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Noble: Bourse’s brazen defence after FCB IPO scandal

As a young boy, my mother taught me ‘to quit while ahead’. Her context was if you kept talking after you missed a ‘cut tail’ she would look at you and ask: “You really want something?”

Every Trinidadian child knows that is the point to shut up. No more complaining because it is licks and more licks passing.

Photo: Bourse managing director, Subhas Ramkhelawan (via trinidadexpress.com)

It is obvious that similar education is lacking in the brazen defiance (or is it cynical ‘spinning’?) by Bourse and its chairman. A recent Trinidad Express article reported that they argue that nothing wrong was done. What then is the logic in paying the fine?

Let us get it clear: most cases of this nature are settled; going all the way to court is rare. The legal costs are significant and both sides often opt to negotiate an agreement and reduce it to writing. These settlements usually include two things: no admission of guilt and confidentiality clauses.

As the defendant, you get away from admitting guilt and the risk of losing badly at the end of a trial and you save legal fees. The SEC, the other party, in this case, gets their money.

As a defendant, you opt for this approach since if you admit guilt in such cases there is every likelihood of civil damages from interested parties outside of the negotiation, or even worse, considerable damage to your brand. You can also ‘vindicate’ yourself as an innocent party, a course now being adopted by Bourse.

Bourse is fortunate that the then-attorney general did not take criminal action but shifted the blame onto the FCB board and the IPO process. Had the attorney general acted, then the outcome may have been completely different.

FCB had, on 14 January 2014, breached Rule 604 of the TTSE (a matter that the AG confirmed at the time ought not to have happened). The action taken then by Bourse appears to have triggered that breach.

Photo: Former Attorney General Anand Ramlogan.
(Courtesy HeritageRadioTT)

This debacle was a flagrant violation and subversion of the laudable intention of the government in launching the IPO as a means of ‘spreading share ownership as widely as possible among the population as well as encouraging greater participation by nationals in the ownership of state enterprises.

The matter, dear Bourse, is more than rules, it speaks directly to ethics and integrity. As a past leader of the Independent bench in the Senate, it is galling to put up such a defence for your managing director. Considering the stated government intention for the IPO, Mr Subhas Ramkhelawan could not reasonably argue that he was thinking about the country’s best interests.

I further point him to the US SEC’s new thinking about such cases that ‘egregious intentional misconduct’ or ‘misconduct that harms large numbers of investors’ will not allow offenders to plead in this usual manner. Maybe our SEC should adopt the same.

This is one more instance showing that we cannot depend on our business elites to behave in the right way. Maybe we ought to also take a hard look at the way the Independent Senators are selected, given the behaviour of some.

After all, according to parliament’s own website: ‘the Senate seeks to represent and take into account the views and interests of those elements of society which may be insufficiently reflected in the composition of the elected House. It has been recognized that it makes salutary contributions to parliamentary debates’.

The investing public needs to understand whether the negotiated deal was ‘fair, adequate and in the public interest’. When disciplinary action against an employee is taken in a business, one ought to consider the impact on the other employees, who are onlookers.

Photo: Investor checking stock prices (credit www.distel.co)

These employees evaluate the judgment and/or act in response to the discipline meted out. I am positive that this same assessment is being made about this decision by the rest of the country even though there appears to be complete silence.

As a leading stockbroker, Mr Ramkhelawan has undermined the Stock Exchange. He has given ammunition to those who are sceptical about its independence in patrolling the behaviour of all the players.

Investor trust is an important component in financial markets; investors must feel assured that their money will not be taken by other players through unfair means. It rests on the perception of exposure to harm and fraud by issuers and intermediaries.

When there is low trust in the formal institution of the Stock Exchange, potential investors increase their participation in risky ventures or real estate. The country suffers when this happens since it creates significant distortions in the financial markets.

Bourse was answering the wrong question. The question is not ‘can I do it?’ but ‘should I do it?’ If you believe it is right to do it, what do you then say to the bandit who robs me of $500? Will you call Gary?

About Noble Philip

Noble Philip
Noble Philip, a retired business executive, is trying to interpret Jesus’ relationships with the poor and rich among us. A Seeker, not a Saint.

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  1. Defending the indefensible, smh.

  2. Very good article. In T&T integrity has gone thru the window. All that matters is money