In its first public statement about Clico, almost 29 months since the collapse of the Lawrence Duprey-controlled insurance company threatened T&T's financial system, the Securities and Exchanges Commission (SEC) said it was not asleep at the wheel but was restricted by outdated legislation.
The SEC pointed out that two products wildly marketed by Clico Investment Bank and Clico, the INC and the EFPA were not approved by the SEC, but no reason was given why that information was not in the public domain for unsuspecting investors. Instead, SEC's attorney Gilbert Petersen SC, prefaced his remarks by listing the SEC's responsibilities and the "onerous" nature of its line of business.
"It is a historical fact that the capital and financial markets of T&T over the last 14, 15, 20 years, this market has evolved and expanded considerably thereby placing a further burden on the SEC in particular and I am sure, the other regulators," he told the COE. The SEC is one of the regulatory bodies which has been criticized for the collapse to Clico, which has left policyholders at the mercy of politicians and the country's purse. Nonetheless, Peterson commended the "vigilance of the SEC" in writing to Clico on November 4, 2008 claiming it had "mis-represented" information on a promotional flyer which suggested that the EFPA was approved by the SEC. He told the Commission of Enquiry that the SEC did "not sit back" and again wrote to Clico on November 13, 2008 "to go to the public and correct the erroneous information."
He observed that the SEC operated in a restricted framework with a top fine for breaches of $50,000.
This, he concluded, made breaches "affordable" coupled with a reprimand from the SEC. Peterson's expressed hope that Colman's recommendations would include enhancement of legislation for the SEC to give it greater "teeth." Despite his defense, he noted that the SEC had within its remit the ability to initiate investigations into securities. Serious consideration, said Peterson, must be given to how an unregulated parent company is allowed to participate into the functions of registered subsidiary companies. That issue was touched upon by Russell Martineau SC, as he gave opening remarks on behalf of his client, PriceWaterhouseCoopers- the auditors of parent company, CL Financial as well as subsidiaries, Clico, CIB and British American.
Martineau observed that despite being "excessively skeptical" auditors were required to work with the financial statements presented to them. Auditors, he said, had to obtain "reasonable" rather than "absolute" assurance that the financial statements were unencumbered. In this regard, it was up to CLF's management to provide all the information to conduct the audit. PWC also came in for its fair share of criticism from counsel to the Commission, Peter Carter. Martineau, whose lengthy opening included the credentials of PWC's present executives, explained that it was not the role of the auditor to pass judgment on a client.
It was Fareid Scoon, lawyer for HCU's president Harry Harnarine, who mounted a defence in his opening statement blaming "lapses" of the Commissioner of Co-Operatives for allowing HCU to move from a mere credit union to a national credit union. He credited Harnarine with being able to identify "gaps" that were not filled by the Government and capitalise on an obvious win-win situation: "Indians (Harnarine's members) having money and Africans needing money." This, said Scoon, allowed HCU to reach exponential growth.
Carter had been critical of Harnarine's spending, at the expense of his members, which he said was "commercial vanity." Other parties to the Commission-the HCU members group, the Institute of Chartered Accountants, First Citizens, Proman Holdings, Joseph Cassidy and former Finance Minister, Karen Nunez-Tesheira did not give opening statements. First evidential hearings begin on Monday.