Monday, January 13, 2020
By NEIL HARTNELL
Tribune Business Editor
The Securities Commission has defended its handling of a collapsed investment adviser by saying it took “appropriate regulatory steps” while arguing that client assets are safe.
The capital markets and investment funds supervisor, in what read like a defence of its approach to Pacifico Global Advisors, argued that it had “closely monitored” developments at the company whose failure had been some two-and-a-half years in the making.
It added that it had requested the September 2019 meeting at which it was agreed that the insolvent firm would enter what has become a court-supervised liquidation process under Intelisys (Bahamas) chief, Ed Rahming.
“The Commission has closely monitored developments and analysed events relating to Pacifico’s operations throughout the past year and before,” the Securities Commission said in a statement. “Where necessary, the Commission took the appropriate regulatory steps, including meeting with Pacifico at various times.
“During a meeting with Pacifico held in September 2019, at the request of the Commission it was agreed that Pacifico would enter in a voluntary court-supervised liquidation. At the time, the Commission observed that client assets were properly segregated from the company’s.
“Further, to ensure the absolute protection of Pacifico’s clients, the Commission required that it approve the proposed liquidator and thereafter supported the approved liquidator’s application for court- supervision.”
The Securities Commission also appeared to draw comfort from Mr Rahming’s finding that client assets had been separated from those of the firm, and had not been improperly co-mingled.
“The Commission’s position on clients’ assets being unaffected is thus far supported by the liquidator’s report, which indicates that ‘based on initial investigations undertaken to date, it appears that the company’s assets were segregated from the assets of clients and customers. The assets of clients and customers were placed in segregated accounts in the company’s name’,” the regulator added.
“As indicated, the Commission is continuing to monitor the matter and will, where necessary, address any contrary findings.” It appears that the Securities Commission’s statement may have been prompted by negative reaction from Pacifico’s clients to the company’s Supreme Court-supervised liquidation and the uncertainty over whether they will fully recover their assets and monies.
For while the assets may have been segregated, Mr Rahming’s report revealed that much depends on the work of fellow accountant Philip Galanis, the HLB Galanis & Company principal, who is the receiver of the Lyford Fund’s sub-funds - the investment vehicles into which the majority of Pacifico Global’s client assets were placed.
How much Mr Galanis realises will ultimately determine how much Pacifico Global’s clients receive, and Mr Rahming’s first report to the Supreme Court has already alleged that the sub-funds’ worth was over-valued and that some investors who previously withdrew funds received preferential redemptions and treatment.
Tribune Business previously revealed how Pacifico Global collapsed into insolvency due to “mismanagement” centred on internal conflicts and the payment of “excessive cash” to related parties for client introductions.
And Mr Rahming said it was currently impossible to estimate how much clients and creditors will recover of the sums owed to them because the company’s accounts “were at least nine months in arrears” when he was appointed in early October 2019 and cannot be relied upon.
His December 16, 2019, report, reveals that Pacifico Global’s operational affairs and back office were a shambles until Marc Brune was hired as its chairman in October 2017. He, working with Nadia Butler, Pacifico Global’s new compliance officer, found that several clients “appeared to be involved in suspicious transactions” and seven such reports were filed with the Financial Intelligence Unit (FIU) as a result.
“The liquidation was ultimately caused by the mismanagement of the company,” Mr Rahming concluded of his review into Pacifico Global’s affairs. “In 2017, the company began to experience a cash shortage/solvency issue which was the result of paying out ‘excessive cash’ to related parties for business introductions and consulting...
“There are substantial related party payments and transfers made with the apparent knowledge that insolvency of the company would occur. There also appear to be creditor payments made shortly before the liquidation that were transacted with the knowledge that the company would shortly become insolvent.”