What’s next?
SSL clients wait after court hands company to board-appointed trustee
CLOSE to 4,000 clients of the fraud-hit Stocks and Securities Limited (SSL) are now awaiting word on what should be their next step to recoup funds invested through the company, following Friday’s court ruling that shifted control of the firm from its regulator, the Financial Services Commission (FSC), to the company-appointed trustee Caydion Campbell.
The FSC through its temporary manager appointee, Kenneth Tomlinson, has been managing the affairs of SSL since January 17, 2023. Tomlinson’s appointment followed the resignation of SSL’s entire board and the termination of its member-dealer agreement with the Jamaica Stock Exchange (JSE) in February 2023.
With Tomlinson at the helm, SSL has so far transferred $15.37 billion worth of investments in stocks and other securities to 1,230 client accounts and $665 million in cash to 338 clients between September 2023 and April 2024. It was in the process of setting up an agreement with a trust company to transfer another $7.6 billion in Jamaican securities and disposing of a US$32.8 million or J$5.06 billion in international securities which were to be remitted to clients.
It is not clear at the moment how the trustee will proceed on these with the court ruling removing Tomlinson and the FSC from winding up operations for SSL. When the Jamaica Observer reached out to Tomlinson on the next steps, he only explained that he would need to follow up with the FSC due to the ruling ending his authority over SSL with immediate effect.
SSL has eight remaining employees.
The FSC in its own release noted that the court confirmed SSL’s insolvency and mandating the court-supervised wind-up, which it claims validates its assessment and regulatory actions taken up to this point. The regulator will remain actively involved in the winding-up process to protect the interest of all stakeholders. It also reiterated that it continues to collaborate with law enforcement agencies to ensure all acts of impropriety at SSL are thoroughly investigated and the perpetrators are held to the full extent of the law.
“The FSC respects the court’s decision; however, the commission is currently reviewing the judgment and assessing the available options, including potential further applications to the court in furtherance of its mandate as regulator. The FSC will continue to work to safeguard the interests of SSL’s clients and the broader financial system,” stated FSC Executive Director Keron Burrell in a Friday release.
Justice David Batts, who handed down the ruling on Friday, ordered the FSC and Tomlinson to provide Campbell with all reports and other pertinent information as he may request in furtherance of his duties, since he now assumes control of the firm. While Batts didn’t stipulate a timeline on the handover of documents, he told those wishing to pursue further legal proceedings against the company that such a procedure won’t be entertained at this time. A similar ruling was made on October 2.
This particular order not only shuts down any ongoing or future SSL cases but could impact the ability of when the Director of Public Prosecutions can bring forward criminal charges.
The move also impacts the case of WellJen Limited, a company connected to former sprinter Usain Bolt, and Jean Elizabeth Forde against SSL and several former directors and executives, including Jean-Ann Panton, who is the only person charged so far in the case. A case management conference was held last Wednesday, but future developments remain unknown.
Campbell is to return to court on September 26 at 10:00 am to submit a report with the FSC’s other claim to be dealt with on the same date in open court.
Also in the court documents from Friday’s ruling is a note indicating that an SSL employee defrauded approximately $940 million from the firm. The Financial Investigations Division (FID) in its December 2023 update noted more than 200 SSL accounts were affected by fraudulent events exceeding US$30 million or more than J$4.6 billion. While Panton is the only one charged so far for the fraud, indications have come that others will be charged, but no progress has been made so far.
While some financial executives reserved commentary on the ruling, they all agreed that the loss is a major blow to the FSC which regulates the securities, pension, corporate services and insurance sector. The Bank of Jamaica (BOJ) is set to become the prudential regulator of the financial sector at a later date under a twin-peaks arrangement.
A February 2016 letter from the FSC, entitled “Opportunity to be heard”, detailed that SSL had been a problematic institution for more than five and a half years and that it intended to suspend SSL’s securities dealer licence. The FSC never suspended SSL’s licence but put the entity under enhanced directions which were stepped up in January 2023.
Batts highlighted that the FSC could have taken the route of applying to the court to have the wind-up converted to a creditors’ wind-up, as appointing a temporary manager is ineffective to stop winding-up proceedings which had already commenced. The FSC had rejected a joint trustee arrangement with Campbell in February 2023 as detailed in the court proceedings.
The FSC’s loss strengthens the BOJ’s move to establish a special resolution regime which it expects to be passed in Parliament during 2024. The SRR would help resolve troubled financial institutions while reducing the reliance to resort to public funds and preserving vital economic functions. Industry feedback was sought in October 2023 with the concept paper outlining a series of steps which would be taken for any troubled entity. One potential route to resolve a troubled entity would be that existing management be replaced, shareholders absorb losses and bondholders’ claims be written down and become new shareholders of the financial institution.
“In 2023, meaningful progress was also made on the implementation of a special resolution regime project (SSR). This project is geared towards strengthening the country’s resolution framework for financial institutions. The SRR will establish a framework to make it feasible to resolve financial institutions that are no longer viable, and have such resolutions done in a manner that does not cause severe disruption in the financial system,” the BOJ’s 2023 annual report said.