The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Securities Commission of the Bahamas’ (SCB) executive director said yesterday that the regulator may look to undertake its own investigation of Alliance Investment Management (AIM) to determine whether any securities laws in the country have been broken.

Hillary Deveaux told Tribune Business yesterday: “This matter is now before the courts in the United States. We will wait and see what happens with this matter. We are looking at the information. We may in fact start undertaking our own investigation to determine whether any securities laws in the Bahamas have been broken and, if so, take disciplinary action.”

The United States Securities and Exchange Commission (SEC) has charged AIM, the Bahamas-based brokerage firm, and its president Julian Brown for facilitating a multi-million dollar international ‘Ponzi scheme’. The SEC filed the complaint against Mr Brown and his brokerage firm in federal court in Chicago on Friday. Alliance is the main broker/dealer subsidiary for BISX-listed Benchmark (Bahamas), which has 735 Bahamian investors.

The SEC alleges that Mr Brown and his firm purported to be the “custodian” for assets under the control of hedge fund manager Nikolai Battoo and his BC Capital Group. “The SEC obtained a court-ordered freeze over Battoo’s assets after charging him in 2012 with defrauding investors around the world by hiding major losses while falsely boasting that their investments were performing remarkably during the financial crisis,” the regulator said in a statement.

According to the SEC’s complaint, Mr Brown and his firm misrepresented themselves to investors as Battoo’s custodian when, since at least 2009, their firm did not have custody of most of the assets listed on investor account statements.

“Brown and AIM allowed Battoo to create false account statements on AIM letterhead that vastly overstated the value of investors’ assets by more than $150m. Brown and AIM then routinely provided the false account statements to auditors and others acting on behalf of Battoo’s investors,” said the SEC.

The regulator further alleges that Mr Brown and AIM permitted Battoo to misappropriate at least $45m of investor funds by transferring money on orders of Mr Battoo’s from investor accounts to Battoo’s direct control. “Battoo used investor funds to pay AIM and Brown more than $5m in return for their critical assistance.”

The SEC’s complaint alleges that Brown and AIM violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and aided and abetted Battoo’s violations of the anti-fraud provisions of the federal securities laws.

The SEC has stated its appreciation for the assistance of the SCB in its investigation. Mr Deveaux noted that the SEC had requested assistance in its investigation into the matter in July 2012. Mr Deveaux noted that although the Commission was not an IOSCO ‘A’ signatory at the time, under and Memorandum of Understanding between the SEC, the Commission, the Central Bank and the Attorney General’s Office it was able to facilitate the request.

“They came to us with request for assistance with the proper protocol. We analysed it. We went to Alliance and requested the information requested by the SEC. Alliance provided us with the information and we passed that on to the SEC,” Mr Deveaux explained.