CLARKE TO NAME NEW FSC BOARD

Minister of Finance Dr Nigel Clarke is expected to announce changes today to the Financial Services Commission’s (FSC) board, days after sprint legend Usain Bolt accused the regulatory body of negligence in the $3-billion fraud at Stocks and Securities Limited (SSL).

Bolt, an eight-time Olympic champion, is among dozens of clients whose accounts at the investment firm were defrauded.

Clarke is also set to detail tougher penalties for securities and banking fraud as well as tighter regulations for the industry when he delivers a policy address later today.

A senior Bank of Jamaica official may be among the new additions to the FSC board, The Gleaner has been reliably informed.

However, Clarke declined to comment on the changes when contacted on Sunday.

The reforms come days after the resignation of FSC Executive Director Everton McFarlane, who inherited a 2017 report that flagged SSL for its “culture of non-compliance and mismanagement of client funds”. Janice Holness served in the position from March 2013 to June 2017.

McFarlane’s tenure began in August 2017 and will end on January 31, 2023, when his resignation takes effect.

The explosive eight-page internal report was prepared by the FSC in February 2017 ahead of a meeting with SSL representatives who were trying to convince the regulators not to suspend its licence.

There has been public concern about confidence in securities, but industry experts have insisted that the sector is strong. It is estimated that SSL’s holdings represent two per cent of a $1.4-trillion industry as at September 2022.

Clarke, who succeeded Audley Shaw as finance minister in 2018, told The Gleaner that he had not been informed of the FSC’s challenges with SSL.

“Neither the board of commissioners of the FSC nor its executive director has ever raised SSL with me at any time,” Clarke said Sunday.

At a press conference last Wednesday, McFarlane would not indicate whether then Finance Minister Audley Shaw was informed about the problems plaguing the investment firm.

Efforts to reach Shaw on the matter were unsuccessful as calls to his cell phone went unanswered on Sunday.

The FSC board was chaired by Howard Mitchell between April 2016 and June 2017, the period under which the bombshell report on SSL was prepared, and Jackie Stewart Lechler from July 2017 to September 2021.

Both Stewart Lechler and Mitchell have declined to comment on the SSL scandal.

Section 15 of the Financial Services Act imposes an obligation to secrecy on current or past board members. They face a fine of up to $3 million and a maximum of three months in prison for breaching the law.

The finance minister said that he met with the current FSC board on Friday and was told that by 2021, and over the last year, SSL was never presented to members as an urgent or deteriorating case.

“Rather, they would have been listed as having deficiencies that were steadily being repaired. The management’s reporting to the board would have been based on the monitoring of compliance with the directions given to SSL, and the progress towards compliance was assessed as being positive,” said Clarke.

Bolt’s lawyer, Linton Gordon, on Thursday confirmed to The Gleaner that a letter was sent to the FSC, communicating that it was liable for the world 100- and 200-metre record holder’s loss of US$12.7 million and that it had failed to perform its duty in accordance with the Financial Services Commission Act.

The FSC is the statutory body that regulates non-deposit-taking institutions such as SSL.

Gordon argued that the FSC “kept quiet and did not alert the public, including Bolt, to the fact that the company was not operating in a way compliant with the law”.

The FSC had branded SSL, one of 38 licensed security dealers with a market share of less than 2.5 per cent, as a “problem institution”.

McFarlane had said that the FSC found no reason to suspend SSL’s licence.

kimone.francis@gleanerjm.com