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Clarke says state entities’ investment in First Rock not in accordance with public-sector regulations

Published:Thursday | July 22, 2021 | 12:12 AMJovan Johnson/Senior Staff Reporter
Dr Nigel Clarke
Julian Robinson

Two public bodies, the Airports Authority of Jamaica (AAJ) and a subsidiary violated government regulations in their $443-million investment in start-up private equity firm First Rock Capital Holdings, the finance minister, Dr Nigel Clarke, has disclosed.

Clarke, however, was not definitive when pressed on how the Andrew Holness-administration would hold accountable two state boards for disregarding Parliament’s approved rules in buying the first set of shares in the company in 2019.

Under the 2017 Public Bodies Management and Accountability Act (PBMAA) regulations, a public body must get the finance ministry’s permission before investing in a private company that is not listed on the Jamaica Stock Exchange.

“Prior approval was neither sought nor received … . This would have been contrary to regulations,” revealed Clarke in the House of Representatives yesterday, referencing the US$1 million shares bought by the AAJ and the NMIA Airports Limited in a private placement in February 2019. The shares were split equally.

Clarke said the AAJ board approved an amendment to the agency’s investment policy in March 2019. A month later, in giving its non-objection to the revised policy, the ministry said that the AAJ needed to make it “consistent” with the regulations under the PBMAA.

The second set of shares, worth US$2 million – equally split - were bought in January 2020, bringing the total investment to J$443 million (US$3 million), which at May 31, 2021, was valued at approximately $349 million.

The AAJ and the NMIA Airports Limited bought stakes in the start-up despite the AAJ Group’s investment policy only permitting equity purchases in “blue chip” companies, firms that are well-established and well-recognised. Up to five per cent of AAJ’s investment portfolio can be in equities, but this must with ‘blue chip’ firms.

The development appears to contradict a June 10 AAJ Group statement provided by Audley Deidrick, the president and CEO, which said that he purchases were done “in accordance” with the investment policy.

The St Lucia-registered First Rock, which focuses on private equity and real estate, started operations on March 15, 2019, and listed on the Jamaica Stock Exchange (JSE) in February 2020.

The second share purchase, Clarke argued, was “within the letter of AAJ’s amended investment policy”, but he said it was a “matter of judgment” as to whether the five per cent cap on investment in equities in blue chip firms was met.


The January 2020 purchase, Clarke said, represented 9.97 per cent of First Rock’s total issued share capital. That is below the threshold for controlling interest but enough to make the two entities the third- and fourth-largest shareholders in First Rock up to March 31, 2021.

“It is also a matter of judgment as to whether it was prudent for a single-equity investment to absorb as much of the space allocated to equities in AAJ’s investment policy as it did, especially if that investment is an IPO of a company that was in operation for only two years at the time,” said Clarke, who was answering questions tabled on June 29 by Julian Robinson, the opposition spokesman on finance.

The questions were triggered by a Sunday Gleaner investigation which brought to light the controversial investment.

Robinson said yesterday that he believed that the investment was too risky given the amount of money involved and the fact that the company had been operating for less than two years.

“What action does the Ministry of Finance plan to take with respect to AAJ for what you have acknowledged to be a clear breach?” he asked Clarke, who responded that his ministry would remind public bodies about the PBMAA.

“In circumstances like this, it’s not as easy as it may seem to determine who is precisely responsible for the breach. The entity acts as a corporate entity, and we would need further information as to how the decision was made,” the minister said, adding that the regulations have any sanctions for the breach.

The finance minister, meanwhile, confirmed that the AAJ is now trying to sell its First Rock shares “to come into line with the investment policy guidelines, but also for purposes of diversification not to be so heavily concentrated in one equity security”.

“They’re exercising good judgment to recognise that this is the appropriate thing to do,” he said rather than “to dig into their position”.

A Sunday Gleaner investigation in June revealed that Fay Hutchinson overlapped as a director of First Rock, in which she is a shareholder, while serving as deputy,and then chair of the AAJ. She has been serving as AAJ director since April 2016, named deputy chair in May 2019, and appointed chairperson in November 2020.


The sales executive, who has close ties to the ruling Jamaica Labour Party, resigned from First Rock’s board on March 17, 2021, one year into her appointment, which was announced on March 3, 2020, just over a month after the second share purchase. ,

The resignation followed growing concerns about the potential for conflict of interest from officials at the Robert Montague-led Transport Ministry which has oversight for the AAJ and the NMIAL.

The AAJ admitted that Hutchinson, who bought her one million units of shares in February 2019 at the same time the AAJ and the NMIA were doing so, did not declare to the board that she was a director of First Rock.

Another public entity, the National Insurance Fund (NIF), the state’s pension fund, is the seventh-largest shareholder in First Rock, with 10 million shares bought for just over US$1 million.

Hutchinson’s son, Andre Hutchinson, has been a member of NIF’s board since 2018 but declared his interest and recused himself from discussions over the investment.

It was also revealed that a board member of the NMIAL recused himself from investment considerations, a development confirmed by the AAJ, which declined to confirm whether it was Newlyn Seaton, the then board chairman whose brother, York Page Seaton, is a founding director and shareholder of First Rock.