FOSRICH Limited said its rights issue which was approved last year is set to get underway shortly, after it was delayed because of the inability of its shareholders — who hold their stake through Stocks and Securities Limited (SSL) — to participate.

The shareholders face the difficulty because their accounts at the brokerage house have been in limbo since the Jamaica Stock Exchange terminated the company’s licence as a member-dealer while it is being run by a temporary manager in the wake of a multi-billion-dollar fraud uncovered earlier this year.

A rights issue is a type of corporate action that allows existing shareholders to buy new shares at a discounted price, usually to raise capital for the company.

FosRich got the green light from its shareholders, at its July 2022 annual general meeting (AGM), to execute an equity raise and a ten-to-one stock split meant to assist with its growing business opportunities. The offer got additional confirmation when June 2 was set as the record date to be part of the equity raise through which the company is authorised to issue up to 126 million shares on a pre-split basis.

However, it was revealed at the AGM held on Tuesday that the offer has been stalled due to SSL clients being unable to execute any actions since SSL was terminated on February 24 and all securities held at the Jamaica Central Securities Depository (JCSD) were moved to escrow accounts. SSL was the lead broker for FosRich’s December 2017 initial public offering.

“I do wish to note that we have been held up for three months, specifically trying to deal with SSL shareholders which represent about 25 per cent of the shareholders. So, we believe we’ve come up with a good solution between the JSE and FSC, and that notice will come out that will allow those approximate 1,000 shareholders the ability to participate just by demonstrating they’re a shareholder, but opening an account with a non-SSL broker because SSL clients directly cannot participate using their SSL brokerage account. As long as they use the same TRN number, open up a new brokerage account with any other broker and in that way, they could still participate. We’re going to give special notice in that regard,” said senior vice-president of investment banking at Mayberry Investments Limited Dan Theoc at the FosRich AGM.

FosRich Managing Director Cecil Foster said in an earnings call that it had received approval for the rights issue in March but didn’t mention an expected timeline for the capital raise. The offer would be for around $139 million and puts the company squarely around the $500-million mark for its share capital — which is the limit for Junior Market companies.

Theoc mentioned that the entire rights issue will be fully electronic and will be done online with brokers such as NCB Capital Markets Limited and Mayberry Investments. While he didn’t delve into the price of the offer, he said it has been attractively priced for the company which is growing substantially.

“Within the next seven to ten days we expect the circular to come out, and then it will give a sort of 10-day notice period before we actually have the opening for the rights issue. The notice will be on the Jamaica Stock Exchange and will be publicised quite a bit,” Theoc added.

SSL was the tenth-largest shareholder in FosRich up to the end of 2022 with 22,689,783 shares. However, there was a fire sale on the same day SSL’s licence was terminated, equating to its FosRich stake and sales in other securities related to its proprietary and managed funds in the prior weeks.

SSL has more than 9,000 clients, according to Finance Minister Dr Nigel Clarke in prior public discussions. Many of these individuals have been unable to move their securities held at the JCSD to other brokers due to the current JSE protocol requiring that the broker where the shares are held initiate the process, even though SSL is no longer a member-dealer. Clients who have reached out to SSL have been met with statements that the Financial Services Commission (FSC) must approve any transaction at the securities dealer that has been under temporary management since January 17.

The FSC is currently in a legal battle with SSL which is set to get underway in the Supreme Court on July 3. The FSC released a public statement on June 12 highlighting that it will advise the public in due course and will make updates once this does not prejudice investigations by law enforcement. SSL had a court hearing on Tuesday in the commercial division of the Supreme Court against Boost Financial Services.