THE Jamaica Securities Dealers Association (JSDA) says it is preparing to learn from the issues which led to the multi-billion-dollar fraud at Stocks and Securities Limited (SSL), saying the incident is “very unfortunate and doesn’t reflect the industry on a whole”.

The association added that its members are keen to implement measures to strengthen the prevention and detection of fraud as it assures nervous investors that their funds remain safe.

The securities dealers gave the assurance at a Jamaica Observer Business Forum on Thursday as they seek to restore calm amid jitters in the market caused by the issues at SSL, adding that “fraud doesn’t decline the efficacy or the strength of the controls within the industry as a whole. It does, however, potentially highlights weaknesses” to be eliminated.

“The reality is that this particular incident is unique. It’s an outlier. If you look at the history of the industry, occupational fraud, employee fraud, theft, is very low and there are data and history to support that particular view,” Steven Gooden, CEO, NCB Capital Markets and president of the JSDA, told the Caribbean Business Report.

“If that wasn’t the case, then you would’ve seen continued losses, et cetera, being incurred by securities dealers, and we would have been required to hold more capital as a result,” Dane Brodber, the interim CEO at Barita Investments, added.

Other heads of securities dealers at the Business Forum were Tara Nunes, CEO Sagicor Investments; Julian Mair, chief investment strategist, JMMB Investments; Johann Heaven, group deputy CEO, Proven Wealth and vice-president of the JSDA; and Gary Peart, CEO, Mayberry Investments.

“I believe the last public data show that the industry has north of $130 billion collectively in capital, with around $80 billion [of that amount] being above the regulatory minimum. The sector has adequate liquidity and all the prudential ratios speak to a healthy industry on a whole,” Gooden added as he outlined that the sector remained strong and well capitalised.

“In the likely case that fraud does occur, what is recovered is embedded in the strength and the capitalisation of the sector,” Brodber added.

“The regulatory requirements that we have for capital are meant to absorb the various risk associated with fraud,” he continued.

The group of CEOs pointed out that they have invested significant sums of monies, individually and collectively, “improving, processes, internal controls, investments in technology and analytical tools, to detect, monitor, and prevent fraud, and that investment is ongoing and we continue to spend significant amounts in that regard.”

“I mean, based on the information in the public, it would appear as if there was a significant breakdown in systems control at a particular institution,” Gooden added while stressing “we don’t have the facts” to ascertain what happened and how.

But he said, “From where we sit, any well-functioning institution with a proper governance framework, the type of fraud that is alleged to have taken place at SSL would not have.”

For Gary Peart, the issue boils down to one of honesty. “You can’t legislate honesty. Even from this situation, we’re waiting on the facts to see how, if we can actually improve even more the controls, et cetera, that we have in place,” he continued.

The group of CEOs added that they they will be advocating for improvements because “there are always opportunities to improve.”

But they argued that: “We take preventative steps and it starts from the processes that go into our know your employee statute…checking them before they get onboarded and ensuring that they go through the fit and proper process, to ensure that they are fit to be giving financial advice and dealing with clients. We have invested heavily in processes, technology, et cetera, to detect fraud. So let’s say somebody decides, you know, that honesty isn’t their policy and they decided to go ahead and fleece something. There is a system to detect it. And to the extent that that loss cannot be recovered from the individual [fraudster], let’s say the money is spent or whatever the case is, then there is the backstop of the institution that would ultimately, in some instances, absorb that loss.”

“We also educate our customers to say, notwithstanding, we believe we have gotten it correct, don’t think the pieces of paper that we’re sending you is an annoyance. It is a backstop that you need to be checking. So the statements, the transaction, contract notes, et cetera, you need to be checking it because you, the customer, has a personal responsibility to look after your money,” Peart added.

Despite the apparent fall down on the job with regards to SSL, the JSDA said the regulatory environment is very dynamic as well and is continually updated.

“When you look at what we have done as an industry, we are the poster child for other jurisdictions that are similar to us. That was a narrative up until last week, Thursday.

“And this unfortunate incident has [negatively] impacted the perception of the industry, not just locally, but globally. And it’s very, very, very unfortunate. We have done a lot to grow the industry, enhance industry, and most importantly, create value for our customers,” Gooden added as he pointed to more people investing in initial public offerings (IPOs) in recent years.

“I think how we deal with this particular incident is going to be very, very important, because the international community is watching. So it’s going to be very important how we deal with it. We need to deal with it swiftly and also take the learnings and implement the changes quickly so that the progress in terms of market growth and development is not stopped,” Gooden as he repeated the assurance, “We are going to learn from this and we are going to become better and stronger.”

The JSDA members said they have not seen any material fallout from the fraud, even though they are seeing more queries from clients and questions being asked about the security of their portfolios.

“We will use this incident as an opportunity to reinforce the ethos of the organisations and not resile from their responsibility of being forthright with customers,” Peart added.