Finance Minister Dr Nigel Clarke said the Government’s intervention to cover the operating expenses at fraud-hit Stocks and Securities Limited (SSL) is not a bail-out. Clarke made the claim in an X (formerly Twitter) Spaces on Friday.

He explained that based on the timeline since January, SSL no longer has the capacity to sustain itself and cover its own bills. These bills include the lease of the building from which it operates, legal fees, and staff costs which amount to around $14.5 million monthly. Of the amount, $9.5 million is for paying the 22 remaining employees, down from 33 in January. SSL staff stayed off the job last Thursday after the August payroll was delayed.

“I would ask for your reasonable understanding. If we’re interested in getting to the bottom of it, this is a choice that we have to make. It does not represent the support of the shareholders of SSL and does not represent a bailout of SSL. For there to be a bail-out, there has to be a beneficiary. There is no SSL shareholder who’s benefiting from the Government’s support of the employees. There is no SSL client who is benefiting from the support of employees. This is completely in the public interest of ensuring that the investigation is thorough and complete,” Clarke said on Friday.

Clarke pointed out that SSL’s owners/shareholders, which largely includes Stocks and Securities (Barbados) Limited, have lost their entire investment and that there’s no benefit to be received. This does not mean that SSL clients have been wiped out from the entity’s current situation.

Clarke also added, “So the employees, having been there over the past few months, it’s not as if it’s been for no gain, the investigators are now reporting affected accounts that are 75 per cent higher than initially reported. Had we brought the curtains down, as some stakeholders of SSL would have wanted us to do, it is highly likely that the losses would have been there, but that the investigators would not have expanded their investigation by 75 per cent as measured in terms of the accounts.” His reference is to a release last week which showed the number of accounts that are subject to fraud at SSL stands at 70, up from the 40 that was initially reported when the investigation started earlier this year.

Clarke noted that the intervention is necessary as the Government is committed to moving forward with a thorough, transparent, and unfettered investigation. He also noted that the Government’s support of covering SSL’s operating expenses is conditioned on the Financial Services Commission (FSC) and temporary manager using all available legal means to monetise assets on SSL’s balance sheet.

While Clarke didn’t give a definitive answer as to the source of the interventional funding, he mentioned that there would be checks made surrounding the FSC’s reserves as a possible source to cover the temporary intervention. The FSC’s last published audited accounts for 2021 revealed $1.88 billion in reserves and $11.90 million in a financial distribution to the Government’s consolidated fund. The bulk of FSC’s income is generated from fees charged to the securities dealer, insurance companies, and pension fund managers it regulates.

He also confirmed that the intervention into SSL wouldn’t go on for an indefinite period but would be done to ensure that the investigation can continue without any impediments.

Dr Clarke noted that the intervention is necessary as the Government is committed to moving forward with a thorough, transparent and unfettered investigation. He also noted that the Government’s support of covering SSL’s operating expenses is conditioned on the Financial Services Commission (FSC) and temporary manager using all available legal means to monetise assets on SSL’s balance sheet.

Dr Clarke further mentioned that the inclusion of forensic audit firm Kroll Associates UK in the investigation has come through the assistance of the British Government, which has provided financial support for their services. The finance minister didn’t provide a cost related to their services, citing potential confidentiality clauses. However, he confirmed that they were in Jamaica in the prior week and that the Financial Investigation Divison’s (FID) expenses form part of its budget.

The FSC is currently involved in a court case with SSL and Caydion Campbell who the prior SSL board of directors tried to appoint as trustee of the business based on a submission to have a member’s voluntary wind-up of the firm. The FSC took over the operations of SSL in January with Kenneth Tomlinson acting as the temporary manager. While the court case is still ongoing, Dr Clarke noted that if the FSC was to lose the case, the job of the FSC and Tomlinson could become harder.

“It’s no secret that there is a matter in court where the former directors of SSL had applied for a voluntary winding up of SSL and sought to appoint their own trustee that would steward that winding-up process. The FSC maintains that this is after the FSC appointed a temporary manager and the FSC and government’s desire is for that temporary manager to oversee SSL into the next stage. The former directors of SSL are maintaining that what they instigated should prevail and not so much them, the trustee, who was appointed by them, his appointment is valid,” Clarke noted in his limited commentary on the case.

When asked why the need to keep SSL’s staff employed, Clarke highlighted that the SSL clients still have live accounts which are receiving dividends, interest income and other forms of income that require the proper administration by human beings. This stems from not allowing client funds to be moved to other financial entities during the course of the investigation.

“The Government’s support of SSL payment of employee cost and direct expenses is conditioned on the FSC and the temporary manager using all legal means available to pursue the monetisation of any asset on the balance sheet of SSL inclusive of any accounts receivable. The Government will not accept a simple statement that accounts receivable balances are uncollectable. Under these circumstances of the Government providing support, the Government and people of Jamaica will accept nothing less than a court order either in Jamaica or whichever territory is the registered territory of any legal entity that owes money to SSL. Only a court in that jurisdiction pronouncing that entity as insolvent will suffice for us to conclude that those amounts are irrecoverable,” Clarke mentioned regarding the monetisation of SSL’s assets in the future.

SSL’s formal voluntary wind-up submission to the Companies Office of Jamaica in January was that 55 per cent of the $1.38 billion in assets as of June 2022 was other receivables. SSL has since sold all of its Jamaican listed securities following the termination of its member-dealer agreement in February. The FSC’s current court case is to have Tomlinson appointed trustee and that SSL be wound up because it is insolvent.

“Now SSL is not in any formal bankruptcy proceedings. I don’t want to sort of go ahead, but one can’t assume that the first use of funds that SSL comes into would be to repay the Government. This is a complex legal situation. The next stage would be insolvency proceedings for this entity and in the insolvency proceedings, the priority of liabilities, that’s a dense legal matter, and I wouldn’t want to pronounce on where the Government would fall in that schedule,” Clarke noted.