Fri | Jun 2, 2023

FSC moves to appoint Tomlinson as SSL trustee

Published:Tuesday | March 28, 2023 | 1:27 AM

The Financial Services Commission (FSC) is seeking the Supreme Court’s permission to appoint head of Business Recovery Services Limited Kenneth Tomlinson as trustee for the fraud-hit investment firm Stocks & Securities Limited (SSL).

The FSC, which regulates the securities industry, named Tomlinson the temporary manager for SSL on January 17, seven days after learning of the alleged multibillion-dollar fraud at the 50-year-old company.

The FSC has declared that SSL is “insolvent” as it does not have enough money to pay its debts.

On March 10, the regulator filed an application before the court seeking leave to present a petition under the Companies Act for the winding-up or liquidating of SSL; leave to appoint Tomlinson as trustee and confirmation of “full and exclusive powers of management” of SSL vested in the FSC effective January 17.

Liquidation is the process through which the affairs of a limited company are wound up or brought to an end, and the assets and property of the company distributed to its creditors and, if any remains, to its members.

A trustee typically leads that process, which would also includes validating claims from creditors, customers and investors.

The decision to close down is reportedly based on findings from Tomlinson.

Up to January 31, SSL had assets of $1.1 billion and liabilities of $1.2 billion, according information obtained by The Gleaner. Losses for the year so far amounted to $184 million in addition to negative equity of around $29 million. Loans totalled $623 million. Some 62 per cent ($710 million) of SSL’s assets are monies due from “related party companies”.

Under the FSC Act, within 60 days of taking temporary management of an entity, the FSC has to determine whether to restore the company to its board of directors or owners, present a winding-up petition to the court, or propose a compromise or arrangement between the company and its creditors.

Among other things, the regulator is arguing that reinstating the SSL board “is not a viable option” as the former directors filed a declaration “when it is clear that SSL was insolvent in January 2023”.

It also noted that some of the directors are involved in other related court cases and further that it is not likely SSL can go ahead with restructuring because of its solvency issues.

The FSC and SSL are in a court battle after the regulator obtained an injunction on January 25 blocking SSL from dealing with SSL assets.

A ruling on whether the injunction should be lifted is expected on April 20.

At least 40 clients, including sports legend Usain Bolt, have been impacted by the alleged $3 billion fraud which is being probed by the Financial Investigations Division, the police Fraud Squad and the United States’ Federal Bureau of Investigation.