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On Tuesday January 10, 2023, the Financial Services Commission (“the Commission”) received a letter from Stocks and Securities Limited (“SSL”) advising of an
incidence of fraud at the company.
The Commission issued Directions dated January 12, 2023, in keeping with its powers under Section 8(1)(b) of the Financial Services Commission Act (“the FSC Act”).
The Commission appointed Business Recovery Services Limited (“BRSL”) as Special Auditor to assist the FSC in its enhanced supervision of the entity and the continuing investigations into its operations on January 16, 2023.
The Commission assumed temporary management of SSL on January 17, 2023, pursuant to powers under section 8(5)(b) of the FSC Act and appointed Mr. Kenneth Tomlinson of BSRL to manage SSL on its behalf, pursuant to paragraph 1(2) of Part C of the Third Schedule to the FSC Act.
Hon. Nigel Clarke, DPhil., MP, Minister of Finance and the Public Service and Howard Cooper, Managing Director at Kroll Associates Ltd., UK, signed a Statement of Work to conduct a forensic audit to identify the nature, extent and value of the fraud perpetrated and to identify any potential assets or benefit obtained by directors, shareholders, employees or parties connected to Stocks and Securities Limited (SSL).
The Commission has also sought to comply with paragraph 1(5) of Part C of the Third Schedule of the FSC Act in that an application was made in the Supreme Court of Judicature of Jamaica for an order confirming the vesting in the Commission of full and exclusive powers of management of the institution. Further, the Commission believes that having conducted an assessment of the state of affairs within SSL, the entity is insolvent, as such, an application has been made which if granted would see the entity be wound-up.
Effective September 22, 2023, the Commission approved the transfer of local client securities held at the Jamaica Central Securities Depository from SSL’s custody to a securities dealer (that is also a registered member-dealer with the Jamaica Stock Exchange) selected by the client.
As at April 11, 2024, 98% of this international portfolio were liquidated. In relation to these international securities, once accounts have been reconciled, funds are to be remitted directly to clients based on their instructions.
About 70% or $16.035 billion in Jamaican dollar denominated assets held in SSL’s off-balance sheet portfolio transferred to clients since transfers began in September 2023. Jamaican dollar denominated assets include Jamaican equity and fixed income securities and Jamaican dollar cash.
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A Temporary Manager is a person or company appointed to manage the affairs of a prescribed financial institution on an impermanent basis. A temporary manager may be put in place when there are concerns about the overall management of the entity.
Section 8 (5)(b) of the FSC Act gives the Commission the power to appoint a temporary manager to replace the existing management team if certain requirements are not complied with. The FSC appointed a temporary manager to oversee the operation of SSL and to verify the assets and liabilities of the company. The temporary manager is responsible for ensuring that the assets held by SSL are proportionately allocated to all clients without prejudice. The temporary manager is also responsible for determining the existence of all the assets and liabilities as well as prevent any possible misappropriation of the assets. Once this exercise is completed, the temporary manager will then ascertain the amount of assets due to each client. This is beneficial to the clients as an independent unbiased third-party verification of the assets is conducted.
An assessment will be done to determine if all the objectives of the temporary manager’s contract have been achieved and a decision taken based on the recommendation of the temporary manager. This would also depend on the conclusion of matters that are currently before the court.
SSL under the temporary manager has been publishing notices that indicate how clients should proceed in order to retrieve their funds.
