Gordon Robinson | A kinder, gentler approach
It seems Nigel Clarke sees media coverage of the SSL fraud saga as undeserved adverse comment on his stewardship of the financial sector.
Why do I say this? Well, he wrote a Gleaner Op-Ed piece (January 28) and, in opening the Budget Debate, returned to the issue fulsomely (look it up). Tuesday readers know the twoth of March was the Old Ball and Chain’s forty-first “wedding” anniversary. What they mightn’t know is March 26th will be her thirty-ninth birthday. So, to mark the occasions, she asked me to take a kinder approach to critiques especially insofar as Nigel, her favourite Finance Minister, is concerned.
So I tried. I returned to his Op-Ed where he wrote:
“Prior to my policy address on Monday I met with FSC commissioners, outgoing FSC executive director, and FSC management. One of the questions I sought an answer to was whether SSL was ever raised with me. In none of those meetings was…the answer in the affirmative....”
Reads a tad defensive don’t it? Still we can accept that, since Nigel became Finance Minister, FSC hadn’t raised SSL directly with him. So it’s understandable if he spent no time thinking of SSL. He explained:
“Late in the evening, a member of FSC management called me to say….FSC would have sent a copy of a report to my office…consequent upon an [SSL] on-site examination in June 2019.”
“Would have”? Or did? He insists he never saw that report. Then: an episode of Stranger Things?
“I asked my office to search and verify whether this was [true]. They didn’t find any such report. I personally returned to the cabinets, searched approximately five years worth of records and eventually found one report regarding SSL, dated June 25, 2019, packaged among other reports, sent by FSC on April 3, 2020 stamped “received” by my office on April 15.”
My favourite Chinese food Chef would say “Wok the heck?” Incidentally, I applaud Nigel’s work ethic. I’ve always maintained organizations’ leaders should be willing and able to do any job they expect employees to do. However, this doesn’t look good on FSC or MOF staff. Why wasn’t the report delivered in June 2019? Why wasn’t it found by MOF staff’s search?
The point I believe Nigel wants to emphasize about the report is that most regulatory reports explain actions taken vis a vis licensees and don’t seek or require ministerial intervention. The particular report, with regard to its contents, was ten months old and chronicled, according to Nigel, regulatory action with which SSL had (mostly) complied.
I understand. I’ve been there from the perspective of a Regulator but, then, I insisted on my political independence not because any of my cabinet Ministers ever interfered but because, in the prevailing political culture, I felt pre-emptive action was necessary. Nigel wants to change that culture. Good on him. But, unless colleagues follow his lead, he’ll likely be disappointed
Regarding the 2019 report, we must first be clear it’s an FSC staff report to the FSC Board a copy of which is sent to MOF. Nigel wrote;
“The report, which doesn’t contain [SSL’s] regulatory history now in the public domain, found breaches worthy of the recommendation FSC meet with [SSL’s] board to address LIQUIDITY ISSUES AT SSL (my emphasis) and further recommended SSL be ‘issued immediately with regulatory directions in order to have the issues resolved in a timely manner’.
“(i) FSC board implemented the report’s recommendations and approved directions, which were issued to SSL on October 25, 2019, almost six months prior to my office receiving a copy…; (ii) FSC board implemented directions that were more extensive than the directions recommended in the report…; (iii) a later FSC status update confirmed SSL was compliant or largely compliant with five of the six FSC board mandated directives by April 25, 2020, days after my office received the report.”
So why is Nigel insisting on showing us previous reports? For me the Janet Jackson principle remains fundamental. What have you done for me lately? We want to know whether the current brouhaha could’ve been avoided with Ministerial oversight in 2020.
Questions remain outstanding. The report highlighted “liquidity issues” with SSL which is something that should raise red flags with the Regulator but also with a Minister. It gets worse. FSC staff recommended to FSC Board “SSL be ‘issued immediately with regulatory directions in order to have the issues resolved in a timely manner’”
As a former Regulator I know it doesn’t get more serious than this. Nigel’s sight of this report in April 2020 should’ve at least prompted a meeting with FSC (2023 sighting prompted several meetings) to find out what provoked such an unusual regulatory intervention; what happened between the report’s preparation and delivery; and why the gap? Was FSC waiting on and hoping for the “compliance” that happened “days after my office received the report” before alerting the Minister? If so, why?
How come it took ten months for “ compliance”? Is that resolving liquidity issues “in a timely manner’”? The kindest thing to be said about FSC inaction was said by Nigel in his budget speech “...it seems clear FSC didn’t exercise sufficient rigour in its oversight of SSL and tolerated significant breaches for far too long.”
How come Minister wasn’t shown the report as it was received? Ministerial intervention isn’t on but discussions with Ministers on these matters can be useful to a Regulator possibly reluctant to rock a particular boat without realizing potential damage to the fleet. The “File 13” approach was, at best, an unforgiveable gaffe. At worst, combined with FSC’s delivery delay, well, I don’t want to talk about it.
In his budget speech, Nigel again used a dead bat approach of which Kraigg Braithwaite would be proud:
“Ministers of Government aren’t all powerful. Maybe as politicians, over time, we are incentivized to appear that way. Maybe it is that we’ve,….as a group, marketed ourselves in that way.... However, I’ve always been clear…that I believe in limited [ministerial] authority. On this point the Constitution provides refuge. Finance Minister’s primary responsibility is policy-making, resolving issues brought…by those implementing policy and coordinating solutions across departments within ministries…..”
I’m aware Nigel has been on a crusade to ensure what he calls limited authority government.
But even Nigel was forced to admit Minister has SOME purpose:
“The Minister can also receive complaints and make enquiries. Operational independence doesn’t mean operational isolation.”
Kareck! Nigel pointed out FSC Act allowed him to give FSC “directions as to the policy to be followed….in matters appearing to the Minister to concern the public interest.”
Then he refined Shaggy’s “It wasn’t me” defence to “It can’t be me!”
“…the sanctity of regulatory space would be compromised by the reality or perception of ministerial interference. Prudential decisions must always be seen as based on purely technical grounds. The possibility of political motive must be zero.’”
I’m very much with Nigel on limited authority government. I appreciate he’s manfully trying to end the culture of politicking regulation whereby persons habitually called Ministers with regulatory problems expecting Ministers to intervene on their behalf. That’s all good. I hope he adds the necessary regulatory accessories including competent, knowledgeable people of integrity. It isn’t easy in Jamaica’s political landscape hence we need fundamental change.
I noticed this new urge for “operational independence” also came about after Jamaica signed the International Organizations of Security Commission’s Multilateral Memorandum of Understanding for Cooperation which mandates this. But, never mind….
Nigel and I are as one on fraud detection. He said: “it’s an inconvenient fact that wherever there’s economic freedom, bad actors will sometimes abuse that freedom…. Governments and regulatory agencies won’t be able to eliminate fraud…. What we must do is act swiftly after detection of fraud to fix any institutional weaknesses….and to institute necessary reforms….to strengthen the regime so the occurrence isn’t repeated.”
Indeed. But did we act quickly? Nigel says yes but that contradicts his own reminders the fraud continued over ten years. That’s quick like ketchup. His challenge “you tell me the last case of securities fraud or theft when a Government moved as quickly as we have done” is brilliant theatre but based on zip-a-dee-doo-da. Nigel may’ve forgotten FSC is Government. THIS case caught government with its regulatory trousers bumbled, bungled and bundled around its ankles. In Nigel’s own words FSC “tolerated significant breaches for far too long.”
What’s being done to detect possible cases lurking? Banking regulators don’t necessarily make good securities dealers’ regulators. Limited Authority Government only works if Regulators are professional; on-the-ground expert on portfolios’ nuts and bolts; and truly independent.
Fancy laws alone won’t cut it.
Peace and Love.
- Gordon Robinson is an attorney-at-law. Send feedback to firstname.lastname@example.org.