Editorial | FSC pussy-footing on pyramid schemes

Among the responsibilities of a regulator is to set the broad terms for the relationship between businesses and consumers and, critically, to call to account firms that breach established codes. That sometimes requires throwing the book at misbehavers. In this regard, we don't understand the pussy-footing of the Financial Services Commission (FSC).

In recent days, the FSC, which has oversight for non-bank financial companies, has issued public-service announcements advising Jamaican summers of the old adage - if an investment opportunity appears to be too good to be true, it usually is.

In this case, the warning relates to what the FSC describes as unregulated financial organisations (UFOs), promoted primarily via social media, offering persons "investment-type" schemes. They promise returns of more than 15,000 per cent a year.

Firms that offer investment instruments, as defined by the law, have to be licensed by the FSC, and their promoters and investment advisers are required to have specific qualifications and have to be certified to be fit-and-proper to engage in these activities. The fact that the FSC refers to the entities that now proliferate as UFOs clearly indicates that they operate without the commission's imprimatur. That, in turn, means they are illegal.

If that is the case, while issuing consumer education information is important, it is, in our view, far from sufficient. The FSC should, and must, issue cease-and-desist orders.

Track the promotions

It is true that the promotion of these entities via social media makes to track their promoters and the "potential for anonymity can make it harder for fraudsters to be held accountable". However, they are not totally untraceable. It can't be beyond the investigative capacity of the FSC and the police, with the help of persons who have "invested" in these schemes, to follow the money to its ultimate destinations.

But even before that, the FSC knows the various names by which various UFOs promote themselves. It can, if it wishes, declare these entities to be non-complaint with its regulations and, therefore, in breach of the law - that they are illegal. In other words, a general cease-and-desist declaration can be made. Formal charges can follow.