What did SEC do?

The SEC general counsel Norton Jack, who appeared on behalf of the SEC at the Colman Inquiry, yesterday could not say.

While the SEC was known to have jurisdiction over Clico Investment Bank (CIB) and some financial instruments issued by CL Financial subsidiaries, counsel for the inquiry Peter Carter QC yesterday noted that the SEC was also compelled to consult with the Central Bank in the interest of protecting depositors.

Carter noted that Section 19 (1) of the Securities Industry Act states that, “The Commission shall consult and co-operate with the Central Bank or any other agency that exercises regulatory authority under a written law over a financial institution, insurance company or other body in order to minimise duplication of effort and to maximise the protection of investors.”

Carter asked Jack whether “protection of investors” also meant protection of policyholders.

“I understand that as I am sitting here,” Jack, who joined the SEC in 2010, replied. “I understand that now.”

“But was that the understanding of the SEC in 2007 and 2008?” Carter asked.

Counsel for the Ministry of Finance Vincent Nelson QC noted that for almost every year, the annual accounts of CIB – which were supposed to be submitted to the SEC – were late. Nelson noted in 2007, the accounts were particularly late.

“When the SEC was having difficulty getting these statements on time, was there any discussion or liaison with the Central Bank?” Nelson asked the witness.

“I am unable to say,” Jack said. Nelson also asked what action the SEC took in relation to CIB’s issuing of billions ($3 billion in 2008) worth of so-called investment note certificates (INC).

“Did the SEC look at that?” Nelson asked.

“That is presumably what they ought to have done,” the witness replied. “I cannot sit here and suggest to you that I know what action was done for that period.”

“If the SEC considered that these were securities being issued by CIB, why did you not take any action to ensure the CIB clarified what these instruments were or to ensure that they were registered with the SEC?” Nelson asked.

“I cannot suggest to you that no action was taken to clarify,” he said. “I don’t think I specifically looked to check on that.”

Jack confirmed that the SEC had had jurisdiction over Angostura Limited. The previous legal counsel at the SEC was Susan Francois, now head of the Financial Intelligence Unit.

Jack noted that the new Securities Bill, which has been tabled in Parliament, proposes high penalties (ranging from $500,000 to $1 million) for entities that fail to comply with regulations. He said the SEC, despite the lessons from the 2009 collapse, still does not have powers to initiate charges on its own, as many other similar regulatory bodies all over the world do.

“We would have to refer that to the DPP,” he said. He said currently the SEC did not have the power to inspect books, but there is hope that the new legislation would change this.

The inquiry continues today at Winsure Building, Richmond Street, Port-of-Spain.