The Financial Services Commission (FSC) suffered a major defeat on Friday when Justice David Batts dismissed its claim to maintain control of fraud-hit Stocks & Securities Limited (SSL) and ruled that no legal action can be taken against the investment house without the court’s permission.

The ruling in the high-profile suit, which was brought by the FSC, clears the way for SSL-appointed trustee Caydion Campbell to proceed with the wind-up of the firm under a court-supervised process.

Responding to the judgment, the FSC, in a late-afternoon statement, said it respects the court’s decision but will remain actively involved in the winding-up process to ensure that it is conducted transparently and in the best interests of all stakeholders.

It also quoted its Executive Director Lieutenant Colonel Keron Burrell as saying that “the commission is currently reviewing the judgment and assessing the available options, including potential further applications to the court in furtherance of its mandate as regulator”.

The FSC also said it “will continue to work to safeguard the interests of SSL’s clients and the broader financial system”.

The regulator also noted the court’s confirmation of the insolvency of SSL and said that the mandated court-supervised winding up of the securities dealer underscored the gravity of the situation facing the company.

“Such an order validates the FSC’s assessment and regulatory actions that would have been taken up to this point,” the regulator said and pointed out that the fact that the court found no issue with the conduct of the temporary manager appointed by the FSC was a recognition of “the diligence exercised during the management period”.

Campbell’s attorney, Caroline Hay, in a reaction immediately after the ruling, said “We are clearly very happy for not just our client whose reputation and even his integrity and competence were challenged by the litigation by implication, but we are also very happy for the creditors and other persons who were affected by this unnecessary litigation, and I think that it is a wonderful addition to the jurisprudence of the region.”

HAY… I feel a lot of happiness for the good people who worked at SSL

Hay said her anticipation was that the judgment “will assist regulators with determining where are the appropriate bounds and improve the understanding of how regulatory legislation and the Companies Act and other legislation work together, especially when a corporate body is in distress”.

Additionally, Hay said she was particularly happy with the court’s decision, given that SSL employees and stakeholders may have suffered tremendous reputational damage as a result of the ongoing scandal.

“I also feel a lot of happiness for the good people who worked at SSL, the employees, the stakeholders there who did their best to keep this going and who may have themselves suffered reputational damage,” she said.

SSL is at the centre of a $5-billion fraud imbroglio on more than 200 accounts, the victims of which include legendary sprinter Usain Bolt.

Campbell was appointed by SSL’s former board of directors as the trustee of the firm to carry out a members’ voluntary wind-up on January 16, 2023.

The FSC, which took the matter to court, had been fighting to retain control of the firm which it had intended to wind up under temporary manager Kenneth Tomlinson, whom it appointed on January 17, 2023.

However, in his ruling, Justice Batts said he found that SSL’s conduct, in deciding to commence a voluntary winding up, was reasonable in the circumstances, as time was of the essence and media interest high.

He also said that there was no suggestion that Campbell is unsuitable or incapable of performing the task assigned to him, neither could any such argument be made based on the evidence before him.

Additionally, Batts ruled the winding up of SSL lawfully commenced on January 16, 2023 and “shall recommence but shall be subject to the supervision of the court with liberty to creditors, contributories and all relevant and interested parties to apply to the court and be subject to such further or other conditions as the court may order”.

He also ruled that the temporary manager and the FSC “shall provide the trustee with all reports and other pertinent information in their possession as well as all relevant information he may request in furtherance of his duties”.

Batts also ruled that, “The trustee shall, in accordance with Section 282 of the Companies Act (as amended by the Insolvency Act), apply to the supervisor of insolvency for an assignment in accordance with the Insolvency Act and shall thereafter proceed in accordance with the provisions of that Act”.

Additionally, the judge ordered the trustee to submit a report to the court within the next 90 days, and said that the court will convene on September 26, 2024 at 10:00 am for two hours “in open court to consider any applications”.

In his reaction, Opposition spokesman on finance Julian Robinson called on the Government to urgently address the implications of the ruling that ousted the FSC from its temporary management of SSL.

“Control of SSL has now been handed over to a private sector insolvency practitioner,” Robinson said, adding that he was deeply concerned about “the potential negative impact on investor confidence, both locally and internationally”.

“In Jamaica today, the statutory regulator of the financial services industry has been removed from managing a company at the centre of a major fraud scandal. This decision to place SSL back under the control of a private sector insolvency practitioner, who was appointed by the same individuals responsible for its control and mismanagement prior to the FSC stepping in, raises serious questions about the effectiveness of our regulatory system,” he stated.

He urged the Government to provide a comprehensive plan to prevent similar occurrences in the future.

“We need to know what steps will be taken to protect investors in Jamaica and ensure that our regulatory bodies are equipped to prevent and manage financial crises effectively. The public deserves clarity and assurance that their investments are secure and that robust mechanisms are in place to uphold the integrity of our financial sector,” Robinson said.