$120m SSL discrepancy

There is a $120-million discrepancy in the reported costs incurred to administer the estate of Stocks & Securities Limited (SSL) over the first 16 months after multibillion-dollar fraud was uncovered at the investment firm, a state regulatory body has suggested.

A court-ordered report by Caydion Campbell, the trustee overseeing the winding-up of SSL, indicated that it cost approximately $500 million to administer SSL’s affairs between January last year when the alleged fraud was discovered and May this year.

This included the temporary manager’s fees of $160 million.

The collapsed investment firm was under the temporary management of the Financial Services Commission (FSC) over the 16-month period during which Kenneth Tomlinson of Business Recovery Services Limited (BRSL) was installed as the temporary manager.

The FSC is the regulatory body for non-deposit-taking institutions such as insurance companies, pension funds, and brokerage firms.

But responding to the trustee’s findings, the FSC pointed to financial records included in Campbell’s own report which show that the total operating expense for SSL during the period was $376.5 million and not $500 million.

This covered the costs for staff salaries and redundancy payments, rent, utilities, security, janitorial services, information technology and legal expenses, the FSC said, citing the cash flow movement records appended to the SSL trustee’s report.

temporary

management services

“The fee paid to BRSL for temporary management services was approximately $48 million and not $160 million as suggested by the trustee,” the FSC said in a “summary” response to aspects of Campbell’s report.

The regulatory body listed a number of initiatives that were implemented during its tenure and described it as “essential” for SSL to continue paying employees who were retained during the temporary management period to help with the various ongoing investigations and the maintenance of client accounts.

“Without the staff, all administrative, financial, brokerage, operational and IT functions could not continue and would have hindered the relevant investigations and put clients’ assets at risk,” the FSC said.

The regulatory body also defended its use of a US$1 million payout on SSL’s employee dishonesty insurance coverage.

No payment was

made to the victims

The utilisation of the payout was flagged in the Campbell report as one of several issues during the temporary management period that may require “further enquiries and likely applications for directions from the court”.

“No payment was made to the victims of the fraud,” the SSL trustee said, charging that funds from the payout were used to cover “temporary management expenses”.

But describing the proceeds from the policy settlement as “the property of SSL”, the FSC argued that the funds were available for use to satisfy the liabilities and/or expenses of the failed investment.

“A reasonable commercial decision was taken by the temporary manager to apply the policy settlement proceeds to operating expenses of SSL to include staff salaries,” the statement from the FSC said.

It also indicated that no management or brokerage fees were charged to SSL clients during the temporary management period because the investment firm was not trading at the time and the services contemplated by the client contracts were suspended.

Campbell’s report, which was submitted to the Supreme Court on October 15, faced tough scrutiny during a meeting with SSL clients and claimants on Friday, according to one person who was present.

Disgruntled SSL investors had “strong objections” to the multimillion-dollar operating costs incurred during the temporary management period, questioned the justification for Campbell’s fees, and requested a timeline for the return of their investments, the source told The Sunday Gleaner.

The winding-up of SSL is being supervised by the court.

livern.barrett@gleanerjm.com