|Last Updated: Feb 19th, 2023 - 15:07:13
The Stocks and Securities (SSL) mess is systemic and widespread in the financial sector in Jamaica. We as a country are quick to adopt new technologies and it stop there; using it to facilitate customer interaction and enhance their experience is not even an after-thought. The most important thing is to profile, take credit for good outcomes and blame underlings for failures.
Book of rules
The public has been mislead to believe that the financial services commission (FSC) is the sole regulator of the brokerage houses when in fact the Jamaica Stock Exchange (JSE) is also a regulator with tremendous powers to audit, arbitrate, fine, admit and suspend their member dealers for a raft of infractions.
Member dealers are required to submit financial statements to the exchange monthly, quarterly and annually within specified times. Audited financial statements must be presented within three months of the end of the financial year, certified by a public accountant, stating among other things that proper books have been kept, and that its net asset worth held in the form of cash and readily convertible securities is not less than a stated amount. The Exchange has the authority to send in an exchange auditor to prepare the accounts and audit same and charge the delinquent member dealer for so doing.
All (proper) books of accounts shall show separately the accounts of clients in respect of:
1. all sums of money received and expended relative to the business as stockbroker or dealer in securities;
2. all sales and purchases of securities whether as principal or broker or otherwise;
3. all assets and liabilities whether as principal or agent or in whatever capacity held.
When requested by the Exchange to do so, present their books of accounts and other records for examination, by a public accountant or other agent appointed by the Exchange, in connection with dealings with clients.
The Exchange may at any time withdraw or suspend any authorisation which it has granted if, inter alia, it appears that the firm is not fit and proper, or has given the Exchange false, inaccurate or misleading information.
Bank of Jamaica (BOJ) has failed in regulating deposit taking institutions so to give it more powers is counter intuitive. According the Dr. Jide Lewis, deputy governor of the Bank of Jamaica (BOJ), as at the end of 2021, the value of all frauds in the banking system was at $700 to $800 million per year. In recent times we have seen lots of the frauds committed by senior employees at multiple financial institutions.
There are adequate laws and regulations currently in place what is missing are proper enforcement with the use of existing technology.
Employees of financial institutions at call centres should only be allowed access to customers account if the customer correctly answers two system generated security questions. If answer to the third question is unsuccessful, the system locks and the call get automatically escalated.
All access by employees to customer accounts should be logged for selected audit.
Online access to customers account should compare the IP address to previous logins and if different the customer notified also by text message and email. Additional verification must be correctly answered to proceed or the account is locked.
Automatically notify customers of account activity by SMS and or email.
Online trading directly from stockbrokerís portal is standard process in developed markets. It is beyond reason why the trading equities in Jamaica is so convoluted wherein investors access their account at the broker, the brokerís access to the Exchange and investor access to the Exchange (Jtraderpro) are separate; and one more, the recently launched JCSD Client Portal (investor access).
Investors account at the Exchange and at the broker does not show the same dollar balance, and investors are required to fund in and out to equate the two. Even the equity holdings sometime differ as some brokerages do not adjust for stock splits and bonuses.
The BOJ and JSE are unwittingly complicit in the proliferation of frauds at commercial banks and at least one brokerage house. Some of the brokerages bring the same juvenile approach to trading overseas equities locally whereby the trades are placed by them and assigned thereafter to the clientís account.
As is the tendency, when faced with any challenge, the financial institutions and JSE abandon the customer/client and run for cover. Two recent issues illustrate the facts:
1. Spate of robberies at automated teller machines (ATM)- the Jamaica Bankers Association (JBA) response is to consider cash reduction at the ATM. Absolutely no thought for the customer, given that the banks reduced in-bank tellers (to save money and increase efficiency), charge higher fees for in-branch services, closed branches and forced customers to use ATM.
2. SSL debacle- there was a time when investors in equities held their certificates for shares held in publicly traded companies. This was discouraged in the move to electronic certificates held by the JSE and traded through a licensed stockbroker. With the fiasco at SSL a temporary manager was placed there to oversee operations and the JSE was only too happy to wash its hands of its responsibility to investors by suspending online trading by investors with equity accounts at SSL. No thought has been publicly expressed or process put in place for the release and transfer of unaffected equity accounts from SSL to another broker. While this persists, there is no consideration for opportunities lost to investors who are unable to effect trades.
Those who have ears let them hear, BEWARE of the Central Bank Digital Currency (CBDC), it is digital control.
Source: Jamaica Stock Exchange, Jamaica Gleaner, Jamaica Observer
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