The Bahamas finds
itself in some debate over the actions of its securities commission assisting
the Canadian province of British Columbia in preventing the violation of its
securities provisions, and perhaps other laws. The situation is instructive and
should clarify an age old problem which many Bahamians seem not to understand.
The securities Commission of the Bahamas should be commended on doing the kind
of job it should do more often, if the Bahamas wants to build its economy,
international reputation, and develop a Capital Market Driven Economy (CMDE), as
advanced by the Council for Concerned Bahamians Abroad (CBA) in several of its
previous reports at
www.ourbahamas.org
.
The Bahamas must base its future on productive
legitimate enterprise, and be a cooperative and collaborative player in world
financial affairs, rather than a small “Black Hole” outlier whose primary claim
to fame in Financial Services is viewed from the outside by powerful
international forces as assisting in the violation of the laws of other
countries. The Country must avoid acts seen as encouraging and promoting the
international movement and disappearance of monies down a virtual “Black Hole”
never to be further traced by anti-terrorist, anti-money laundering, and taxing
authorities and agencies.
In brief, it has been reported that Gibraltar Global
Securities a Bahamian based and apparently owned financial service company has
been declared “Unsuitable” to do business in the Province of British Columbia by
the Securities Commission of British Columbia (BCSC). The company and its
Canadian affiliate “Global Securities” also faces other sanctions and fines in a
hearing scheduled for June 12, 2012. The principals of the Bahamian company have
publicly complained that it is a sovereignty issue and that the Securities
Commission of the Bahamas (SCB) was wrong in providing the BCSC with information
it involuntarily retrieved from Gibraltar in a 2010 “surprise” visit to
Gibraltar’s offices. The SCB seized documents containing information which the
British Columbia government claimed existed, and which Gibraltar had reportedly
refused prior requests for discovery, claiming protection from “Fishing
Expeditions” not allowed by Bahamian “Financial Secrecy Law”. Also, Gibraltar
now claims that the SCB should be investigated in the matter, as its actions
will hurt the Bahamian industry, and reverberate internationally among clientele
seeking offshore services and protections.
The SCB has
admitted to sending the seized documents to the Provincial government thus
giving them evidence needed for their subsequent ruling and actions. Generally,
this is how a competent securities Commission is expected to operate, and based
on current law and regulations, the SCB seems to have been justified considering
the prior discovery requests and resultant refusals by Gibraltar. The BCSC in
its ruling also offered evidence that Gibraltar and Global had previously
proffered formal statements specifically denying their engagement in the
activities the retrieved documents later evidenced they were involved in. More
on the specifics of the case can be viewed at
www.ourbahamas.org
.
While the CBA can only opine as to the actual facts as
reported in the BCSC ruling and elsewhere, an evaluation based on what has been
reported, reveals a situation which is highly instructive. Notably, this is not
the first incident the Bahamas Securities Commission has had with Canadian based
and affiliated financial service operations. There have been several prominent
examples. Due to the lack of a federal securities commission, oversight
regulations, and enforcement capabilities, the Canadian securities system which
is Provincially based, has come under much scrutiny and criticism. Some
observers have gone as far as to state that parties hurt by Canadian related
financial services must often depend on transactional connections to the long
and powerful arm of the U.S. Securities operations and laws for enforcement
solutions. Ironically, this is also one reason the more prudent Financial
Services operations in the Bahamas have traditionally and facially steered away
from U.S. based transactions whenever they can. The situation in Canada has led
to disparate enforcement of securities matters, and internal and international
forum shopping by questionable Investment practices and promoters. The Bahamas
has unfortunately become a forum shopped by some of these entities due its
history as an offshore center with laws touting financial secrecy, and with
local actors amenable to lucrative, less enforceable Canadian, as compared to
highly scrutinized U.S., based transactions.
The view from outside is extremely important in this
area. The Bahamas cannot build and maintain a financial services industry or any
industry for that matter, which is viewed from the outside as assisting in the
violation of the laws of other countries. This is particularly so when the laws
being violated are those of world leading countries, and where our actions may
be seen as contravening international norms of financial practice. Simply
because we are a sovereign nation with our own laws, does not mean we can do any
and everything to make money.
A simple rule that
actors within the Bahamian Financial Services industry must remember is that
within International Law and Relations, “Might Is Almost Always Right”. This may
be a sobering realization for the less well heeled nations, but it is one to
take important notice of. While International law and treaties may be
interpreted by international bodies with some token representation from smaller
nations, such laws are generally established by the larger more powerful forces,
and always unilaterally self interpreted and enforced by them in protecting
their interests. Unresolved international disputes only exist when two behemoths
disagree, but generally when a behemoth confronts a small actor in an
international dispute, most knowledgeable observers realize who will ultimately
win. Numerous examples of this can be cited but is unnecessary in the context of
this report, and may be covered in a follow up report on
www.ourbahamas.org
.
Large powerful countries and international
organizations in attempting to protect their interests will strive to do so,
particularly when the moral and ethical situation, and international law is
arguably on their side.
The new Minster of Financial Services Ryan Pinder, a
highly trained and U.S. experienced Tax and Business Transactional lawyer has
his work cut out in reigning in unrealistic actors and expectations in the
Bahamas Financial Service community. His appointment breeds hope that financial
services can now be focused on bringing foreign income and jobs from legitimate
foreign business setup and financial services, rather than from the assistance
of “Black Hole” financial services couched in terms like “sovereign protected”,
“wealth management”, “high net worth offshore asset protection” et
al.
The writing has been on the wall for some time now for
any objective observer to see. Large important production based world economies
will not allow small non-production related economies like the Bahamas to assist
foreign violations and abuse of their laws. The recent BCSC ruling, FATCA, OECD,
The Patriot Act, and several others now in the pipeline are clear examples that
the problem for countries like The Bahamas is not going away.
Both Prime Ministers Ingraham and Christie recognized
the problem, and Ingraham though criticized for giving in to the OECD during his
first terms in office should be applauded for doing what was morally and
ethically right, even if he may have been forced to do so. It is important to
note that Christie in his first term did not try to repeal Ingraham’s decision,
apparently recognizing the futility of attempting to do so in face of the clear
writings upon the international wall of financial compliance. In addition, he
appears to have an obvious inclination and predisposition to make the Bahamas a
more important and respected player on the world stage. Members of the Bahamas
Financial Services Community who do not follow the views espoused in this CBA
report, should not be surprised, or expect Prime Minister Christie to take any
steps which will put the international reputation of the Bahamas at
risk.