account holders at the firm.

The 36-year-old former sprinter claims to have lost approximately $2 billion in holdings arising from the alleged fraud that the Financial Investigations Division (FID) said stretches back at least a decade, during which “questionable actions” were taken against affected accounts.

Bolt, who retired in 2017, has been doing business with SSL for 10 years.

“There's no reason to presume that the same issues continued from 2017. We respond. We monitor entities on a regular basis, and as issues arise, we address those issues as deemed appropriate,” said McFarlane.

“What [is being] presumed is that somehow between 2017 and 2020, nothing was done, and that the actions of these people as of 2017 apply perfectly well after 2020. I will not confirm or deny. What I am trying to say to you is that we monitor institutions continuously, regularly, and where issues arise of whatever nature, we seek to have them addressed,” he added.

When pressed by journalists if the regulation breaches committed by SSL were reported to then Finance Minister Audley Shaw, as mandated by law, the executive director cited confidentiality agreement constraints for his non-response.

Similarly, he would not answer questions surrounding FSC's role in ensuring compliance from SSL since 2017.

FSC had been supervising SSL since 2013.

“I've outlined the parameters of my responses,” McFarlane said.

“We are aware that there are a number of questions that are of public concern. Questions, for instance, relating to the FSC's past actions. What we knew, when we knew it, what we did, but … our ability to answer certain questions at this point in time is constrained,” he said, in seeking to pre-empt journalists.

Meanwhile, fraud prevention, detection, and investigation specialist, Collin Greenland, has suggested that temporary manager Kenneth Tomlinson's probe at SSL “should be a fairly easy task” amid the sworn confession of a former employee, which detailed how she allegedly defrauded the accounts of the investment firm's clients.

Tomlinson, a noted business recovery expert, was appointed special auditor to investigate SSL's affairs and to manage the day-to-day operations of the entity, which is now under FSC control.

Greenland said that in a routine fraud examination or forensic accounting exercise, the auditor would first ascertain the level of control at the company and whether there are segregation of duties, the type of accounting software, and associated gaps, among other things.

He said that an analytical tool would then be employed to run all transactions to detect anomalies.

“Numbers usually operate in a certain trend. There is a technique called the Benford analysis. The principle of this is that transactions occur in a certain trend. So if I ran through all of Benford, transactions going back 10 years, it will show some transactions that operated out of the norm.

“If those transactions were coming up attached to a Collin Greenland and a John Brown, mainly, then there's a hint. You would test all of Collin Greenland's transactions. In the case of SSL, he's going to do a historical analysis of all the transactions, and depending on the tools and techniques he has on hand, the computer will do the work for him,” he said.

The FSC has not disclosed the terms of reference of Tomlinson's probe.

However, Greenland noted that in looking for red flags, the lifestyle of employees should be reviewed and cross-referenced with their income.

“Along with red flags are symptoms. Symptoms are specific indicators, quantitative or qualitative, that show up in documents and information. Symptoms like statements not reconciled routinely ... and customers complaining of incorrect balances. So you look at symptoms and red flags together as indicative of possible manipulations,” Greenland noted.

He said in the case of SSL, “the deed has already been done” and that Tomlinson would now likely gather evidential information to ensure accountability under the law.

kimone.francis@gleanerjm.com