John Myers Jr., Business Reporter

The Financial Services Commission (FSC) has warned that those entities purporting to be 'investment clubs' rather than securities dealers were operating illegally as they too are required to have a licence to operate.

A number of high-yield investment schemes, which define themselves as clubs and not traders, have been claiming that their operations fall outside the ambit of the FSC.

But deputy executive director of the regulatory agency, George Roper, said Wednesday that investment clubs, based on the stipulations used in other jurisdictions, were limited by the number of members involved in the club and all members were required to participate in deciding in the type of investments entered into, counter to what obtains with local entities.

"If you have one or two persons who are making the investment decisions then those one or two persons will have to be licensed as investment advisers," Roper advised at the latest 'Think Before You Invest' public forum hosted in Kingston by the regulator.

"The important thing to note is that there is no exemption from licensing for 'investment clubs' in Jamaica," he stressed.

healthy portion of investments

Addressing the concern of the likely impact high-yielding investment schemes would have of the island's financial sector should they crash, the FSC executive said the legitimate financial sector was still handling a healthy portion of investments in Jamaica and therefore the fallout would not lead to a financial meltdown as the case was in Albania.

The formal sector is valued at about $1.2 trillion, whereas loose estimates of the high-investment scheme funds have been placed at about $150 billion.

Olint and Cash Plus are said to command the larger portion of those investments.

Roper said the FSC did not have knowledge of how much money was invested in these schemes when asked about the 25 per cent of GDP estimate that is bandied.

The agency, however, estimated that there were at least 15 schemes offering high-return investment to Jamaicans at this time.

Returns range as high as 18 per cent per month offered by Cash Plus and 25 per cent per month on offer from SwissCash before it disappeared from the radar in July.

taking action

As to whether the FSC will intervene in any of the operations, Roper said: "We wouldn't discuss plans to intervene with the public." But: "At anytime that we will be taking action, the public will be advised - at the appropriate time."

The FSC is in litigation with Olint to determine whether it has jurisdiction over the foreign exchange trader's operations.

john.myers@gleanerjm.com

TAKEN FROM THE FINANCIAL GLEANER, FRIDAY, NOVEMBER 9, 2007