Legislation is coming that will prevent a court ruling similar to one that saw the temporary manager appointed by the Financial Services Commission (FSC) to oversee the fraud-hit Stocks and Securities Limited (SSL) thrown out in favour of the SSL-appointed trustee.

This was disclosed on Tuesday by Finance Minister Dr Nigel Clarke, as he responded to questions from Opposition Spokesman on Finance, Julian Robinson in the House of Representatives.

He said an insolvency bill is to be tabled in the Parliament before the end of the month with a view to plugging the gap in the current legislation.

On May 31, Supreme Court Justice, David Batts, ruled that the FSC’s temporary management of SSL through Kenneth Tomlinson was “ill-advised” and must cease with “immediate effect”. He ordered that control be given to Caydion Campbell, the trustee appointed by SSL.

The FSC had moved to block Campbell’s appointment and brought a lawsuit to that effect on January 23, 2023. However, Batts, in his ruling, stated that Campbell’s appointment on January 16, 2023 was “valid” and took precedence over Tomlinson’s appointment by the FSC on January 17, 2023.

Despite the ruling, Clarke noted that it was after the FSC intervened that it was discovered that the fraud, now in the region of $5 billion, was much bigger than initially thought, with many more clients affected.

The finance minister also noted that the court case centred around the issue of the property rights of the shareholders of an insolvent financial institution vis-à-vis the rights of the society to have a secure financial system.

Clarke pointed out that the country’s regulatory framework “stops short of recognising that property rights of shareholders of a failed financial institution, or an institution that is about to fail, or about to become insolvent, at some point has to be subordinated to the society’s rights for a secure and stable financial system”.

While acknowledging that the situation was created by an absence in the regulatory framework, Clarke said: “The good news is that before the end of June, we plan to table in this house, a special regulatory regime for financial institutions…an insolvency bill for the financial sector which proposes to resolve this gap that exists”.

Clarke was at pains to point out that the court, in its decision, “continued to recognise the property rights of shareholders of a failed institution that is beset by fraud, people have stolen money, stolen $3 billion and the judgment is that the property rights of the shareholders trumps the society’s need for financial sector stability”.

He suggested that Jamaicans did not fully comprehend the implications of the judgment.

“It is the responsibility of lawmakers to make sure that we plug that gap in legislation and regulation to ensure that it is very clear that you have property rights when you are functioning properly and you’re not posing a risk to the financial system,” he said.

“The moment it becomes apparent that you can pose a broader risk to the stability of the financial system, your property rights have to be subordinated to the rights of the Jamaican people to a stable financial system,” Clarke added.

He told his colleagues that the legislation is dense and will take some time to sort through because of its complexities.

“I’m going to count on the entire house to get through the legislation and to get through it in as quick a period as possible so that we can avert any problems in the future,” the minister said. He pointed out that the legislation will ensure that taxpayers are not called to account, to pay for failed financial institutions.

Clarke also pointed out that the judge did not impose a stay on any possible prosecution of any individual connected with SSL.

“As far as the investigation into [the fraud at] SSL is concerned, the position of the government is that you leave no stone unturned… get international help and follow the evidence wherever it leads…,” said Clarke.

He argued that had the FSC not gone in along with the Financial Investigation Division and international forensic experts, the full extent of the fraud would not have been uncovered.