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'Don't be fooled by fancy financial jargon'
FSC boss says Ponzi schemes still exist
BY ALICIA DUNKLEY Obsever satff reporter dunkleya@jamaicaobserver.com
Tuesday, January 19, 2010
DESPITE the fact that hundreds of Jamaicans are still reeling from the collapse of several Unregulated Financial Organisations (UFOs) which folded with their billions, Financial Services Commission boss Rohan Barnett has said the entities have not all disappeared.
Appearing before a meeting of the Public Administration and Appropriations Committee of Parliament on Wednesday, Barnett said there is evidence that similar schemes are still soliciting clients.
"It is incorrect to assume that there has been a complete decimation of Ponzi schemes or any sort of investment schemes, we, in fact, received information as recently as last month that there was a scheme trying to develop and attract clients," Barnett told the committee.
"At the end of the day without there being the ability for the investor to authenticate what the entity actually does with the money it boggles the mind that one would place your assets with that company or individual. Just because they have documentation doesn't mean their representations are correct," he noted.
The International Monetary Fund's (IMF) June 2008 country report identified 35 unregulated schemes operating in Jamaica and at the time recommended that Jamaica close all unregulated investment schemes, saying that they jeopardise the island's otherwise sound financial sector.
"Unregulated investment schemes promising implausibly high returns in excess of 10 per cent per month have proliferated over the past, these schemes have the potential to cause social and macroeconomic instability and hurt the financial sector," the report said at the time.
Citing the collapse of pyramid schemes in 1900s Albania, it further warned of possible future macroeconomic implications and social unrest, should Jamaican schemes fail.
At the time of the IMF's warning, several alternative schemes, including Cash Plus and Olint -- the two most well-known in Jamaica -- had been unable to make scheduled payouts.
Cash Plus was subsequently liquidated and its boss Carlos Hill and other executives charged with fraud. That year several other unregulated investment clubs wound up in trouble leaving clients high and dry.
Last month, Jamaica's Supreme Court ordered a temporary freezing of the assets belonging to embattled Olint boss David Smith, his wife Tracey-Ann and brother Gilbert Wayne, along with that of collapsed foreign exchange trader Olint Corporation Limited. The order prevents the Smiths and Olint Corporation from dealing with their worldwide assets for a 21-day period.
On Wednesday Barnett said the FSC has been waiting for a determination from the Courts on the challenge brought by Olint against it for issuing a cease and desist order on the entity.
"The matter hasn't ended. We inexplicably have been awaiting a decision for close to ten months now, so the matter is with the Court of Appeal," Barnett said. In the meantime, he told the committee that Olint had not submitted an application for registration.
"What was submitted was from the promoter of Olint David Smith, not the entity and what was submitted was insufficient to be considered an application so it was returned," he said further.
He also pointed out that the while the FSC has powers to search and take documents as well as investigate and as a result issue Cease and Desist Orders, it cannot physically shut an entity down but has to rely on the courts for this.
Barnett said the FSC had in its possession a "raft of recommendations" that it believes should be implemented in order to bring the enforcement aspect of the FSC up to a higher standard.
"At the end of the day that would enhance our presence as a regulator," he noted.
"Perhaps we need to make some recommendations with regards to the operation of Ponzi Schemes to give your office greater powers to enable you to effectively shut down such an operation once you have made that determination," committee member Phillip Paulwell noted.
"We would welcome that. We have referral power where we can refer to the Financial Investigation Division (FID) or the director of public prosecution for further action but as far as having a law enforcement arm where we could dispatch authorities to padlock a building or detain individuals we simply don't have that power," the FSC boss pointed out in response.
In the meantime, he urged Jamaicans to conduct the necessary due diligence when making investment decisions.
"The first step is to see to it that any institution you are dealing with is a registered institution and the way to do that is to contact the FSC. The other step is to take a look at the financial records of the institution, every reputable institution will readily provide you with this to authenticate what they are doing. Don't be fooled by fancy financial jargon," Barnett said.
Committee chair Dr Wykeham McNeill, in requesting the FSC's recommendations for perusal by the committee, said the group would also be making its own suggestions to Parliament in addition to those with respect to the work of the entity.
http://www.jamaicaobserver.com/news/...--2010_7331270
FSC boss says Ponzi schemes still exist
BY ALICIA DUNKLEY Obsever satff reporter dunkleya@jamaicaobserver.com
Tuesday, January 19, 2010
DESPITE the fact that hundreds of Jamaicans are still reeling from the collapse of several Unregulated Financial Organisations (UFOs) which folded with their billions, Financial Services Commission boss Rohan Barnett has said the entities have not all disappeared.
Appearing before a meeting of the Public Administration and Appropriations Committee of Parliament on Wednesday, Barnett said there is evidence that similar schemes are still soliciting clients.
"It is incorrect to assume that there has been a complete decimation of Ponzi schemes or any sort of investment schemes, we, in fact, received information as recently as last month that there was a scheme trying to develop and attract clients," Barnett told the committee.
"At the end of the day without there being the ability for the investor to authenticate what the entity actually does with the money it boggles the mind that one would place your assets with that company or individual. Just because they have documentation doesn't mean their representations are correct," he noted.
The International Monetary Fund's (IMF) June 2008 country report identified 35 unregulated schemes operating in Jamaica and at the time recommended that Jamaica close all unregulated investment schemes, saying that they jeopardise the island's otherwise sound financial sector.
"Unregulated investment schemes promising implausibly high returns in excess of 10 per cent per month have proliferated over the past, these schemes have the potential to cause social and macroeconomic instability and hurt the financial sector," the report said at the time.
Citing the collapse of pyramid schemes in 1900s Albania, it further warned of possible future macroeconomic implications and social unrest, should Jamaican schemes fail.
At the time of the IMF's warning, several alternative schemes, including Cash Plus and Olint -- the two most well-known in Jamaica -- had been unable to make scheduled payouts.
Cash Plus was subsequently liquidated and its boss Carlos Hill and other executives charged with fraud. That year several other unregulated investment clubs wound up in trouble leaving clients high and dry.
Last month, Jamaica's Supreme Court ordered a temporary freezing of the assets belonging to embattled Olint boss David Smith, his wife Tracey-Ann and brother Gilbert Wayne, along with that of collapsed foreign exchange trader Olint Corporation Limited. The order prevents the Smiths and Olint Corporation from dealing with their worldwide assets for a 21-day period.
On Wednesday Barnett said the FSC has been waiting for a determination from the Courts on the challenge brought by Olint against it for issuing a cease and desist order on the entity.
"The matter hasn't ended. We inexplicably have been awaiting a decision for close to ten months now, so the matter is with the Court of Appeal," Barnett said. In the meantime, he told the committee that Olint had not submitted an application for registration.
"What was submitted was from the promoter of Olint David Smith, not the entity and what was submitted was insufficient to be considered an application so it was returned," he said further.
He also pointed out that the while the FSC has powers to search and take documents as well as investigate and as a result issue Cease and Desist Orders, it cannot physically shut an entity down but has to rely on the courts for this.
Barnett said the FSC had in its possession a "raft of recommendations" that it believes should be implemented in order to bring the enforcement aspect of the FSC up to a higher standard.
"At the end of the day that would enhance our presence as a regulator," he noted.
"Perhaps we need to make some recommendations with regards to the operation of Ponzi Schemes to give your office greater powers to enable you to effectively shut down such an operation once you have made that determination," committee member Phillip Paulwell noted.
"We would welcome that. We have referral power where we can refer to the Financial Investigation Division (FID) or the director of public prosecution for further action but as far as having a law enforcement arm where we could dispatch authorities to padlock a building or detain individuals we simply don't have that power," the FSC boss pointed out in response.
In the meantime, he urged Jamaicans to conduct the necessary due diligence when making investment decisions.
"The first step is to see to it that any institution you are dealing with is a registered institution and the way to do that is to contact the FSC. The other step is to take a look at the financial records of the institution, every reputable institution will readily provide you with this to authenticate what they are doing. Don't be fooled by fancy financial jargon," Barnett said.
Committee chair Dr Wykeham McNeill, in requesting the FSC's recommendations for perusal by the committee, said the group would also be making its own suggestions to Parliament in addition to those with respect to the work of the entity.
http://www.jamaicaobserver.com/news/...--2010_7331270