While the Financial Services Commission (FSC) cited Stocks and Securities Limited (SSL) over the last decade, the Jamaica Stock Exchange’s (JSE) Regulatory and Market Oversight Division (RMOD) cited and fined SSL multiple times in 2022.

The RMOD published nine monthly reports in 2022 which covered member-dealers/brokers and listed companies. SSL was cited in five of those reports with Proven Wealth Limited and Barita Investments Limited being cited in the May report for a late March 2022 submission and an incomplete July 2021 submission, respectively. SSL was cited seven times from the 19 listed actions in that May report.

The main offence that SSL was written up for was the late submission of monthly and quarterly reports which is required by all member-dealers of the JSE. The May 2022 report even mentioned SSL’s 2021 reports being late with the April 2022 report mentioning that SSL had an incomplete broker report for February 2022. SSL was subject to JSE Rule 211 which prescribes for fines from $2,500 to $5,000 per day including public holidays and weekends until the information was submitted to the RMOD.

Except for the July 2022 report covering May 2022 monthly returns, every other month had 14 out of 15 or 13 out of 14 reports submitted on time with SSL’s late submissions being a reason for this less than 100 per cent on time submission.

Apart from member-dealers monthly returns being mentioned, the RMOD also discussed the excess net capital of member-dealers and categorised them by six different ranges. In the April report, it was noted that one member-dealer of 14 had a net capital deficit for the March 2022 period.

When the Jamaica Observer checked the publicly available disclosures and financials of the various member-dealers, only four could not be confirmed since these were private entities. SSL was one such broker while FHC Investments Limited was not on the reporting list for the March 2022 period.

That member-dealer continued to be in a capital deficit until July 2022 as confirmed by the August 2022 monthly report. While no broker was suspended for the capital deficit, the JSE rules state that the broker would have had to explain the reason for the deficiency and plans to correct it within 30 days or submit proof that adequate capital had been injected into the firm since the April report.

This coincided with the effective sale of SSL’s 79.08 per cent stake in SSL Venture Capital Limited (renamed MFS Capital Partners Limited) to MFS Acquisitions Limited on July 21 for $29.99 million.

The RMOD is the regulatory arm of the JSE which oversees the regulatory affairs of the Jamaican stock market. It is governed by the Regulatory & Market Oversight Committee which is composed of independent directors Janet Morrison, Livingstone Morrison, Dian Black, Eric Scott and Michael McNaughton. Janet Morrison chairs the board after taking over from Livingstone at the end of 2021.

SSL had also been selling other listed securities in 2022 which went to bolster the broker’s capital base at a time when other brokers were seeing their capital base being eroded or receiving capital injections from their parent companies. SSL sold 30,514,053 shares of FosRich Company Limited during the first nine months of 2021 which ranged from $0.91 to $4.90 during 2022 after accounting for the 10 to 1 stock split.

SSL also sold 11,541,387 shares of Everything Fresh at $1.28 on September 22, 10 million shares at $1.29 on November 11 and 10 million shares at $1.21 on November 23. This amounted to $39.77 million.

The JSE has a compensation fund which had total assets of $927.03 million at the end of 2021 with net equity of $894.84 million. Although this fund is to compensate investors for pecuniary loss in events of fraud and defalcation by a member-dealer, an executive highlighted that payments and claims are determined by the JSE board and that payouts can be capped.

The compensation fund is funded by the contributions of member-dealers based on the value of business done with the JSE by trade values. It fulfils its obligations of the JSE under Sections 27 through 35 of the Securities Act by its administration of the fund.

When the Business Observer reached out to JSE Managing Director Marlene Street Forrest on what protocols and measures are being brought in to enhance investor safety, she said, “Further in March we will be rolling out the JSCD Client Customer Portal which will also provide more information to member/dealer clients and for ease of queries. Given the instances of alleged internal fraud, a self-assessment checklist will be designed during the first quarter of this year, that will assist member/dealers to review and improve their internal controls for the protection of client assets and supervision of their officers.”

Investors can currently check their brokers platform, Jtraderpro.jamstockex.com, create an account on jamstockex.com and input relevant details or contact the Jamaica Central Securities Depository directly.

The JSE MD referenced JSE rule 228 on the disciplinary proceedings for member-dealers which sets out reasons for which a licence can be suspended or revoked. Apart from the capital deficit, there is also any act which results in a member-dealer being convicted for a criminal offence involving dishonesty or fraud. Delinquency in submitting monthly reports to the exchange exceeding 60 days from the due date of such report or failing to pay accrued fines within a period of 90 days from the date of the breach for which the fines are charged.

Street Forrest also referenced the fact that the JSE has several procedures in place to protect investors such as, “The tightly coupled system of trading and depository platform; the surveillance of members and verification of password procedure; our own cybersecurity environment; the requirement for brokers to present monthly financial report and audited financial statements; the management of the repo framework; the customer interface for verification of accounts and portfolio balances at brokerage; on-site and offsite examination of member/dealers equity ordering procedures.”