FSC pulls plug on SSL accepting some new funds

Observer business writer

Friday, March 27, 2020

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The Financial Services Commission (FSC) has pulled the plug on investment and stockbrokerage firm, Stocks and Securities Limited (SSL) accepting some new funds from customers. But SSL assures that it is dealing with the situation and that the FSC has expressed satisfaction with its progress.

The move comes as the regulator for non-deposit taking institutions has sanctioned SSL over what it deems as the company engaging in unsafe and unsound practices. FSC Executive Director Everton McFarlane has already communicated the regulator's concern to SSL regarding certain aspects of the investment and stockbrokerage firm operations.

Meanwhile, SSL has been working closely with the FSC to put corrective measures in place based on the FSC assessment, according to SSL CEO Zachary Harding.


“SSL is in safe hands and we have nothing to hide,” Harding told the Jamaica Observer. “It is no secret that there were challenges in the recent past. My role now, as group CEO, is to fix them and ensure we have a stable and thriving business. We are in touch with the FSC on a regular basis and even have an in-house Risk and Compliance officer, Sonia Nicholson, who makes sure we are doing the right things at all times.”

“In fact, the FSC, in our last discussion with them, expressed satisfaction with our level of urgency and attention to matters arising and congratulated us on taking these matters seriously and working in a fully transparent and proactive manner to have them resolved,” Harding told the Caribbean Business Report.

“It is not unusual for the FSC to give directions and guidance to financial institutions. That is the purpose of a regulator - to ensure compliance of a licensee while protecting the interests of the customers. We welcome and respect any guidance from the FSC, as we see it as being in our best interest also,” he said.

Our investigations have revealed that the company is highly liquid, particularly given its recent sale of majority shareholdings in microfinance and cambio operator, Dolla Financial Services, which also have operations in Guyana. The multimillion-dollar sale of the Montego Bay based entity with seven branches spread mostly across rural Jamaica is to be completed in two weeks.


Among the FSC's concerns with SSL is the belief that the company is holding increasingly large client cash balances, which are not being invested and that SSL has failed to ensure that proper liquidity management procedures are in place.

However, our sources indicate that the FSC is unconcerned about SSL's liquidity and viability as a business given its strong financial health but is more concerned about ensuring that the regulatory breaches are cleared up.

Our own probe confirms that the company is financially sound aside from the regulatory breaches. In his October 25, 2019 correspondence addressed to SSL Chairman Jeffrey Cobham, McFarlane outlined the FSC's areas of concern.

He charged that, “SSL failed to ensure that proper internal records are maintained for both on-and off-balance sheet funds under management, which prevented the FSC from confirming the adequacy of securities held by SSL to cover client liabilities and as a consequence...SSL has also contravened section 63 (1) (a) of the Securities Act and regulation 12(1), 12(2) and 12 (3) (c) (i) of the Securities (Conduct of Business) Regulations, 1999.”


In light of cited contraventions, the FSC issued a six-point directive which includes a demand that “SSL take the necessary steps to eliminate the $1.1 billion of client funds that are not invested in securities within two months of the date of these directives, and provide the FSC with a board-approved policy relating to the treatment of client funds not yet placed”.

In addition, the company was ordered to commission and execute an independent audit of the off-balance sheet portfolio and on-balance sheet client interests at September 30, 2019 – within three months of the directive – showing evidence of the value of the assets and client liabilities within the off-balance sheet portfolio as of the reporting date, the value of the on-balance sheet client liabilities, as well as the value of assets (including liquid assets, effectively segregated) assigned to the on-balance sheet liabilities.


SSL was also ordered to notify the FSC forthwith of the completion of the audit and deliver the independent audit report to the FSC within 24 hours of receipt, and to refrain from accepting any new funds in relation to portfolio management services until the items in all the directives stated above are satisfactorily addressed and verified by the FSC.

The company was further directed to develop an SSL board-approved risk management policy, with appropriate risk limits and safeguards, inclusive of related party limited and liquidity management. This is to be done within three months of the date of the directives and proper record management is to be implemented to ensure that processes and procedures are transparent enough to guarantee ethical and regulatory obligations are met within six months of the date of the directives.

The FSC has advised that it may, at any time, conduct an on-site and or off-site examination of SSL in order to satisfy itself that the directives have been fully complied with, advising that any breach will result in “heightened enforcement action” being taken.

We contacted the FSC seeking an update on whether the restrictions have been listed, but were advised by FSC Communications and Investor Relations Manager David Geddes that “the FSC does not comment on matters involving a regulated entity”.


When contacted, SSL CEO Zachary Harding admitted to the directives given by the FSC amid concerns being raised about certain aspects of the company's operations.

He conceded that the FSC has pulled the plug regarding SSL being able to accept new funds from customers but sought to explain that this wasn't a widespread bar of receiving funds but, rather, was confined to a certain category of funds. He would not go into details on this.

In a statement prepared in response to a number of questions submitted by the Jamaica Observer, Harding declared, “SSL has been working closely with the FSC to put corrective measures in place based on this assessment. Following the conclusion of our examination in September 2019, the FSC advised SSL of corrective actions for some specific areas of concern. To date, SSL has resolved the majority of the issues and have demonstrated clear progress in other areas.”

According to the SSL CEO, “Based on our consistent dialogue with the FSC we can say that the company is on track for completion within the required time frames. The FSC has also expressed satisfaction with measures put in place and the progress made to date.”

He welcomed the input and directives given by all regulators, “as we view these as a necessary part of the process required to achieve our goal of being a world-class financial firm. SSL would also like to highlight that, during the period, we continued to meet and exceed all our regulatory benchmarks with the FSC”.


In part two in Sunday Finance we will delve into the corrective measures being rolled out by SSL in compliance with the FSC directives.

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