FSC Changing it’s Tune on Inventment Clubs in Jamaica?

I was a little surprise by a report in the Business Gleaner today stating the the Financial Services Commission FSC is at the planning stages of allowing investment clubs to operate in Jamaica. The FSC seems to be changing there tune on investment clubs in Jamaica.

We can all recall the hostile environment the Cash Pluses of the world were placed in by the big banks, media and government. They were alienated (UFO) with an intention by the FSC to WARN/SCARE the public with those press releases, billboards and TV/radio ads.

After the great falls of OLINT and other FX trading firms, why would the government now seek to institutionalize these clubs that many said were pyramid schemes characterized by blatant fraudsters like Carlos Hill and David Smith.

Some of the new guidelines being considered include:

1. Capping the membership of the clubs to no more than 20 persons.

2. Requiring that all club members take part in investment decisions.

3. Requiring that all members invest equal amount of funds.

4. Prohibiting the payment of administrative fees to one club member.

5. Placing a limit on the amount of funds that can be invested in any given year

In the current economic climate of Sanfords and Madoffs who would trust a small man with their money if big world recognized insurance, brokerage or bank in the most sophisticated financial system in the world are falling like flies or nose deep in “toxic assets”.

I shake my head when I look at the upheaval in the United States about American Insurance General AIG. It would appear that AIG alone was responsible for the entire world economic crisis today. The anger and out rage expressed by Americans at the million dollar bonuses paid to big executives servers a daily diet of hate. Then again there has to be a poster child, an example made of someone or something, something emotional.

I think the AIG exes should get their million dollar bonuses because it is contractual, it was promised long before the current melt down. It should be their own decision to not take the money because of the current environment, not heavy handedness and fake anger by politicians calculating public sentiments and eyeing the next election, or talking heads yapping away on TV. The bonuses account for less than .1 (point one) percent of the almost trillion dollar bailout/ stimulus package.

But people have to place their anger and frustration somewhere so the blogs, TV talk, newspapers “gang up ” on 10 people in one company by hammer them daily in the media, threatening them that their names will be released to the media and the congress will past legislation to tax the bonuses at 100% if they don’t give it back.

These are nothing short of mafiaistic tactics in its core element. Bear in mind that some AIG staffers are already being threatened some never worked in derivatives-swaps which are in main cause of many of the problem facing the American economy.

What am I blabbering about?-I am not sure, but what I do see is when the winds of fortune changes then the captains of industry are now the first to be dragged out and lynched. In Jamaica creativeness and firsts are cut down by governments and other greedy friendly bastards, Uncle Sam just give them a big bonus then scold them for taking it.

Sometimes what was outrageous and illegal yesterday will find favor tomorrow. But I can not help but beckon the question. Was it really necessary punish those with a vision and a will, or those willing to take a risk.

There can be many other arguments with mountains of complexities too numerous to get into here. These opinions just barely scratches the surface of a deeper situation both here in Jamaica and the states.

Although it was said before that the government might set up a legal framework for these investment clubs, I can not help but wonder if new urgency was given to making them legit because of the current world economic situation.

Read the Jamaica Gleaner’s article regarding the FSC HERE


~ by RB on March 25, 2009.

7 Responses to “FSC Changing it’s Tune on Inventment Clubs in Jamaica?”

  1. DB, you raise a number of different issues here so let me just respond to a few points.
    – I agree with you about the faux outrage in Washington, D.C. over the AIG bonus issue. It was simply political theater for when election time come around. The reality is that the American tax payer now owns 80% of AIG and trying to destroy it by chasing away the few talented people left (most of whom didn’t cause the problem) is counterproductive.
    – I would much rather see the perpetrators of these forex scams brought to justice than to see any new regulations enacted at this point. Unfortunately I don’t think anything is really going to be done on the Jamaican end especially with Olint. Thank God for Turks and Caicos. When this thing unfolds I think it will reveal that Olint was a massive transfer of wealth from the poor and middle class to the wealthy and well connected.

  2. bwoy, DB, there really are no simple answers to some of the questions you pose here. I just taking a wait and see approach. History shows that every coupla years the world goes through a huge ‘crisis’… I looking over this thing to the end and the results…

  3. Investment clubs as proposed by the FSC in Jamaica have been in operation in the US for many years. Small groups of friends and/or relatives will pool their money and ideas for investing. When properly structured these clubs provide cost savings (spreading trading costs among 20 or so people) and probably some tax advantages as well if the club documents its expenses. This is a good idea. In hindsight, calling an operation like Olint an Investment Club was not a good idea..

  4. Kevin, it was a good idea for Olint and others to call themselves ‘clubs’ as a cover. It was all a part of the scam. The genuine investment clubs like the one you refer to aren’t regulated and quite frankly don’t need to be.

  5. Funny you should bring up this topic. For the past few years, it is becoming more and more evident to me that if there is a way to take something legit and turn it into a scam, you can count on us to do so. We don’t like rules especially when they are in place to protect the least powerful of us. I’m in an investment club in the states right now, and two years ago we had to get rid of four of the other Jamaicans who were active, because they wanted to run the club into the ground! First of all, they refused to do the work of investigating the companies, etc. and were all about making the quick money. They constantly complained that the group was “too American” – mind you, there is not a single american in the group; we all hail from every part of the caribbean. But we do work with “american sensibilities” in terms of the structure of the group, accountability, divvying up the work, etc. We are registered with NAIC, for example. When the group wouldn’t vote the way they wanted, they created such a fuss that meetings were unbearable. They weren’t friends with each other before they came into the club, but quickly became friends because of their approach. Two of them actually wanted to run their Olint money through the club by buying up more shares than everybody else, and thus have more voting power than everyone else! That was when we said enough was enough and kicked them out. All of us, including me, learned a couple valuable lessons. 1) Don’t violate your principles just because is your countryman; 2) some things have to be learned, and some people tek longer fi learn them than others. Our club works fine now, we make a good amount of money and really enjoy what we are doing, but we are definitely gun-shy in the aftermath of Olint. Not every investment group works the same; the people who are in it will have a lot to do with what kinds of things the group gets into. You are going to have folks who will twist the rules to get as close to an Olint model as possible, but most people won’t do that.

  6. I read about that too. I think the FSC was after this UFO, because they were not registered and hence had no legal guidelines to somewhat protect the members/investors. I figure this move is to introduce Investment clubs as legit businesses with guidelines and a means for the FSC to keep tabs of their activities.

  7. @ Rolin-What is even more silly is that the congress who approved and voted for the bonuses were aware of it, some even reject a clause to prevent the money being used as bonuses. Late last years the first bailout from the Bush administration was given even more support because it there was an election. Many other wall street banks are doing the same thing with bonuses, why target AIG, its humor us to learn that the same money the banks took as bail out they are using it to lobby the government on other issues.

    @ ruthibelle- I can tell you that these are times many of us have never seen. It is big it is complex, there are no easy answers. We have have to hold on. I am tired of reading about lay offs and failing banks. I think we will get pass this and the world will be stronger and wiser for it.

    @ Kevin-Thank you for that update. I will admit that I did not know that. I might have confused investment clubs with some exclusive hedge funds or the sorts.

    @ Longbench-Thats true we Jamaicans don’t like rules because we are cultured that rules come from the big man who is always fighting us down. Not only that but other human natures like greed, arrogance and selfishness is more evident in less formal setting as an investment club as opposed to a brokerage, shareholder arrangement. I is good that you all put yourselves down and not get over run by the indiscipline FEW in the club. I think one of amplifier of the investment club debacle in Jamaica was just uninformed investors. If the FSC goes ahead with the plan the idea of membership being 20 that’s a good thing, also forcing people to understand and participate will be beneficial. this can start a whole new investment culture in Jamaica, but watch out we might try to tweak it as we do everything.

    @ Stunner do you think it was better issue Cease and Desist Order on many investment clubs, taking them out of business, being mindful that what is grossly unreported is the negative impact on the economy, personal lives ruined OR would it have been better to introduce the guidelines and legislation in a timely manner to facilitate a new concept to Jamaica, also bearing in mind that similar clubs exist in other parts of the world. Allow clubs to come under the legal framework. I think this would have been smoother and less disruptive. Before the FSC intervene I can not remember any of the clubs having problems besides administrative problems from their huge clientele.

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