Editorial | Transparent transactions

Parliament should indeed act on the Integrity Commission’s (IC) call for stricter laws and clear guidelines against insider trading by public officials, including legislators.

However, the recommendation – contained in a report on its investigation of the finances of Prime Minister Andrew Holness – raises questions about the status of the code of conduct and job description that the legislature was supposed to develop for its members but about which relatively little has been heard since the initiative was launched more than a year ago.

That code, if sufficiently robust, may well address a concern implicitly raised, although not specifically mentioned, in the Holness probe: how to achieve greater real-time transparency into the financial conduct of people who control the critical levers of the State without removing their right to engage in business.

The investigation of Mr Holness began as a relatively routine questioning of a bank’s inadvertent mischaracterisation of one of the prime minister’s accounts, causing a hold-up in a certification of his income, assets, and liabilities filings for 2021.

That morphed into a larger probe of whether he had engaged in illicit enrichment, that is, whether his wealth had grown beyond his lawful sources of income and/or that he had abused his public office for private gain.

For the IC’s director of investigations, Kevon Stephenson, the latter question remained inconclusive, although he determined that Mr Holness’ net wealth had an unexplained growth of around J$1.9 million in 2022.

What the report showed, however, was large movements of money between companies owned by or in which Mr Holness had interests. Additionally, it suggested that funds belonging to a charitable foundation established by the prime minister were used to help buy bonds in the name of one of his companies. Mr Holness told investigators that this was an error for which his brokers were ostensibly responsible. He sought to have the matter fixed during the course of the investigation years after the bond purchase.

LAX AND OVERLY FLEXIBLE

Mr Stephenson also highlighted what he perceived to be a lax and overly flexible approach by a brokerage and asset-management company, Barita Investments, in lending J$50 million to one of Mr Holness’ companies. So he asked the securities regulators, the Financial Services Commission, to investigate the deal to determine whether Barita broke regulatory rules.

Mr Stephenson also urged the tax authorities to determine whether the prime minister’s companies, in fact, evaded income taxes, which, he argued, was the case. He also recommended that the Financial Services Division, an arm of the finance ministry that investigates financial crimes, take a deeper dive into the prime minister’s finances.

Added Mr Stephenson in a report sent to Parliament: “As a last recommendation, the DI (director of investigations) directs the attention of the Parliament and the Cabinet secretary to the issue of parliamentarians and public officers engaging in the purchasing of shares and other equities in public corporations, as well as private companies, which fall under the regulatory regime of the Government of Jamaica. Without prejudice to the right of any citizen to engage in any of the foregoing activities, the DI recommends that strict laws and guidance be implemented to mitigate conflict of interest, and abuse of authority for financial gain, and other actions which may, in substance, amount to insider trading.

“It cannot be overlooked that parliamentarians and public officers, by virtue of their respective positions, will come into confidential information from time to time, having to do with investment opportunities directly or indirectly arising from government interventions and policies which they could use to their advantage or for the benefit of another.”

Section 51 of the Securities Act makes insider trading, or the use of privileged information to unfairly benefit in the sale or purchase of securities, a crime.

On its face, that law deals primarily with the owners and executives of companies and equities dealers rather than public officials like policymakers and civil servants who execute those policies. Politicians and public officials, presumably, would be captured under the illicit enrichment provisions of the Corruption Prevention Act.

Nonetheless, The Gleaner agrees that for the avoidance of doubt, and to bring greater clarity to their obligations, the laws should be specific with respect to the expected conduct of public officials in engaging in business, especially in areas where they may have regulatory influence.

ACTIONS TRANSPARENT

Red lines must be clear and their actions transparent.

Already, legislators, and some public officials, have to file annual income, assets, and liabilities statements annually with the Integrity Commission. These filings, though, are after the fact, covering the preceding year. They generally list assets and income at the end of the period.

Given that reporting is not real-time filings, many things can change over the period, which may be difficult to reconstruct. In that regard, perhaps a registry of interests, similar to what exists in the United Kingdom parliament – but under the control of the Integrity Commission – could work in Jamaica for legislators and the public servants who make statutory filings.

They would report the basics of their regulated transactions within 30 days of execution. That would allow the IC to track a filer’s transactions and more easily discover discrepancies in their annual reports.

This, for parliamentarians, would be part of the conduct and accountability regime promised by Prime Minister Holness more than 15 months ago when there was a public outcry when salaries of ministers and members of parliament were increased by over 200 per cent. The code of conduct, including a job description for MPs, was supposed to be under discussion by a committee of legislators.

What has become of that process?