Questions for Barita and the Financial Services CommissionWednesday, September 15, 2021
Questions continue to swirl around the relationship between Barita Finance Limited (BFL), Barita Investments Limited (BIL), and Cornerstone Financial Holding (CFHL) even after Cornerstone's Chief Investment Officer Jason Chambers addressed the issue last week.
Chambers had told the Jamaica Observer that “Barita Finance Limited is a special purpose vehicle whose shareholdings and directorship are totally independent of and external to Barita Investments Limited, the Cornerstone entities, and any of its directors.”
He also explained that Barita Investments Limited is the investment manager of Barita Finance Limited and acts as fiscal agent as it relates to debt issuances by Barita Finance.
“This represents the narrow and sole nature of the relationship between Barita Finance, Barita Investments, the Cornerstone Group, and any of its management, shareholders, directors and their connected parties, including the companies they own,” he added.
“Functionally, Barita Finance is a vehicle used to provide investors of Barita Investments with exposure to various marketable securities which form part of the suite of off-book investment structured products offered to the market,” Chambers said.
Chamber was responding to an August 31 report in the Trinidad Express questioning BFL's relationship with BIL in which it owned 14.9 million BIL shares up to the end of June 2021.
According to the Express, an investigation it conducted “uncovered the fact Barita Finance Ltd was incorporated in St Lucia under that island's International Business Companies Act as an offshore company on November 29, 2018 by a registered agent named Hewanorra Corporate Services Ltd with the incorporation number 2018-00544”.
The Express added that its investigation “also uncovered the fact that a company named 294 Inc was also incorporated in St Lucia under that island's International Business Companies Act as an offshore company on November 29, 2018, by a registered agent named Hewanorra Corporate Services Ltd with the incorporation number 2018-00540”.
On September 1, the Express reported that Cornerstone Financial Holding Ltd, a privately held company, purchased an additional 15 million shares in its publicly held subsidiary, Barita Investments Ltd, on the floor of the Jamaica Stock Exchange on August 16, 2021.
According to the Express, it was privy to a report that, of the 15 million shares acquired by Cornerstone Financial, some 12,047,520 shares (80.31 per cent) were sold by a company named Barita Finance.
The newspaper also reported that a significant number of Barita Investments shares traded on August 16 were sold by “two siblings, one of whom is a director of the company and the other is the corporate secretary of Cornerstone United Holdings Jamaica. The latter sibling holds a regulatory position regarding financial institutions in Jamaica. Cornerstone United Holdings Jamaica is described as the counterpart of Cornerstone Financial on the company website”.
The transaction, the Express noted, is significant because it came exactly two weeks before the publication on Monday, August 30, 2021 of the prospectus for the additional public offering (APO) of shares in Barita Investments.
The APO opened on September 6 and is scheduled to close on September 21.
The prospectus for the APO indicates that Cornerstone Financial owned 806,566,479 shares in Barita Investments, constituting a 74.30 per cent stake, as at June 28, 2021. The purchase of the 15 million shares on August 16 takes Cornerstone Financial to a shareholding of 821,566,479 or 75.67 per cent of Barita Investments.
Since the Express report, other questions have been placed in the public domain for both Barita and the Financial Services Commission (FSC):
1. What is the fiscal year for Barita Finance Ltd?
2. What percentage of Barita Finance Ltd's total investments were shares of the Cornerstone companies as at September 30, 2020, December 31, 2020 and June 30, 2021?
3. Should Barita Finance be disclosed in Note 17 of Barita Investment Ltd's September 30, 2020 audited accounts as a related party since it is branded “Barita” and is a product offered to investors of BIL and because BIL clearly has control or influence over Barita Finance Ltd?
4. What percentage of the shares traded in BIL from September 1, 2020 to the present day involved Barita Finance as one of the parties in the trade?
5. Has the Financial Services Commission requested and found out who are the ultimate beneficial owners of Barita Finance Ltd?
6. How much fee income in BIL was earned from Barita Finance Ltd for the year ended September 30, 2020 and for the six months ended June 30, 2021?
7. Are the retail client investors of BIL who invested in Barita Finance aware of the portfolio of investments on the books of Barita Finance Ltd?
8. How much BIL shares did Barita Finance purchase last year October and from whom did they buy those shares?