Investment and stockbrokerage firm Stocks and Securities Limited (SSL) has sought to set the record straight regarding being barred by regulator, the Financial Services Commission (FSC) from accepting new investment funds.
In addition, the firm has sought to explain the regulatory breaches cited by the FSC, while declaring that it is safe for business and that investors have nothing to fear. Company executives have hinted that the problems identified by the FSC in its October 2019 directive letter were being addressed weeks before receipt of the regulator’s correspondence.
As part of addressing the gaps identified by the FSC, company executives report that it was undergoing significant changes in its operating systems and personnel over the past two years pointing out that “these changes have undoubtedly impacted the company.”
According to SSL Chief Executive Officer, Zachary Harding, “SSL has remained committed to working along with regulatory bodies to ensure compliance and return the company to its strongest position. SSL has achieved the projected targets to return to stability towards the end of 2019 and continues to ensure that any remaining gaps have been addressed.”
Caribbean Business Report sought to investigate the regulatory breaches identified by the FSC, the result of which focussed on SSL’s regulatory issues and its failure to ensure that proper internal records are maintained for its on and off balance sheet funds under management and the fact that this failure preventing the FSC from confirming the adequacy of securities held by SSL to cover client liabilities.
However, Harding told Caribbean Business Report that the reference about failure to ensure that proper records are kept was as a result of a technical glitch in its IT system, which has now been corrected. According to Harding, “last year SSL underwent an IT systems upgrade. While client accounts remain safe, the new system unfortunately presented a gap in providing some information which is crucial to our regulators.”
He further explained “as soon as the cause was identified our IT experts fixed the issue. Again, with full transparency, we invited the FSC to evaluate the correction. We welcome and respect the FSC’s directions and guidance, and we were assured that everything is to their satisfaction and it was approved.”
During the period of examination, the FSC guided SSL to other areas that needed to be addressed in order to ensure that the investment and brokerage firm remains compliant and to date SSL continues to meet the statutes presented by the FSC, Harding declared.
Questioned why was SSL holding large sums of cash balances not being invested in securities, Harding responded, “Any sums of cash that were on our books, are fully accounted for, reconciled, and available to clients at any time. After a liquidity event, some clients opt to keep cash on their accounts until they are ready to invest with us again. In essence, they treat their investment account like a savings account and hold funds there to reinvest it in the future.
“SSL have advised our clients on how and where they can invest these large sums of cash, which in some instances have include ETFs (Exchange-traded funds) or private equity deals.”– SSL CEO Zachary Harding
He confirmed that an independent Operations Audit was successfully completed in January for the on and off-balance sheet assets and that “coming out of the audit, we had some reporting adjustments that needed to be done and these have now been successfully completed.”
Caribbean Business Report asked what steps have been taken regarding the $1.1 billion in client funds not invested in securities and the SSL CEO responded: “We have now placed these uninvested funds into bonds, securities and private equity deals. From the existing amount of uninvested cash, we have completed the placement of approximately 80% into such opportunities, approved by our clients.”
We quizzed Harding on whether SSL is now accepting new funds in relation to portfolio management services, which he replied that in the negative but made the point that it is however accepting funds into brokerage, investments and private equity deals as they are still fully allowed to do by the FSC.
On the general issue whether SSL is now in compliance with the FSC directives, as outlined in correspondence to the company addressed to Chairman, Jeffrey Cobham dated October 25, 2019, Caribbean Business Report was advised that to date, the firm have completed the necessary actions within the required timelines and continue to respond to the outstanding ones in a timely manner before they become due.
We further quizzed Harding about the circumstances that caused SSL to be in breach of the regulations, as stated in the correspondence from the FSC Executive Director but he emphasised that “for clarity SSL has not been in ‘breach of regulations but have been very transparent with the FSC and with the public in indicating that SSL has been restructuring and committed to aligning operations with good governance.”
He argued that the directions from the FSC clearly highlight “instances where an entity is about to engage in an unsound practice,” which he contends does not constitute a breach but was cautionary. Harding was adamant that SSL is safe and secured so much so that the FSC has not taken any action against the investment and brokerage firm outside of the October 25 directives, which they are for the most part now in compliance.
The SSL boss stated “We continue to work closely with the FSC and they have expressed great satisfaction with the actions and responses from SSL so far.” According to Harding, “the FSC has also expressed satisfaction with measures put in place and the progress made to date. Most importantly, SSL welcomes the input and directives given by all regulators, as we view these as a necessary part of the process required to achieve our goal of being a world-class financial firm. “
In concluding Harding highlighted that “during the period, we continued to meet and exceed all our regulatory benchmarks with the FSC.”