Marcella Scarlett, Business Reporter
The Financial Services Commission (FSC) announced Tuesday that it has curtailed the activities of Stocks & Securities Limited (SSL), whose managers must now reach out to the regulator for permission to execute certain transactions.
But the regulator refused to clarify whether its directive was a precursor to further action.
A well-placed source who has dealings with the investment house and has knowledge of the process said it was not unusual for the FSC to issue 'directives', but said such regulatory actions are normally not publicised.
"The FSC has issued directions to SSL, which means that certain activities will be allowed only with the prior approval of the FSC. Every activity that we allow them to do up there has to have prior approval from us," said director of communications at FSC, Nadene Newsome.
The clampdown follows the FSC-approved disposal of Stocks & Securities' repo business to JN Fund Managers (JNFM) earlier this year.
SSL also holds a stockbrokerage licence and is a cambio operator. It was unclear whether the FSC directive would also curtail SSL's foreign-exchange operations, given that the currency market is regulated by the Bank of Jamaica. Newsome had not, up to press time, clarified the issue.
Stocks & Securities is one of the smaller securities dealers in the financial sector. Sources have said that its repo book was valued at about J$3.9 billion and that SSL managed total assets of about J$7 billion around the time of its deal with JNFM, which both companies said would transfer 500 clients.
The FSC said in a press advertisement Tuesday that the transfer of clients, effective July 19, included almost all of Stocks & Securities' clientele, excluding "a small number of select sophisticated investors who hold bonds issued by SSL".
Newsome would neither confirm nor deny whether the 'FSC directive' was a precursor to a takeover of the company by the regulator.
The FSC has, in the past, placed vulnerable firms under temporary management, but in this instance, the regulator has implied no wrongdoing or breach, saying only that its actions "are aimed at protecting the interest of investors" and mitigating market impact.
ASSESSING WAY FORWARD
"We are currently looking at what is happening in the company now - analysing the company and assessing the way forward," said Newsome.
"This action is allowing the FSC to assess the state of affairs at SSL. This is with a view to facilitate the preservation of the company's assets and any other negative impact which might arise," she said.
A well-placed source said the review has been ongoing since at least September 2012.
Efforts to reach Mark Croskery, president and CEO of SSL, were unsuccessful, as he did not answer calls or respond to voice messages left at his office and on his cellphone.
Only large "sophisticated clients'" accounts remain at SSL, said Newsome.
"All non-sophisticated investors - their funds are with JN Fund Managers," she said.
"All of those invested in repos, mutual funds, etc. - all of those are with JN Fund Managers for the majority of small investors. This, in fact, means that those investors' funds are safe. So now we are looking at the sophisticated investors who hold bonds issued by SSL that have not matured yet."