1. Contributory factors to the crisis of the crash/meltdown of Jamaica financial
sector in the 1990’s
While it may be impossible to reach a consensus regarding the causes of the problems in
the financial sector, there is an ample menu of contributing factors about which most would
agree. Briefly these factors are the following:
• The attitudes of domestic entrepreneurs were in-appropriate for the
financial sector. While most domestic entrepreneurs in the financial sector
were dynamic risk takers who explored possibilities for business that were
beyond the vision of most, they were too bullish in risking clients savings, too
eager to demonstrate success by building large high-rise office buildings, and
too prone to bend prudential norms and regulations.
• The quality of indigenous management of the troubled institutions
was deficient. Foreign owned and controlled institutions operating in the
same environment using indigenous managers did not experience the same
problems. Higher incidence of fraud and irregularities in indigenous
institutions are indicative of weakness in the control environment. Better
internal controls and prudential guidance by overseas head offices seem to
have been a factor in the better performance of the management of foreign
owned banks.
• Poor portfolio performance -euphemistically referred to by managers
as a "mismatch between assets and liabilities" in the case of insurance
companies and a high ratio of non-performing loans in the indigenous banks,
may have been due at least partly to inability/unwillingness of management
to resist political and social pressures to lend, and partly to recklessness in
investing in sectors where they had no special advantage or competence.
• Product design, reflected in too many and too complex products mostly
lacking in transparency was another failing of management.
• A culture of non-repayment of debt was fostered by the absence of a
system for collecting and sharing data on the credit history of
borrowers. Lack of information on customers/borrowers made it difficult for
managers of institutions to assess the risk associated with lending. The laws
have traditionally been skewed toward preserving the secrecy of customers’
relations with each institution, with the result that institutions do not share
information. FINSAC found that very frequently customers were
simultaneously indebted to several institutions. Add to this the failure of
institutions to insist on getting adequate documentation on collateral, and the
result was that many customers got more credit than would be justified by
their wealth and income situation.
• The macroeconomic policy environment, particularly the high interest
rates and high reserve requirements, has been cited by owners/managers as
an important factor that undermined the viability of their institutions. Again, it
must be observed that foreign-owned banks operating in the same
macroeconomic environment fared much better, enjoying positive net income
and return on assets of between 1.5% and 3% compared to the negative net
income and return on assets of indigenous banks. While the macroeconomic

2. situation may have contributed to the rise in the ratio of non-performing loans
in all banks, it does not explain the much larger rise in the ratio for
indigenous banks.
• The collapse of the real estate market has been cited as an important
cause of insolvency. This is only partly true. There was evidence of over-
building and the construction sector cooled off by 1990 (as evidenced by
commercial bank loans and advances and by sectoral GDP growth) before the
contractionary (tight money) stance beginning in 1992 to contain the high
inflation after its peak of 80% in 1991. But it is true that with the
contractionary policies in place market conditions ceased to validate overly
optimistic re-valuation of real estate assets. In the case of banks, collateral in
the form of real estate became inadequate to support the growing stock of
loans when real estate prices slowed as inflation was brought under control.
• Deficiency in the regulatory environment was a contributory factor to the
debacle in the financial sector. Specifically, there was tardiness in updating
prudential regulations and in putting adequate supervisory agencies in place.
The Office of the Superintendent of Insurance was especially not adequately
staffed and as a department within the Ministry of Finance did not appear to
have the stature needed to deal at eye level with the moguls of the insurance
industry. Bank inspection at the Bank of Jamaica fared better, but was still
late in being upgraded to deal with the increasing complexity of the groups
within which the banks and other deposit-taking institutions were located. For
some time the government had been concerned with the need to upgrade the
legal / regulatory framework of the sector, and had introduced major
revisions of financial legislation in 1992. However, further revisions as well as
the complementary institutional development could not be put in place quickly
enough to avoid the deterioration that quickly developed after 1994.
• Capital account liberalization has been blamed by some for financial sector
problems. Liberalization was not followed by massive outflows of Jamaican
savings into investments abroad. On the contrary, there seems to have been
some increase in inflows, possibly in response to liberalization of outflows and
possibly in response to high interest rates and a virtually stable nominal
exchange rate. Some of the increase may have been the repatriation of
earlier capital outflows provoked by controls. Short-term interest-sensitive
inflows can be a source of instability, (as the Chilean experience showed) and
their increase is not an undiluted advantage. However, the problems of
indigenous financial institutions did not result from sudden inflows and
outflow of foreign savings. Jamaica experienced large inflows (some capital
but mostly transfers) especially during 1994, which may have made monetary
management difficult. The Bank of Jamaica had to buy up foreign exchange in
order to restrain the appreciation of the Jamaican dollar, which had the effect
of injecting domestic currency into the system tending to compromise the
effort to reduce aggregate demand and inflation. Whatever may have been
the undesirable side effects of liberalization, it would be stretching credibility
to suggest that it was a cause of the widespread insolvency of indigenous
financial institutions.
• Lack of timely information flow on financial institutions (including
insurance companies and other non-banking entities) from a credible,
objective, official source to the public made it difficult to assess the relative
risk attached to dealing with one institution rather than another. This problem
extended to the information provided on instruments such as certificates of
deposit and promissory notes, which sometimes makes it impossible for the
public to determine who is custodian of their funds, the manner in which the

3. • funds will be invested, and who is obligated to repay.
• Lack of established arrangements for solvency support at the time of
the crisis essentially meant that there was resort to ad hoc approaches
leading to more uncertainty and panic than necessary. The JDIC had been
under study but not yet established.

4. Even though it appears the big boys have won again, I still don’t think this saga is over yet. My
question is what these investment “club” will do now that the law has been laid down. I think
they should start their application for license to the adversary (FSC). It will be interesting to see
if they will be successful in becoming registered so they can operate with a license under the
umbrella of regulated legitimacy. I am not sure but I think either OLINT or LEWFAM had some
cambio license that was suspended by the bank of Jamaica. It will truly be awkward to turn
around and beg the people you were fighting in court to give you the tools to fish so you can eat.
Cash plus and the others should make speedy their application to become regulated. I am not
sure if legislation would need to be enacted for them to carry on what they were doing, but surely
FOREX trading which is the main function of OLINT and LEWFAM does not need new laws
because both banks and brokerage firms already trade FX
THE ROLE OF THE FSC IN THE CASH PLUS SAGA
FSC issues Cease and Desist Order against World Wise
Posted on August 5, 2008 by investforlife
There is news that a Cease and Desist order has been issued against World Wise Partners. While
information is sketchy it is understood that sometime this morning the order was issued.When
contacted the FSC would not say much save and except that a statement would be issued later
today.
World Wise had just re-opened after been closed for 2 months and had stated that accounts under
$5000 would be closed and that no new deposits or members would be taken on at this time.
FSC Issues Cease and Desist Order to World Wise Partners Ltd./Noel Strachan
The Financial Services Commission (“FSC”) issued a Cease and Desist Order on Tuesday,
August 5, 2008 to World Wise Partners Limited/Noel Strachan (“World Wise Partners”)
pursuant to section 68 (1B) of the Securities Act.
The Cease and Desist Order issued by the FSC demands that World Wise Partners immediately
stop conducting securities business including soliciting and accepting monies from the public. It
should be noted that this Cease and Desist Order does not prevent World Wise Partners from
paying outstanding amounts due to investors. Therefore no one can claim that the FSC’s Cease
and Desist Order has stopped World Wise Partners from paying investors the amounts due to
them.
The FSC’s decision to issue a Cease and Desist Order is based on the fact that World
Wise Partners has induced persons in Jamaica to enter into arrangements which are securities in

5. the form of investment contracts. This was being done even though World Wise Partners is not a
licensed securities dealer and its investment contracts have not been registered with the FSC.
World Wise Partners has therefore engaged in securities activities in breach of sections 7, 10 and
26 of the Securities Act (“the Act”). Section 7 of the Act prohibits the carrying on of a securities
business without being licensed as a securities dealer by the FSC. Section 10 prohibits an
individual from carrying out the functions of a dealer’s representative without first being
registered for that purpose by the FSC. Section 26 prohibits the issuance of securities without
first applying to be registered by the FSC in respect of the securities.
In accordance with the Securities Act, entities that conduct or that propose to conduct securities
business or offer investment advice to the public are required to be licensed, and issuers of
securities are obliged to apply to the FSC to have their securities registered by the FSC before
they are issued.
The FSC is once again advising investors to refrain from investing with or through persons who
are not licensed or registered under the Securities Act

6. OLINT WOES hit investors in Grenada(with letter!)
Posted on July 23, 2008 by investforlife
SGL HOLDINGS INC. Investors in Grenada are feeling the pinch as result from the problems
affecting OLINT TCI. In a report on a Grenadian website, SGL Holdings INC acknowledges
that its having problems returning customers’ deposits. The Ministry of Finance in Grenada is
aware of the problem and to had dialog with SGL HOLDINGS INC. today, July 23, 2008. Here
is a quote from the article.
At a meeting held on Wednesday July 23 with the Ministry of Finance, the company advised that
the present challenges being experienced emanate from difficulties facing its trader, Olint TCI,
located in the Turks and Caicos Islands. Olint TCI has had its assets frozen pending an
investigation into its operations and until such time as this matter is resolved the Company is
unable to make any payments to its customers.
This is the story of yet another feeder in trouble. SGL is just one of the many
feeder/affiliate clubs with links to OLINT. The list includes Lewfam, UWIN, Wilshaw among
others. Read (How OLINT survived?)
The Ministry of Finance in Grenada made it clear that SGL Holdings does not fall under the
Banking Act. In May 2007 SGL Holdings applied to the Grenada Authority for the Regulation of
Financial Institutions (GARFIN) for a licence to conduct its operations.
After some tussle with the regulators and SGL Holdings in Grenada, the regulator issued a Cease
and Desist Order. It appears that they ceased taking new deposits while they sought to have
themselves regulated but now have hit repayment snags.
SGL Holdings claims that efforts are being made to ascertain the status of the investigations in
Turks and Caicos Islands and that they are committed to repaying

7. The Role Of FINSAC
MANDATE:
FINSAC Limited was incorporated with a specific mandate from Government:
To resolve the problems of solvency and liquidity being experienced by the financial sector.
OBJECTIVES:
In pursuance of this mandate, FINSAC developed eight broad objectives to guide its activities.
These objectives are as follows:
• to protect the investments of policyholders, depositors and pensioners;
• to restore liquidity and solvency to distressed institutions (in pursuit of the first
objective);
• to strengthen the financial management capability of intervened institutions;
• to improve the efficiency of the sector in mobilizing and allocating financial resources;
• to create an attractive environment for investors to recapitalise financial institutions;
• to minimize moral hazard and promote prudent behaviour;
• to promote strong corporate governance, managerial accountability and shareholder
oversight;
• to strengthen the sector through the establishment of appropriate institutional frameworks
and regulatory structures.
In pursuit of these objectives, FINSAC was established with the following Terms of Reference,
Financing and Exit Strategy (These are based on a Budget Presentation made by the Minister of Finance and Planning on March 27,
1997):
TERMS OF REFERENCE:

8. 1. FINSAC serves as the vehicle through which realignment and restructuring of the
financial sector will take place.
2. FINSAC serves as the executive arm of the Ministry of Finance and Planning in which
Government strategy will be planned and through which the interventions of various
agencies (specifically the Bank of Jamaica (BOJ) and the Superintendent of Insurance)
will be co-ordinated.
3. Through FINSAC, the Government will provide financial assistance to the sector and,
therefore, FINSAC will have the accountability for the spending of such resources
provided to it directly or guaranteed by the Government.
4. Through FINSAC, the Government will provide guidance and technical assistance to the
financial sector. It may mobilize and deploy external technical and managerial support
for the restructuring of intervened institutions.
5. FINSAC will sponsor and/or undertake diagnostic studies of the overall health of the
financial sector with specific focus on the institutions which require assistance.
6. FINSAC will assist institutions in developing workout plans, where necessary, to return
them to viability. Such plans will form the basis for the conditions which FINSAC will
attach to financial assistance. FINSAC will monitor the implementation of such plans on
a continuing basis and will evaluate their effectiveness in achieving their specified
objectives. It will inform and co-ordinate the inputs of FINSAC's board members of
intervened institutions on issues considered essential to the viability of the financial
sector.
7. Based on the experience gained in its work, FINSAC will advise the Government on the
prudential regulation of the sector and on the renewal, suspension and revocation of
operating charters of individual institutions within the sector.