Friday, April 17, 2015
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A “conservative shopkeeper’s attitude” has deterred many Bahamians from becoming shareholders, a Cabinet Minister yesterday suggesting that the CLICO (Bahamas) “catastrophe” had also undermined the development of a savings culture.
Damien Gomez, minister of state for legal affairs, said the creation of a ‘shareholding democracy’ was being held back by a “quirk” that made many Bahamians reluctant to trust other people with their money.
Addressing the National Conclave of Bahamas Chambers of Commerce, Mr Gomez said too many shied away from investing in securities - equity and debt - because they were not in total control of their investments.
Acknowledging that Bahamians preferred to invest in real estate and bank deposits, investments they could control and perceived as relatively low risk, the Minister said society needed to be educated on the benefits of owning shares in productive companies.
Turning to the collapse of CLICO (Bahamas) and its ultimate parent, Trinidad-based CL Financial, Mr Gomez criticised both Bahamian and Caribbean regulators for failing to spot signs they were in trouble.
Noting that many CLICO (Bahamas) clients had invested their “whole life savings” with the insolvent insurer, Mr Gomez said they had poured money into vehicles that “made absolutely no sense”.
He reiterated the need for greater investment education, suggesting that many Bahamians had been ‘suckered’ into placing funds with CLICO (Bahamas) by the high interest rates it was offering in its last, desperate days.
They had, Mr Gomez said, failed to equate ‘high reward’ with ‘high risk’.
Identifying the root cause for why relatively few Bahamians were eager to buy shares in operating businesses, the Minister recalled how his grandfather had told him he would not invest in a company where he did not own at least 51 per cent (and majority control).
“We have a quirk in our community and our history,” Mr Gomez told the Conclave. “Most Bahamians have tended not to trust other people with their money.”
Referring to his grandfather’s tale, he added: “Therein lies the problem; a conservative shopkeeper’s attitude. If I can’t control it, I don’t participate.”
Mr Gomez agreed that share ownership involved risk, as investors were essentially betting that the Board of Directors and management of the company to which they had contributed their money were acting both properly and doing what was necessary to generate desired returns.
Yet a properly regulated environment, in which investor protection was “uppermost” in the minds of regulators, should encourage securities investments.
Mr Gomez said: “In real terms, Bahamians have not shown a level of enthusiasm for share ownership.
“Bahamians buy land or something they can hold and control, but owning shares is not that attractive for them. That is something that we have to demonstrate to the public will work for them.”
Mr Gomez’s comments are likely to strike a chord with observers who believe that the Bahamian capital markets lack both breadth and depth, in terms of number of investor participants, and that this in turn has held back a more equitable distribution of wealth in this society.
The Minister then suggested that CLICO (Bahamas) collapse into insolvency in February 2009, as part of the problems that engulfed its CL Financial parent, had further exacerbated the “conservative shopkeeper attitude”.
“This is why the CLICO (Bahamas) debacle has been so catastrophic in the whole region,” Mr Gomez said.
Recalling that, when in private practice as an attorney, he had represented 30 CLICO (Bahamas) clients, including four pastors, Mr Gomez said: “They had literally put their life savings into different financial vehicles that made absolutely no sense.
“I said: ‘You should have known something was up. Who gives 30 per cent interest?’ If you’re going to take a risk, the higher the interest, the greater the risk. People don’t think that way, it seems.”
The last liquidator’s report to the Supreme Court shows that CLICO (Bahamas) is insolvent to the tune of $34.146 million, with $41.546 million in assets dwarfed by $75.693 million in liabilities.
The insolvent insurer’s 13,000 policyholders are currently stuck ‘in limbo’ more than six years after its collapse, waiting for the Government to come through with the long-promised $30 million ‘guarantee’ vital to moving the liquidation forward.
Mr Gomez said CL Financial’s demise had impacted the entire Caribbean, and implied that the region’s financial regulators should have seen it coming and taken action to prevent it.
“It was a collapse that ought to have been identified very early on by the regulatory agencies throughout the region,” he added.
“We’re part of the Caribbean Financial Action Task Force (CFATF), and not one country - not one of the Central Banks or insurance regulators - detected what was going on, in spite of what we knew happened.”
Comments
GrassRoot says...
I like when the Minister talks down from up on the high horse. Bahamians have all the reasons not go crazy about stock in Bahamian companies. See what happens to the shareholder democracy culture at BOB. In the stock market, the rules are made by the ones that control the stock market and the banks/liquidity providers. You can have a perfectly sound company, if the banks cease to support its operations, your perfectly sound company is a dog over night. Particularly in a market like the Bahamas, where there are very limited alternatives to raise liquidity by companies, stock market is not to be trusted, because the "market" part is not working. Look at the value of BTC. It is manipulated by the government not giving a second license, or maybe the issue two more licenses, who knows, who knows. So as a shareholder you are totally at the merci of the people controlling the environment, and in the Bahamas, these are the often the people that steal or want to take your money in the first place.
Posted 17 April 2015, 5:37 p.m. Suggest removal
watcher says...
It. is very difficult to invest as a Bahamian. because in some instances (Cable Bahamas, BTC, BOB to name a few) Government insists on retaining partial or majority ownership. If there is one thing that can be guaranteed, it is that our Government does not know how to run companies in an efficient manner. A shareholder expects a reasonable return on his / her investment by way of dividends and share price increase as the company grows, but the interference by Government means that there is unfair meddling in the company's day-to-day operations and its efficiency is lessened. Will Government exercise its right to retake control of Cable Bahamas for instance.....we do not know.
BISX as a market is a laughing stock. One trade of shares is enough to affect a company's share price...really? In what other markets is there so much illiquidity that a single trade can have an across-the-board effect.
Yes, we are conservative shopkeepers at heart because we do not trust Government, we do not trust the banks, we do not trust the brokers, and we certainly do not trust the integrity of our regulatory bodies. For example, where were the Central Bank, the Securities Commission et al when the BOB scandal was unfolding? True, we heard from them AFTER the event, but surely someone, somewhere, knew what was going on as the crisis was developing.
Invest my money in shares.....I think not.
Posted 17 April 2015, 6:54 p.m. Suggest removal
TalRussell says...
To Comrade State Minister for Legal Affairs Damien, can you please remind your PM/Minister Finance and PLP Cabinet Colleagues - thanks for all your care and support about da creation of shareholder democracy and all that stuff - but the 'quirk' you skipped over talking about, is why is it the PLP Cabinet are not keeping its 2012 General Election promise to protect the CLICO (Bahamas) Policy Holders, who are still paying their monthly insurance premiums as directed to do so. by not only former PM/Minister Finance Hubert but also your boss PM/Finance Minister Perry Christie. Policy Holders who couldn't be any more 'reluctant' to scrap up the monies every month to continue paying their CLICO insurance premiums - with not a damn single one, ever receiving back one red cent back in insurance benefits. Minister Damien this PLP government have done an excellent job of teaching people, not to trust a damn soul with handling their monies. Would you?
As the Minister of Legal Affairs, why has no director/officer of CLICO, ever been charged, if you know how crooked they were being crooked in the offering as you claim, a 30% interest return - knowing damn well the insurance company were heading into bankruptcy? People like elected House of Assembly PLP's - shouldn't have to wait til 2017 - to be thrown out office. yet, our prison is 60% full citizens and visitors that ain't even there for being crooked. And, a government sanctioned insurance company crooked as all hell directors/owners does run free - to crook the poor people all over again.
Posted 17 April 2015, 9:48 p.m. Suggest removal
John says...
It is not Clico but RND, BoB, Freeport Concrete (Robin Hood) to name a few that caused Bahamians to lose millions. RND (now listed under another name). Has not put out a report in how many years and while some brokers have removed Freeport Concrete from their books, others still have it listed. The entire Bahamian stock market took a beating over the past eighth years. There is money to be earned but it is risky and long term. And yes most Bahamians don't have the capital or experience for this level of investment yet. Atlantis bought back their shares when they were in the height of growth and profitability.
Posted 18 April 2015, 8:09 a.m. Suggest removal
The_Oracle says...
From the days of Mail Fraud, (Bay Street suitcase Companies)
nothing much has changed, except perhaps the expanded variety of scams we practice.
Is it not every Bahamians right (and habit) to bounce checks?
No law against it so far.
Posted 18 April 2015, 3:52 p.m. Suggest removal
banker says...
Since the regulator has no teeth, investing in any BISX company is fraught with danger. Look at how long Julian Brown's company was listed after it became apparent that it was a bankrupt criminal organisation. There are many other examples of BISX being the last to act even though it has the fiduciary responsibility to regulate. It is a joke. It is just pure theater pretending to be real business, and comments like that from the vacuous, imbecilic, dense, deficient, anencephalic like the ethically-challenged Gomez, is just pure insulting to every Bahamian who can think independently.
Posted 20 April 2015, 11:18 a.m. Suggest removal
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