JMMB Group Limited (JMMBGL) will be reorganising its regulated Jamaican subsidiaries under JMMB Financial Holdings Limited (FHL) as it moves to align its group structure with that of the Banking Services Act (BSA) of 2014.
JMMBGL was formed in May 2012 and became the ultimate parent company of Jamaica Money Market Brokers Limited (JMMB) in April 2015 under a scheme of arrangement which was approved by the Supreme Court of Jamaica and its shareholders. This was done when it acquired Capital and Credit Financial Group Limited, which had a merchant bank as one of its subsidiaries. The holding company was liquidated with the various subsidiaries falling under different parts of the JMMB Group. The acquisition also resulted in full and unhindered access to information by the Bank of Jamaica (BOJ) and be subject as an entity under the Financial Institutions Act of Jamaica.
According to the Companies Office of Jamaica (COJ), JMMB Financial Holding Limited was registered on December 22 with JMMB Group’s Chief Compliance Officer Carolyn DaCosta being the company secretary. The company’s 2021 financial notes explained that the new financial holding company will be regulated by the BOJ as a licensed financial holding company (FHC). DaCosta is also JMMBGL’s company secretary.
“The regulations say that a securities dealer could not own a deposit taking entity. In 2015, what we did was that we transferred ownership of the entities from the original parent Jamaica Money Market Brokers Limited to now the ultimate parent JMMB Group Limited. What we are now doing is a continuation in that the Banking Services Act which requires a financial group that has a deposit-taking entity within the group must have consolidated supervision and it must have a financial holding company that has ownership of all the financial entities. What we’re doing now is separating the regulated entities from the non-regulated entities,” DaCosta said at the group’s investor briefing held last Thursday.
Section 69, Part 1, subsection (a) of the BSA states that a FHC shall be established, and consolidated supervision will apply where two or more financial institutions in Jamaica are members of a financial group and one of them is a deposit-taking institution (DTI). Part 2 also states that the FHC should hold the DTI and all other financial institutions subject to sections 70 and 75. The passage of the 2014 BSA was one of the various omnibus bills required under the International Monetary Fund bailout package for Jamaica.
While JMMBGL directly owns JMMB, JMMB Bank (Jamaica) Limited and JMMB Money Transfer Limited, it is only a holding company with a stated intent of only owning equity investments in business enterprises. The reorganisation would result in all of the Jamaican subsidiaries falling under FHL except for JMMB Real Estate Holdings Limited and Capital and Credit Securities Limited (CCSL). CCSL is a special purpose vehicle and not an active company. The restructuring is not expected to require shareholder approval.
“JMMB Financial Holding is now going to be regulated by the Bank of Jamaica as a financial holding company owning all the regulated entities in the group. The cost is being managed and the team who is working on this project is ensuring we take the most cost and tax efficient way of transferring ownerships,” DaCosta explained the route to be taken.
When Sagicor Life Jamaica Limited (SLJ) transferred ownership of its various operating subsidiaries to Sagicor Group Jamaica Limited in September 2013, the consideration for the transfer of ownership was effected by non-cash interest bearing promissory notes. The value of those notes was $10.66 billion at the end of 2021 and mature in January 2024.
The reorganisation of various financial companies on the JSE during that decade saw the DTI or financial institution delist from the stock exchange(s) and become a wholly owned subsidiary of the FHC which was then listed on that stock exchange. The shareholders of that DTI were issued new shares in the FHC which mirrored their prior ownership in the DTI.
Listed company GraceKennedy Limited (GK) is currently in the process of creating a new unified GK Financial Group under a new holding company ahead of its planned listing on an international stock exchange. While the GraceKennedy Financial Group Limited (GKFG) currently owns all financial businesses in the GK group, it will be creating a new licensed FHC pursuant to the 2014 BSA. GK owns First Global Bank Limited through First Global Holdings Limited which also owns GK Capital Management Limited and GraceKennedy Properties Limited. The GKFG also controls listed company Key Insurance Company Limited.
GK Group Chief Executive Officer Don Wehby told the Business Observer in August 2021 that the restructuring was well advanced. This was also the reason why the GKFG went on a branding campaign under the theme of “Live a Graceful Life”. GK is currently in discussions with international investment bankers on listing their subsidiaries which also includes GK Foods. GK Foods owned $70.11 billion in total assets at the end of 2021 while the GKFG owned $129.68 billion in assets.
Barita Investments Limited is the other listed company which will fall under a reorganised FHC due to its ownership under Cornerstone Financial Holdings Limited. Cornerstone United Holdings Jamaica Limited owns 100 per cent of Cornerstone Trust and Merchant Bank Limited. Both Cornerstone entities have the same shareholders. Barita owns 100 per cent of Barita Unit Trust Management Company Limited. The reorganisation under a licensed FHC is expected to be completed by Barita’s next financial year (FY) according to the company’s second quarter report. Barita’s ends on September 30.
“In anticipation of the change, the Cornerstone entities will remain focused on, inter alia, strengthening the talent pool, risk management framework and corporate governance and bolstering the delivery of services to clients across the group by deploying a digital first strategy using multiple channels in order to provide frictionless service to our clients,” Barita’s 2021 annual report stated.