EFFORTS to sell-off the valuable accounts of clients of fraud-hit Stocks and Securities Limited (SSL) to securities dealers are so far proving futile with no one willing to take on the assets without getting some guarantee of financial protection against future claims.

The Jamaica Observer has learnt that at least three securities dealers have been approached with none giving a favourable response.

When the Financial Services Commission (FSC) assumed temporary management of SSL in January 2023 the aim of the temporary manager was to not only ascertain what was taking place at the financial firm, but allow for clients to regain access to their accounts.

“Negotiations are ongoing between the regulators and several securities dealers to accommodate the transfer of SSL’s securities portfolio. Once completed, you will be provided with an update related to regaining access to your account,” a client experience manager stated in an e-mail to a client in July 2023.

However, another broker who was close to those discussions explained that nobody wanted to touch the firm after the discovery of fraud related to WellJen Limited, a company connected to Jamaican track and field legend Usain Bolt.

The FSC is currently in a court case against SSL and Caydion Campbell, the purported trustee of SSL, surrounding control of the firm. Campbell has not been able to execute any of his trustee duties since January 2023 with the FSC managing the operations of the firm through Business Recovery Services Limited. Both the FSC and Campbell want to wind up SSL, but under their own purview.

The case is being heard before Justice David Batts, who has stopped all other court cases regarding SSL until control of the firm can be resolved in the current trial which has been ongoing since February 26.

As many as three firms were involved in the 2023 deliberations to purchase SSL’s client book of business. These buyers wanted different forms of indemnity before they pulled away from these discussions amidst continuous new developments.

Even before the alleged fraud details became public, the broker noted that SSL as a company was on the selling block in prior years. Those years included SSL being put under enhanced FSC directions and it being late with its monthly filings to the Jamaica Stock Exchange’s (JSE) Regulatory Market and Oversight Division (RMOD).

SSL as a securities dealer is involved in the provision of different services regarding financial assets to its clients. The company also benefited from being one of the 15 JSE member dealers. Despite these positive advantages for SSL, recently revealed financials show the company has been in dire straits for years.

The books show the company could not even cover its day-to-day expenses.

For example, SSL’s last financial statements for the year which ended June 2022 show it earned $251 million from its operations, but that was barely enough to cover 40 per cent of its $620 million in expenses in that year. In that same year, the company recorded $492 million in operating losses forcing it to seek additional financing to cover the shortfall. Overall, the net loss was $539 million. The year before, the net losses at SSL were $338 million.

But its operations were not the only part of the business showing financial strains. The value of the assets it holds was also declining. It dipped by 16 per cent in its last financial year to $1.3 billion, a far cry from the $9.9-billion worth of assets the company held in 2008.

“It became apparent from the last audited financial statements for the year ending 30th June 2022 that were approved by the board on the 9th January 2023, that although SSL was solvent, the capital base was diminished due to accumulated losses and the company, at the current rate of losses, would become insolvent in the current financial year [2023],” former SSL director Peter Knibb said in a witness statement to the Supreme Court.

Temporary Manager Kenneth Tomlinson of Business Recovery Services noted in his witness statement to the Supreme Court that he understood SSL was insolvent within 24 hours of assuming his role.

Still, the company was making efforts to stay afloat by selling off some of its assets.

SSL sold its 50 per cent stake in SSL Reit (now KW Warehousing Services) in October 2019 for $145 million; its 75 per cent stake in Dolla Financial Services for US$500,000; and its 79 per cent stake in SSL Venture Capital (now MFS Capital Services) for $30 million in May 2022.

SSL and its parent company SSL Growth Equity Limited poured more than $300 million into SSL Venture Capital between 2018 and 2022 before writing off most of these funds.

SSL sought to have some of the enhanced supervision requirements reduced in September 2020 as the inability to accept new funds for portfolio management services severely limited the business. SSL Chairman Jeffrey Cobham said in a letter to the FSC, “This directive has significantly crippled our ability to raise funds in the last year and service our clients effectively.”

The company was planning to undergo a restructuring to convert some of its related-party assets from SSL Growth Equity, which would have involved the transfer of three equity positions to SSL’s books. It was also set to get a new majority owner, with Spectrum Capital Partners to have gained a 59 per cent stake through a US$4-million equity injection. However, that deal fell through in February 2023.

The FSC intended to suspend SSL’s securities dealer licence in November 2016 based on the firm’s problematic nature for more than five years.

In February 2017, the FSC had a hearing, but SSL was not suspended as the company sought to correct the different deficiencies put forward by the regulator.

During the ongoing trial involving SSL in the Supreme Court, when attorney-at-law Caroline Hay, King’s Counsel, asked whether or not the FSC had intended to cancel SSL’s licence between 2019 and 2022, FSC Director of Securities Karene Blair said that the FSC didn’t issue any intention to do so, but kept SSL under enhanced supervision through directions over the period.

“SSL highlighted the point that a suspension of the company’s dealer licence, even for a day, would inevitably lead to total destruction of the company and destabilisation of the financial [sector],” stated a FSC 2016 document related to the SSL February 2017 hearing.

The FSC is empowered under the third schedule of the FSC Act to suspend, cancel or revoke the licence or registration of any institution based on needs for remedial action.

Although the Bank of Jamaica (BOJ) currently controls the FSC’s board, under the proposed twin peaks arrangement, both the FSC and BOJ will have independent board of directors.

Business Recovery Services published a March 31 update regarding SSL client accounts: As of March 15, SSL has transferred $14.6 billion of local securities to 1,200 client accounts and $635 million in cash for 245 clients since the process began in September 2023.

The update states that SSL has stopped processing local securities transfer requests and will publish an additional notice outlining the requirements for clients to access these assets. However, SSL will continue to process available cash balances held with the firm to the clients’ preferred bank account.

The update also says that liquidation of the international portfolio of securities is currently projected to be completed by mid-April and funds from this sale will be remitted directly to SSL clients based on their instructions. Clients should provide their banking details to
sslserviceteam@sslinvest.com and that no third-party transactions will be executed.

The final phase of resolving the SSL promissory notes will be dependent on the financial status of the SSL Group.

The FSC will be back in court against SSL in early April to determine control of the firm.