Olint Corporation Ltd, David Smith v Financial Services Commission; Lewis and Lewis (t/a Lewfam Investments) v Financial Services Commission

• Jurisdiction: Jamaica
• Judge: N. E. McINTOSH, J.
• Judgment Date: 24 December 2007
• Judgment citation (vLex): [2007] 12 JJC 2401
• Court: Supreme Court (Jamaica)
• Date: 24 December 2007

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

APPEAL BEFORE A JUDGE IN CHAMBERS

PURSUANT TO SECTION 68(1C) AND/OR SECTION 74 OF THE SECURITIES ACT

[1] APPEAL NO. HCV 2006/01365

BETWEEN

OLINT CORP LIMITED

1 ^ST APPELLANT

AND

DAVID SMITH

2 ^ND APPELLANT

AND

THE FINANCIAL SERVICES COMMISSION

RESPONDENT

AND

[2] APPEAL NO. HCV 2006/01357

PURSUANT TO SECTION 68 AND/OR SECTION 74 OF THE SECURITIES ACT

BETWEEN

NEIL LEWIS and JANICE LEWIS (t/a LEWFAM INVESTMENTS)

APPELLANTS

AND

THE FINANCIAL SERVICES COMMISSION

RESPONDENT

Lord Anthony Gifford, Q.C., Mr. Christopher Dunkley and Mr. Huntley Watson, for the Appellants, instructed by Messrs. Watson & Watson, Attorneys-at-Law,

Mrs. Nicole Foster-Pusey and Miss Kalaycia Clarke for the Respondent, instructed by the Director of State Proceedings.

Mr. R. Braham and Miss D. Gentles for the Appellants, instructed by Messrs. Livingston Alexander & Levy, Attorneys-at-Law.

Mrs. Nicole Foster-Pusey and Miss Kalaycia Clarke for the Respondent, instructed by the Director of State Proceedings.

INVESTMENT - Foreign currency trading - Whether breach of Securities Act

CURRENCY MARKETS - Financial Services Commission - Power to issue Cease and Desist Order

N. E. McINTOSH, J

1 The parties in the above entitled appeals made several appearances in the Supreme Court in connection with some related issues and during the course of those appearances it was determined that the two appeals should be heard together, having regard to the issues common to both. So it was that the hearing commenced with submissions on behalf of the Appellants in [1] above followed by submissions on behalf of the Appellants in [2], after which came the Respondent's submissions, first in relation to appeal [1] and then to appeal [2]. The replies were heard in a similar vein.

2 For the purposes of this decision, I will refer to them as the "Olint Appeal" and the " Lewfam Appeal".

3 THE OLINT APPEAL

4 By Notice dated April 7, 2006, the Appellants appealed pursuant to sections 68 and 74 of the Securities Act against the Respondent's Order dated 24 ^th March, 2006 by which the Respondent purported to "order the Appellants, their servants, agents and representatives including directors, officers and employees to immediately CEASE AND DESIST (unless and until the relevant licence is acquired):

• (a) from carrying on securities business and investment advice business within the meaning of the Securities Act;

• (b) from holding themselves out as carrying on securities business and investment advice business;

5 And without limitation to the foregoing

• (c) from soliciting any new securities business and investment advice business within the meaning of the Securities Act; and

• (d) from taking on any new securities business and investment advice business within the meaning of the Securities Act."

6 This Order was issued at the conclusion of certain investigations carried out by the Respondent's Financial Investigations Division which included the execution of search warrants under the Securities Act authorizing a search of the offices of the Appellants and seizure of documents and records relating to their activities. According to the affidavit of Janice Holness, Attorney-at-Law and Chief Investigator in the Respondent's Investigation and Enforcement Department, the investigations were triggered by certain information and complaints received by the Department and a report was thereafter prepared and presented to the Commission. This report was considered at a meeting of the Commission held on March 22, 2006 and, as reflected in the affidavit evidence of Brian Wynter, its Executive Director, it formed certain views about the activities of the Appellants.

7 The Preamble to the Order gave the basis for the investigations into their activities as arising from the Commission's suspicion that, in breach of the Securities Act, the Appellants were:

• "1. On a day to day basis and without a securities dealer's licence, carrying on securities business in contravention of section 7(l)(a) of the Act.

• 2. On a day to day basis and without a securities dealer's licence, holding yourself out as carrying out securities business in contravention of section 7 (1)(b) of the Act.

• 3. On a day to day basis and without an investment advisor's licence, carrying on investment advice business in contravention of section 8 (l)(a) of the Act

• 4. On a day to day basis and without an investment advisor's licence, holding yourself out as carrying on investment advice business in contravention of section 8 (1)(b) of the Act"

8 Section 7 provides that:

(1) A person shall not —

• (a) carry on a securities business; or

• (b) hold himself out as carrying on a securities business unless he is in possession of a dealer's licence to do so granted under this Act.

9 Section 8 provides that:

• (1) Subject to subsection

• (2), a person shall not

  • (a) carry on an investment advice business; or

  • (b) hold himself out as carrying on an investment advice business unless he is the holder of an investment advisor's licence granted under this Act.

10 Subsection 2 provides certain exceptions which are not relevant to this case and in section 2 (1) the following definitions are provided

"securities business - a business of dealing in securities";

investment advice business — the business of advising persons as to the investing in or the buying or selling of securities;"

11 The Respondent expressed in the said Order that, in the circumstances, it was satisfied that the Cease and Desist Order should be made because it believed that the Appellants:

"dealt in securities and through their operations, engaged in the participation of a profit sharing agreement in relation to foreign currency trading activities;"

12 that they:

"issued investment contracts in relation to foreign currency trading activities;"

13 and that they:

"provided investment advice to potential investors in relation to foreign currency trading activities."

14 The Order went on to state that inasmuch as the Appellants were not licenced to carry out those activities, the said activities were therefore unlawful.

15 In short, the Order required the Appellants to cease and desist the activities of carrying out securities business and investment advice business, of holding themselves out as carrying on securities or investment advice business or from taking on any new securities and investment advice business, within the meaning of the Securities Act, "unless and until they acquired a licence." It is the Respondent's position that if the Appellants intend to engage in these activities, offering these services to the public, they must obtain a licence.

16 However, Lord Gifford for the Appellants has argued that they have not breached the Securities Act (hereafter referred to as the SA) as their activities did not involve securities and there was therefore no basis for the issuance of the Cease and Desist Order. He emphasized that their activities were concerned with foreign currency trading and foreign currency is not a security as defined in section 2 of the SA.

17 That section defines "securities" as follows:

"2— (1) In this Act unless the context otherwise requires---------------------

"securities" means —

• (a) debentures, stocks or bonds issued or proposed to be issued by a government;

• (b) debentures, stocks, shares, bonds or promissory notes issued or proposed to be issued by a company or unincorporated body;

• (c) documents or writings commonly known as securities or as the Minister may prescribe from time to time by order;

• (d) rights or options in respect of securities;

• (e) certificates of interest or participation in any profit sharing agreement;

• (f) collateral trust certificates, preorganization certificates, or subscriptions, transferable shares, investment contracts, voting trust certificates or certificates of deposit for securities,

but does not include —

• (g) stocks or shares of private companies

• (h) futures contracts that are governed by any written law Regulating trading in futures contracts;

• (i) bills of exchange;

• (j) certificates of deposit issued by banks licensed under the Banking Act or financial institutions licensed under the Financial Institutions Act; or

• (k) securities issued by the Bank of Jamaica."

18 All the questioned activities in the Cease and Desist Order touch on the definition of securities, argued Lord Gifford and foreign currency is not included in that definition. If an item is not contained in (a) to (f) of the section it is not a security. The Appellants were entitled to look at the law to note that it does not extend to their activities and then to associate as they did in carrying out a lawful activity.

19 It is against this background that the Appellants challenge the action of e Commission in the following ten (10) grounds of appeal:

• 1. The Commission acted in breach of the principles of natural justice in that it took a decision which has prejudiced the Appellants' right to associate with fellow citizens in pursuit of a regularly organized and legitimate activity, in the absence of the Appellants and without first giving to the Appellants the opportunity to be fairly heard in defence of their rights of association and/or property.

• 2. The action taken against the Applicants was null and void ab initio ...