The Tribune

A broker/dealer that became embroiled in a controversial fight with both Bahamian and Canadian regulators yesterday said it was closing down, leaving 15 Bahamians out of work and taking an estimated $1.5 million out of the local economy.

Warren Davis, founder of Gibraltar Global Securities, said the Sandyport-based firm shut its doors last Thursday, blaming the move on a fall-off in business levels stemming from the Securities Commission of the Bahamas’ decision to release information on its clients - and their identities - to Canadian regulators.

Arguing that this had damaged Gibraltar’s business reputation, and client confidence, beyond repair, Mr Davis said the broker/dealer - which once boasted 1,224 clients - had no option but to close down voluntarily.

“In this business reputation is everything, and when it has been damaged, even unjustly, the impact is a measurable, quantifiable fall-off in business,” said Mr Davis in a weekend statement issued by a Nassau-based PR agency. He did not respond to Tribune Business e-mails seeking further comment.

The apparent closure stems from regulatory action taken against Gibraltar by the British Columbia Securities Commission (BCSC), which ultimately found it was advising on, and trading in, securities within the latter’s jurisdiction despite not being registered to do so.

It also allegedly failed to provide the BCSC with requested information on its clients.

Gibraltar was forced to pay a $300,000 administrative fine imposed against it by a BCSC hearing panel, a sum less than 20 per cent of the $1.6 million punishment that the Canadian regulator had sought.

However, Mr Davis has repeatedly saved his harshest criticisms for the Bahamian regulator, the Securities Commission of the Bahamas, describing its decision to pass information on Gibraltar’s clients to the BCSC as “highly questionable”.

He and the broker/dealer have stood by the legal opinions they received from two attorneys, which said there was nothing in Bahamian law to support the handing over of information on its clients to the Canadian regulator - which was seemingly engaged in a so-called ‘fishing expedition’.

“We did everything we were supposed to do,” added Mr Davis. “We succeeded. Not a single client lost a single penny. We lost as a company because we were part of a bigger picture of other countries piercing the armour of what is supposed to be private and confidential investing in stocks, bonds and Treasuries, and a local Securities Commission that could have done more to protect the interests of the Bahamian financial services industry as a whole, as well as those of one of its licensees.

“But when the representatives of a powerful nation go on a fishing expedition and decide that we are to be the bait, it is out of our control.”

Mr Davis and Gibraltar alleged that, at the BCSC’s behest, the Securities Commission raided their offices in 2010 and seized client information stored on computers, after it was discovered that one person of Canadian nationality from British Columbia had opened an account with Gibraltar.

“If regulators could come in, gather this information, for which we were advised through legal opinions prepared by two Bahamian law firms - both of which stated that Gibraltar was not legally obliged to produce the information sought and that their piercing amounted to no more than a fishing expedition - one has to question what does that portend for the offshore financial service sector, particularly for smaller local registrants?” Mr Davis asked.

“Are Bahamian-owned and operated businesses being targeted? Are Bahamian-owned and operated businesses in financial services more vulnerable, for instance, than an international bank engaging in the same business?”

Mr Davis, in his statement, said there was a possibility that Bahamian regulators reacted without considering the ramifications or implications for the industry.

“My company was 100 per cent Bahamian-owned and staffed,” said Mr Davis. “And I am proud that we had one of the highest qualified staffs of any institution in the financial services industry.

“Those 15 people are now out of work at a time where jobs in that industry are few and far between. In addition, the charities and other social causes we supported for years will now be without that support. Everything from National Insurance payments to utilities to rent - gone from the economy. I estimate that the closing of Gibraltar will take about $1.5 million out of the Bahamian economy annually.”

Mr Davis urged the Government to conduct an internal investigation into the matter, and added that he was concerned about the future of the Bahamian financial services industry as a whole.

“If Cayman and other jurisdictions can diversify their product and find the balance between offshore investments and regulatory requirements, why can’t we in the Bahamas do the same?” he asked.

“We will continue to lose our competitive advantage ,and once people of wealth go elsewhere for one set of services, they are likely to conduct other business in that other jurisdiction as well. That could be everything from real estate to legal services, yacht registration to capital investment. This is a much larger issue than one highly professional Bahamian securities trading company closing its doors.

“Unbalanced regulation, inconsistently enforced, may foster this trend of registered entities opting, like Gibraltar has done, to surrender their license. This is a challenge that must be addressed industry wide. I only hope it serves as a wake-up call for the industry.”