Club members of popular foreign currency trading outfit Olint and indeed most of the country are preoccupied with two questions: Will people be able to recover their invested funds and what happened to all that money?

Smith... Jamaicans should pray for Olint and keep their fingers crossed

The answer to both those questions resides with Olint's main principal, David Smith.

Olint was expected to make a significant payout last Friday, a deadline that came and went with no good news for its club members, many of whom have not received a payment since the beginning of the year. Earlier this month, Smith, speaking to journalist Cliff Hughes, said that Jamaicans should pray for Olint and keep their fingers crossed that the money arrives in Jamaica. Alas, divine intervention did not materialise.

Many club members expressed concern, and by Monday of this week, a foreboding picture was painted when its Braemar Avenue office was closed and an e-mail was released to all club members, part of which read: "It is with some regret that we advise that, as a result of threats to staff members, including a bomb threat within the last few days which is being taken seriously, the Club Member Care Office will be closed to the public as of Monday, July 14, 2008. Efforts are being made to address the matter and we will advise you further."

The e-mail went on to read: "We fully appreciate that this sort of behaviour may well flow from the failure of the Club to honour recent encashment requests in a timely manner, including our most recent efforts. The fact is that the last 18 months have been testing ones for the club, as we were clearly faced with conspiratorial scheme(s) since 2006, designed for us to fail by causing a run, to drive us out of business and out of Jamaica. That result would no doubt have brought satisfaction to regulators and bankers who, by the methodology of their efforts, could have no other intent."

The e-mail then went on to take aim at the press: "The fact is that the constant negative and speculative reports have wreaked havoc on us. The effect, if not the purpose of these orchestrated speculative reports, is that collectively, they are intended to and do cause ever-increasing levels of encashment, which no sound financial operation can withstand indefinitely.

"These negative and speculative press reports have put a strain on the management of the fund and the fund has come under more and more scrutiny, which has also itself been triggered by the increased encashment demands."

This missive clearly blames the regulators, the banks and the press for Olint's misfortunes, but at no time and nowhere does it allay the fears of its members by giving them a definitive date as to when they can expect their money and what happened to all those millions of US dollars.

According to a press report this week, Olint sought to wire US$200 million through a prominent Jamaican bank. The bank in turn reported the activity to the authorities and an investigation followed. The bank in question was not named.

Olint has not endeavoured to confirm the veracity of that statement, leaving NCB prudently to categorically state its position.

"It is well known that Olint Corp Limited has accounts with National Commercial Bank Jamaica Limited (NCB), and NCB has been required by a court injunction to keep the accounts open. NCB is not aware of any attempt to send such a wire through NCB, and has not reported any such attempted wire as suspicious activity," read a release from NCB.

Both the Financial Services Commission (FSC) and NCB made it clear earlier this week that they were not the ones preventing members encashing Olint cheques inferring that once members had cheques they could be cashed. The excuses were slowly being whittled away.

The demise of Olint, it is widely believed, will have a detrimental impact on the Jamaican economy, precipitating another damaging blow to the banking sector. Likely results would be high-end vehicle dealerships may see a fall in sales, there may be a few home repossessions and there may be a discernible dip in consumer spending. However, this boost brought on by unregulated investment schemes was an aberration, with virtual income creating a false sense of reality.

Minister of finance Audley Shaw noted that the banking sector is unlikely to be adversely affected. He pointed to healthy capital adequacies and excellent ratios and the sound footing of commercial banks, merchant banks, credit unions, brokerages, and merchant banks.

The investment and banking sector is based on a fiduciary obligation and honour. It is incumbent on practitioners to conduct their business in a professional manner and to run their businesses in a transparent manner. Thus audited statements are issued on a timely basis. These audited statements are prepared by reputable firms thereby lending credibility to the endeavour.

For some time now, Olint has not been forthcoming about its operations. It did not make a concerted effort to comply with the demands of the regulators, choosing to remain steadfastly obstinate. To this day it is not known what sum Olint has under management. Some say close to US$1 billion, others speculate US$750 million. Then there are those who believe that it is closer to a quarter billion US dollars. What is clear, however, is that the club has a sizeable sum requiring professional management.

Club members must be left in no doubt whatsoever that the Government will not be bailing them out. There will be no FINSAC II. Senator Don Wheby made that very clear earlier this year with a statement which read:

"Cabinet today (Jan 7) endorsed a number of steps being taken, and to be taken, in the interest of the public regarding unregistered investment schemes.

While investors must bear the risk of their own investment decisions, the Government has a duty to ensure that these investment schemes are conducted within a regulatory framework that ensures appropriate and timely disclosures so their investors can more effectively evaluate the risks they take.

"The Financial Services Commission will continue taking action prescribed under the law to prevent entities from offering securities to the public in contravention of the Securities Act. This will involve the issue of cease and desist orders and the engagement of the Financial Investigation Division (FID) and their instituting prosecution where necessary.

"Cabinet has also given instructions for urgent steps to be taken to ensure that legislation adequately addresses the operation of investment clubs. Investment clubs, where they operate in other jurisdictions, are limited in the number of members they may have and are required to allow members to participate in the investment decisions made by the club.

"The FSC will consider applications from any entity for registration and/or licensing under the existing legal provisions. Such applications will be processed in accordance with established criteria, which include minimum capital adequacy, fit and proper assessment of principals and operating officers and the filing of appropriate returns to enable regulatory oversight.

"Genuine investment schemes committed to proper standards of operational conduct should have no reluctance in submitting themselves to this regulatory framework.

"The Government will not allow them to elude oversight and to expose to irresponsible risk, the hard-earned savings of innocent members of the public."

In effect, club members will have no recourse other than Olint for their money. So what does David Smith propose to do about it? His representatives have been strangely quiet, and he has not stood before his flock and calmed their nerves.

He would be no less of a man if he admitted that bad trades have derailed the operation and that he will be offering his members 50 cents on the dollar on their principal before terminating the company. Or he can choose to give them the option to trade the remainder of the funds as a regulated, compliant organisation, issuing timely statements that will ensure that principals are repaid.

In short, he has to clearly articulate how he intends to make good. His efforts should not be wasted apportioning blame for his company's misfortunes to the banks, the press and the regulators. Rather, he should concentrate on what has to be done now.

So what happened to all that money? It may be the case that Smith concentrated on trading, leaving the management to professionals. The back-room operations were probably overwhelmed by the sheer volume of members. In that case, they too are culpable here and were remiss in not outlining Olint's predicament.

It may also be the case that having paid out anticipated returns to his club members, and with no new money coming in; he was caught between a rock and a hard place. Then again, the question has been posed: Was he fully engaged in foreign currency trading, or were there detrimental lapses?

A local analyst speaking with Caribbean Business Report said: "You summed it up earlier in that article, 'Olint at the crossroads', when you said if the goal posts keep moving a lot of people will get pissed-off. I've got the quote here on my desktop: 'If David (Smith) does pay out everybody what he should rightfully pay them, then there will be a huge sigh of relief right across Jamaica. His reputation will be enhanced both professionally and personally. If he does not, he will be stigmatised as a charlatan and rendered a pariah. His fate lies in his own hands. His word, dare I say it, has to be his bond.'

"I think that about says it all, don't you?"

The fear factor

Feeding the multitude

DANGEROUS PETS