By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian broker/dealer has been placed in Supreme Court-supervised liquidation amid fears it is almost $11m insolvent and unable to fully repay clients what they are owed.

Sir Ian Winder, the chief justice, via a February 25, 2025, signed Order agreed with the Securities Commission that LCG Capital Markets be wound-up amid concerns over multiple supervisory breaches that included “a significant regulatory capital deficiency”; repeatedly late audited financial statements; and “non-compliance with corporate governance obligations”.

Legal documents seen by Tribune Business also reveal that, during its first four years in The Bahamas, LCG Capital Markets incurred combined losses of more than $18m to year-end 2021. And its chief executive and sole director, Sean Munnings, submitted his resignation on September 13, 2024, some two months after the Securities Commission was warned it “was unable to continue” due to its Swiss parent’s troubles.

The Chief Justice, in his Order last week, named Bahamian accountants James B. Gomez and Noreen Taylor-Campbell, both of Ecovis Bahamas, as LCG Capital Markets’ joint official liquidators. They will now be in the early stages of taking control of all the broker/dealer’s corporate records, as well as its bank accounts and other assets, as they begin the task of recovering funds’ due to clients.

The Securities Commission, in its December 4, 2024, winding-up petition as well as an accompanying affidavit from Christina Rolle, its executive director, asserted that the Bahamas-based broker/dealer’s demise stemmed directly from the regulatory woes encountered by FlowBank, its Swiss-based parent.

Regulators in that European nation initiated bankruptcy proceedings against FlowBank on June 13, 2024, and secured the appointment of liquidators, “due to insufficient capital and concerns of over-indebtedness”. This, in turn, triggered massive problems for LCG Capital Markets, initially incorporated as London Capital Group Bahamas, due to its heavy reliance on the Swiss parent for back office support and client origination.

The Bahamian broker/dealer, which specialised in arranging deals, foreign exchange (forex) trading and contracts for difference (CFDs), the latter of which involves buyers paying the difference between an asset’s current price and the value at the time the contract was initiated, took just one month it would be unable to exist without its parent’s support.

“LCG is wholly owned by Swiss-based bank FlowBank,” Ms Rolle said, “which has provided crucial services to LCG via outsourcing agreements, including client funds reconciliations, Know Your Customer and anti-money laundering services, information technology services, customer support and finance and accounting services.....

“LCG advised the Commission, via letter dated July 12, 2024, from its attorneys, Graham, Thompson & Company, that it was unable to continue without the financial and operational support from FlowBank and sought the Commission’s intervention with initiating a supervisory liquidation of the company.” FlowBank’s Swiss liquidators had already confirmed they “cannot give access to any funds” to the Bahamian broker/dealer.

Back office support and the provision of “any further financial services” was also being cut-off, and Ms Rolle added: “The Commission has been made aware that LCG is projected to be insolvent in the amount of $10.827m, noting that adjustments made by FlowBank leave the company with insufficient funds to pay its clients.”

Then Mr Munnings, during a September 27, 2024, meeting at the Securities Commission’s offices to discuss the broker/dealer’s financial and operational issues, advised: “LCG is financially reliant on FlowBank and therefore unable to meet its debts and operational demands without this support. 

“FlowBank has assisted LCG financially in the form of subordinated loans, but this approach was changed to providing assistance to LCG in the form of bank overdrafts. This only added to LCG’s debt issues because the overdrafts also accrue interest.”

Mr Munnings, according to Ms Rolle, also revealed that FlowBank’s Swiss liquidators had warned they would “not fulfill” an agreement which would have provided the Bahamian broker/dealer with $4.9m or about 31 percent of its total revenues.

And, as FlowBank was shut down, “LCG clients were no longer able to freely trade or make withdrawals. This resulted in LCG being unable to provide information to their clients concerning their CFD trading and withdrawals”. 

Ms Rolle, noting that LCG Capital Markets’ audited financial statements showed it had incurred total losses, or an accumulated deficit, of $18.206m to end-December 2021 - just over four years since it was incorporated in November 2017 - said: “Several regulatory matters relative to LCG’s operations have also given rise to concerns about their governance issues.”

Both the Bahamian broker/dealer’s audited financials for 2022 and 2023 remained outstanding when the Securities Commission petitioned to place it in Supreme Court-supervised liquidation. The regulator added: “LCG has faced a significant regulatory capital deficiency since the 2019 third quarter, which has worsened due to unhedged client positions and capital shortfalls.

“Despite repeated requests from the Commission for a detailed capital management plan and financial support from FlowBank, LCG failed to address its insufficient capitalisation... LCG’s financial insolvency and lack of funds for voluntary liquidation are in direct contravention of regulatory capital requirements, necessitating regulatory intervention.”

And Ms Rolle, in her accompanying affidavit, disclosed: “LCG’s regulatory challenges are compounded by governance issues and non-compliance with corporate obligations.” She said LCG’s ‘annual information update’ forms for 2022 and 2023 both listed Mr Munnings, its chief executive, as also being the company’s sole director.

The Securities Commission, on January 22, 2024, requested an updated directors’ register and asked when at least one additional person would be appointed to the Board. Mr Munnings, on March 20, 2024, named the extra person that LCG planned to appoint as a director but, more than eight months’ later, had failed to submit a formal application seeking regulatory approval for this.

And, while FlowBank’s Swiss liquidators had pledged to help LCG “facilitate the migration of their clients to another designated service provider and, most importantly, to proceed with the splitting of all data pertaining to LCG versus FlowBank”, the deadlines by when this was supposed to happen have now passed without any further word.

The Securities Commission suspended LCG’s registration with immediate effect for 30 days on October 31, 2024, an action that was backed - along with Supreme Court-supervised liquidation - by the broker/dealer itself just one day later. Having “ceased to operate”, LCG was unable to voluntarily wind-up because it lacked the necessary two Board directors to give this effect.

“Given the mentioned regulatory issues coupled with the ongoing supervisory winding-up of Flow Bank, LCG’s circumstances are anticipated to only worsen,” the Securities Commission asserted in its petition. “LCG, being insolvent in the amount of $10.827m, is unable to meet its debts and operational demands, and adjustments made by FlowBank leave the company with insufficient funds to pay its clients.

“Parent company FlowBank, on whom LCG relies financially, is being wound-up and without this financial support LCG cannot continue operating.” As a result, the Securities Commission argued it was in the interest of LCG’s clients, investors and creditors that the company be wound-up.

Mr Munnings, in a November 1, 2024, letter to Ms Rolle, agreed: “Further to the Securities Commission of The Bahamas letter of October 31, 2024, I confirm receipt and agreement with the registration suspension and regulatory wind-up of the company.

“I will inform former LCG staff and registered officers that they are expected to facilitate the winding-up action to the best of their ability and assist the appointed joint provisional liquidators, James Gomez and Noreen Campbell, both of Ecovis Bahamas, with their requests.” There is nothing to suggest that Mr Munnings, or any LCG staff members, have done anything wrong.