THE Financial Services Commission (FSC) convened a press briefing on Wednesday with the purported purpose being to address issues raised in the public domain about the multi-billion-dollar fraud at brokerage house Stocks and Securities Limited (SSL), but was seemingly only prepared to stonewall journalists, dodging questions, and being evasive for the most part.
The stage was set for the FSC not being forthright in answering most of the questions that the regulator would have expected, with Executive Director Everton McFarlane telling journalists at the end of his prepared speech “our ability to answer certain questions at this point in time is constrained…[and] would perhaps be a bit premature”. He continued that the FSC is also bound by confidentiality obligations in its work.
That, however, did not stop the journalists from digging in, though they found the FSC unwilling to answer most of the pointed questions about what happened, when, and the actions the FSC has taken.
The entity’s Director of Communications David Geddes and journalists also engaged in a brief verbal skirmish after the FSC boss told Geddes, who was chairing the briefing, to “take another question” when he was asked if the FSC would admit that it has been lacking in its oversight and, in the process, allowed an SSL employee, by her own admission, to steal over a billion dollars from clients accounts over more than a decade.
Previous to that, McFarlane only engaged in presenting a timeline of events since last week Tuesday, starting with the letter the FSC got from SSL on January 10 about an alleged fraud involving one of its client relationship managers. The FSC itself did not take action until two days later on January 12, even though the executive director said “the information was assessed as being credible”.
For journalists at the news conference, the delay sums up the FSC’s modus operandi in the last few years, giving SSL a ‘bly’ as it has been doing since flagging the entity as a “problem institution” in a 2017 report in which the regulator even acknowledged the brokerage house has “a culture non-compliance and mismanagement of clients’ funds”.
On that matter, the FSC did not directly address the SSL issue, but stated that, in general, if issues occur it would give entities time to implement corrective actions which may not be completed “the next day or the next month”.
McFarlane said the FSC monitors those corrections, but it was pointed out that SSL did not implement the “corrective actions” and instead was clearly not adhering to the orders given by the FSC, even under the threat of a notice to suspend the securities dealer’s licence in 2017.
“The language there speaks for itself,” a clearly uncomfortable McFarlane muttered before deferring an answer.
“So, I cannot speak to the specifics, but clearly if there was a condition that required for them to satisfy certain obligations… we would take steps to suspend the licence,” he continued before stopping and then acknowledging that the licence had not been suspended.
But as the regulator was bombarded with questions about issues coming up at various times involving SSL, including in 2020 when a cease and desist order was issued on the entity, McFarlane, while not addressing the questions directly, said, “There is no reason to presume that the same issues continued from 2017 into 2020.”
“What you’re presuming is that somehow, between 2017 and 2020, nothing was done and that the actions that you speak to out of 2017 apply perfectly to 2020,” he said. “I will not confirm or deny that.”
Journalists also wanted to know if the FSC acted too late moving into SSL, waiting until the company itself notified the regulator of incidents of fraud.
“Those kinds of questions, at this point in time, I am constrained to answer. It’s not that we’re not aware that there are not questions of public interest,” McFarlane said.
He told the press briefing that the FSC’s action since being notified about the fraud a week ago was “a quick response” and the temporary manager, Ken Tomlinson, should be “in a position to ascertain that”, in reference to questions from the Jamaica Observer about whether withdrawals took place from SSL over the two-day period between when the regulator was notified of the alleged fraud and when the enhanced oversight was implemented.
He reminded, however, that “the company was still conducting business before our directions came into effect”, adding that part of the temporary manager’s role “is to assess if there were any breaches” of the directives given to the company between the time it was put under enhanced oversight on January 12 and when the temporary manager took over on January 17.
“The response was aimed at providing the FSC with a mechanism to have daily and indeed intra daily insight into the affairs of the entity, which would assist us and the entity in managing itself concurrent with the investigations,” McFarlane read from his prepared speech at the start of the press briefing. But despite that, he refused to update the nation beyond what is already in the public sphere, citing it would be premature to do so.
He, however, hinted that the fraud was conducted by more than one person, saying “This despicable act of dishonesty by an employee at SSL, and possibly with collaborators, we believe, cannot be taken as symptomatic of the risk for the entire industry.”
But he refused to be drawn further when asked to elaborate on the number of people it is believed were involved in swindling investors’ funds, the scale of which is yet to be ascertained.
“Those are specifics that I believe, for the integrity of the investigation, would be premature to speak to at this time. And, in fact, you know, there are several law enforcement agencies that are working to address [the number of people involved in the fraud], so I cannot speak to that with regards to the question,” he said.
The same evasive response was given when McFarlane was asked to give an update on whether the quantum of the funds stolen had changed.
“I would reserve an answer right now until… we can be comfortable putting an estimate out that we can stand behind,” he said.
The pattern of dodging specifics continued when the FSC was asked if SSL faced any prosecution for violating the regulations, given that it had been labelled a problem company.
“The specifics of our actions in relation to SSL, at this point in time, I am constrained to answer,” McFarlane said as he carefully counted his words. But he added, “With regards to the question around the information in our strategic plan, again, the specificity of the question in relation to SSL is something that I would have to refrain from answering at this time. Unfortunately, I cannot.”
He also declined an answer whether or not the finance minister had been told about the issues at SSL, as required by the statutes under which the FSC operates.
The FSC head said he is committed to giving as much information as possible, but for journalists who were starting to feel stonewalled, unease started to set in, as all came to the realisation that it would be hard to get the regulator to address concerns in the public domain.
The FSC’s stance, however, did not discourage journalists from asking questions.
What was SSL’s financial position prior to the unveiling of the fraud?
While McFarlane again sidestepped the question, he did say the value of the capital at the entity was under the FSC’s oversight and that its prudential indicators were being monitored on a regular basis.
Another question frequently asked: Were the funds stolen insured?
The FSC did not address that question specifically, but noted “all securities dealers are required to have…fidelity insurance that covers various aspects of the operations of its company and its agents”.
It was, however, stressed that the figure is a minimum.
Issues were raised also about a former employee of the FSC taking a post at SSL, but McFarlane did not give a direct answer.
“I don’t want to speak to the specifics of any particular person. Suffice to say, over the years at the FSC persons leave, and after a period of time they seek alternative employment. Employment at the FSC should not be a fetter on your being able to earn a proper livelihood based on your skills and experience,” he said.
Asked if it could be seen as a conflict of interest, McFarlane, after a period of deafening silence, replied: “Again, I repeat again. I repeat. It’ll be unreasonable for employment at the FSC, for which you’re not guaranteed a lifetime appointment, should be a factor for you not to seek appropriate employment at some point in time after leaving the FSC in accordance with your skills and experience.”
McFarlane said he understood the connection that was being drawn, but said he wouldn’t allow himself to be drawn into addressing the concern that has been raised.