Editorial | Unpacking the SSL saga

This newspaper appreciates Nigel Clarke’s appeal for patience in the criminal investigations into the more than J$4.7-billion (US$30 million) fraud at the collapsed broker and investment house Stocks and Securities Limited (SSL).

He indicated that the probe was deep and complex, involving many victims, but was being handled with competence and transparency.

However, Dr Clarke, the outgoing finance minister, may have taken, too literally, the concerns raised by the athletics icon Usain Bolt about the state of the investigation and of the insufficiency of updates he perceives therefrom.

The minister, therefore, missed, and failed to respond to, the larger issue – beyond the question of criminal liability for the fraud – that was implicit in Mr Bolt’s observation: When will he and other victims of the SSL fiasco get back their money and how much?

This is a front on which the Financial Services Commission (FSC), the securities industry regulator, has been far too quiet. Or rather, the FSC has been insufficiently robust in helping SSL’s clients navigate their way through the miasma of this affair, including what they should do to secure and assert their rights. That cannot be the subject of a single or one-off declaration or public announcement.

CONFESSED STEALING

It has emerged that even before SSL’s disclosure to the regulators in January 2023 that one of its employees had confessed to stealing the equivalent of J$250 million from the accounts of 40 clients, the regulator had known for years that the company was badly managed; that it had existed on the brink of insolvency; and that periodically, it breached undertakings to right-side itself. Put mildly, the FSC pussyfooted on the matter, disregarding its fiduciary obligations to the Jamaican public.

In the face of the scandal, the FSC finally acted, asserting its presumed power under the law to take control of SSL. It inserted a temporary manager, Ken Tomlinson, into the company. The regulator said that when it acted, SSL was insolvent. SSL’s owners and directors challenged the FSC’s intervention in court, claiming that they had acted first in appointing a trustee, Caydion Campbell, with a mandate to wind up the company. Mr Campbell insisted that SSL was solvent at the time of his appointment.

In May, Justice David Batts ruled that Mr Campbell’s appointment was indeed lawful. He ordered an end to the FSC/Ken Tomlinson’s temporary management.

In other words, SSL was to be returned to the trustee, Mr Campbell, who was to effect its court-supervised liquidation.

The FSC has appealed Justice Batts’ ruling.

For ordinary folk who are not versed in legal matters, there is an absence of clarity. Many people who had investments in SSL are now uncertain about how to proceed. Which we hope will be clarified when SSL holds a planned meeting with investors in the coming weeks.

It is not known whether Mr Bolt (who claims – depending on how the counting is done – between US$6 million and US$12.7 million) is among the confused lot, uncertain as to whether he will get his money back. He, unlike most, has a high-powered lawyer on the case.

But getting clear answers ought not to be dependent on whether an SSL client has, or can afford, a lawyer. Neither should it be dependent on a ministerial response to a hugely iconic figure about the status of a criminal investigation. It is the regulator’s responsibility to keep the people to whom it has an obligation in the loop.

DO URGENTLY

So what the FSC must do urgently, through press advertisements and public-service announcements and private communication, is clarify the state of play since its appeal of Justice Batts’ ruling:

• Who is in charge of SSL or its understanding thereof?

• Can clients with accounts at SSL still register their claims?

• With whom and how?

There are some other facts that the FSC should address.

While Mr Tomlinson, during his tenure, had deemed SSL bankrupt, that is, its shareholders had more liabilities than assets, he had also determined that the company had J$29.4 billion in off-sheet liabilities. That, presumably, was clients’ investment funds.

The good news for investors was that Mr Tomlinson also reported finding J$29.2 billion in assets to match those liabilities.

In other words, SSL’s investors who were owed these funds, could, on its face, get back 99 cents on each dollar of investment.

But that was before the Financial Investigation Division (FID) reported last December that the fraud detected at the investment house had jumped to US$30 million, from the investigative agency’s previous estimate of US$10 million in August 2023, and that the defrauded accounts had increased from 70 to over 200.

At the time, the FID promised arrests other than of Jean-Ann Paton, the executive who initially confessed to a crime but subsequently suggested that she was also taking a fall for others. There is lots still to unravel in this matter.