Marcella Scarlett, Business Reporter
JN Fund Managers Limited (JNFM) has acquired the repo portfolio of Stocks & Securities Limited (SSL), a deal that well-placed sources say has been in the making since last November.
The transaction gives JNFM 500 new clients, the parties disclosed in a press advertisement on the weekend.
The deal was struck on September 2, and the transfer of business is expected to last six months.
The companies were unwilling to disclose further details of the transaction, and the Financial Services Commission (FSC) was unresponsive up to press time on whether the deal needed its imprimatur and what procedures the parties were required to follow.
JNFM, a subsidiary of Jamaica National Building Society, currently has J$23 billion under management. Wednesday Business says that Stocks & Securities last year had total assets valuing J$7 billion and that its repo book was valued then at about J$3.9 billion.
During the transition, clients can continue to liaise with Stocks & Securities, the ad said.
President and CEO of Stocks and Securities, Mark Croskery, told Wednesday Business that he is not commenting on the transaction. JNFM indicated that it was willing to speak, but not now.
"We will comment on this deal at a future date," a JNFM spokesman said on Tuesday. Efforts to speak directly to general manager of JNFM, Brando Hayden, and JNBS general manager, Earl Jarrett, proved futile.
A repurchase agreement, or repo, is a kind of short-term borrowing arrangement for dealers in government securities.
It involves the sale of FSC-approved securities accompanied by an agreement for the seller to buy back these securities at a later date. The original seller is effectively borrowing, using the security as collateral for the loan at an agreed interest rate.
The FSC, at the behest of the International Monetary Fund, has been pushing for securities dealers to reduce their exposure to repos in order to manage their balance sheet risk.
Jamaica has agreed to phase out the retail repo business model and FSC is not approving licences for dealers whose business models are largely repo-based.
However, there is an exception under mergers and/or acquisitions of existing firms.
SSL is the second oldest brokerage firm in Jamaica, with its roots dating back to 1977 when it was established by Paul Chen Young and operated under the name of Paul Chen Young and Company Limited.
Chen Young, an economist, was also the founder of Eagle Merchant Bank in 1981, the centrepiece of the Eagle network of companies.
Eagle was among the companies hit hardest during the financial sector collapse in the 1990s and was taken over by the Government, but the brokerage house was not a part of the Eagle Group and was therefore unaffected.
In 2006, five years after an ownership change, Paul Chen Young and Company Limited was relaunched as Stocks & Securities Limited by owner Hugh Croskery, to give the company a "fresh start". Mark is Hugh's son.
Only this year, SSL moved its headquarters from rented space at 24-26 Grenada Crescent in New Kingston to 331/2 Hope Road, into a building that it acquired and refurbished.
The repo book sale to JNFM leaves Stocks & Securities with business lines relating to stock brokerage services, foreign exchange trading, investment banking services, bond trading, and other services.
Efforts at getting a comment on whether other aspects of the company were up for sale, including the headquarters, were unsuccessful.