Building Investor Confidence after Fraud

Fraud is among the list of hazards or risks that produce crises in organisations. At my upcoming MASTER CLASS on Crisis Communication Planning, I will share “strategies to build investor confidence” following the recent disclosure of fraud at the Jamaican investment house, Stocks and Securities Limited (SSL).

The Government of Jamaica must be commended for taking swift steps to strengthen the regulatory regime for investment houses following allegations of fraud at the stock brokerage company. The measures announced by Finance Minister Dr Nigel Clarke included the appointment of the current Central Bank Governor, Richard Byles as chairman of the Financial Services Commission. The Bank of Jamaica will also have increased regulatory powers over investment houses.

These official responses were aimed at addressing the public perception of weak oversight and governance by the Financial Services Commission (FSC), which apparently contributed to an environment conducive to the commission of fraud at SSL. The Government appears so far to be successful in tamping down any contagion effect resulting from the performance of the regulatory institution.

But the country is not yet out of the woods.  More work needs to be done at the level of the individual investor to preempt and prevent the contagion effect. Researchers (Anhert and Bertsch 2022) suggest that investors receive a wake-up call when financial crises occur elsewhere in entities where they have no assets but share interdependence through, for example, the same regulator. 

The positive thing about the awakening of investors in these circumstances is that their interest in gaining information about the market is at its highest. This is the time that investor relations must kick into high gear. This is the time for increased transparency at the firm level.