The fallout from the gigantic fraud at the Jamaican investment firm Stocks and Securities Limited (SSL) that wiped out more than US$12 million (BDS$24 million) from global athletics icon Usain Bolt, is still occurring.
The investment firm, which touts a corporate slogan of “Experience Financial Freedom, with SSL”, is now reeling from this scandal.
The mind-boggling fraud has cast a pall over that country’s financial system, forcing the sector’s leaders and the Jamaican Ministry of Finance to quickly scramble public statements of assurance that the expansive financial system was still safe and stable, despite what looks like one of the biggest thefts in its history.
Everton McFarlane, the man who heads the Financial Services Commission in that country has abruptly resigned, as the pressure mounts on both the regulatory body and SSL’s management to explain how such an incredible scam could have taken place right under their noses.
In an environment where banks and other financial institutions are required to submit suspicious transaction reports to financial intelligence units, where anti-money laundering regulations are a humbug, when seeking to move large sums of money forces people to jump through hoops, we are aghast that one employee swiped billions of Jamaican dollars from high-net-worth individuals over such an extended period without a red flag being raised.
Just how widespread the fraud scheme was is still unknown, as Bolt’s US$12 million was not the only client account that was looted. It must have been a shock to discover the sports star now has only US$12,000 in his investment account with the company.Attorneys for the multi-Olympic champion are in a desperate legal race to recoup the runner’s nest-egg.
The discovery at SSL, though miles away from Barbados, should prompt each of us to pay greater attention to our investments, savings in institutions, and any financial asset accumulated. Investment products in Barbados are fairly simple. They range mainly from the straightforward fixed deposit accounts to mutual funds, pension funds, corporate securities, government bonds and treasury notes. Insurance policies are another favourite with Barbadians.
Regarded among the most conservative investors, Barbadians tend to simply place their savings in deposits at banks and credit unions where interest rates are low, though credit union members have the added incentive of sharing in the surplus (profits) of the institutions.
This cautious approach to handling their savings and investments has not prevented them from being the victims of corporate abuse, such as what occurred with Trade Confirmers in which ordinary people lost hundreds of thousands of dollars.
The simple investment strategy did not protect Barbadians from
losses incurred with Manulife, the second largest insurer in Canada which left them out of the loop. The late Wismar Greaves, a former Supervisor of Insurance and chief executive at the Insurance Corporation of Barbados, led a valiant class-action lawsuit in the Canadian courts against the insurer.
The Greaves-led lawsuit alleged that Manulife knew that it would be demutualizing when it sold its Barbados operations, yet took no steps to protect the Barbadian policy holders rights to receive some of the CAN$ 8.3 billion in cash it paid to mainly Canadian policyholders.
Most important, the traditional investment pattern of Barbadians did not protect them from the fantastical collapse of CLICO International Life Insurance and British American Insurance Company. While the Government of Barbados managed a process, under consistent pressure from the Barbados Investors and Policyholders Alliance,that provided some settlements, it took years to resolve. Some investors in the controversial Executive Flexible Premium Annuities suffered major losses.
Government’s debt restructuring too, has also played on the minds of investors at the individual and institutional levels.
With the recent Jamaica debacle, Barbadians are looking to the regulators as their guard rail against dishonest characters in fancy skirt suits and expensive handbags, as well as their male counterparts who have access to citizens’ hard-earned funds.
On January 3, Barbados Financial Services Commission (FSC) issued a lengthy document outlining its Corporate Governance Guidelines under chairman Oliver Jordan.
Given his background as the early Judicial Manager tasked with trying to clean up the CLICO mess, he and his officers at the FSC know that governance failures are frequently at the base of improprieties in financial institutions.
We cannot legislate ethics into people who are corrupt and dishonest at their core, but we can create governance and compliance structures and ensure that they are adhered to in financial and related institutions. This, rests squarely on the shoulders of boards of directors and regulators.