CIMA places Caledonian into controllership

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The Cayman Islands Monetary Authority has placed Caledonian Securities and Caledonian Bank into controllership just days after the U.S. Securities and Exchange Commission filed a lawsuit against the bank and its brokerage on Feb. 6. 

The SEC alleges that Caledonian and its co-defendants Clear Water Securities Inc. and Legacy Global Markets SA in Belize and Verdmont Capital SA in Panama offered and sold stocks to investors in the U.S. without the registration required for the shares to be publicly tradable.  

The sham offerings of penny stocks in four shell companies – Swingplane Ventures, Goff Corp., Nostra Energy and Xuamnii Inc. – were followed by aggressive pump and dump schemes involving the virtually worthless companies and netting the perpetrators of the fraud US$75 million, according to the writ.  

CIMA issued a public notice Tuesday advising that the authority has appointed Keiran Hutchison and Claire Loebell of Ernst & Young to assume control of the affairs of both Caledonian bank and its securities trading affiliate.  

The controllers have assumed immediate control of Caledonian and “have all the powers necessary, to the exclusion of any operator, to administer the affairs” of the entities in the best interest of its depositors, investors, clients and creditors, CIMA said. 

The controllers will also be responsible for assessing the financial position of the bank and brokerage and reporting back to CIMA. 

The authority, which regulates the financial services industry in Cayman, had said on Monday that it was aware of an investigation and filing by the SEC of its regulated entities and warned that it would take whatever 
action available to them. The authority said it had “been working with Caledonian to address matters of concern, some of which are outlined in SEC filings.” 

CIMA also confirmed it had been in contact with the SEC for the past 18 months.  

Wayne Panton, minister of financial services, released a statement earlier this week that he was aware of the SEC lawsuit against Caledonian and that it is a regulatory matter that is dealt with by CIMA. He confirmed that CIMA had been in discussion with Caledonian over the weekend, and said he has “every confidence that CIMA will seek the best possible resolution and take the necessary action available to it, in the best interests of depositors and investors.” 

Caledonian

Caledonian House on Dr. Roy’s Drive, George Town. – PHOTO: TANEOS RAMSAY
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  1. A few questions….

    1. Did CIMA conduct regular reviews of Caledonian Securities and Caledonian Bank and if so what were their findings over the years?

    2. Did CIMA initially identify the issues outlined by the SEC?

    3. Does Caledonian Securities and Caledonian Bank have internal auditors and what were their findings over the years?

    4. Does Caledonian Securities and Caledonian Bank have external auditors and what were their findings over the years?

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  2. Hugh,

    Considering CIMA doesn’t audit the financial institutions, that question is meaningless. However the point of the annual audit by its auditors would be to give an opinion on the financial statements, not to check every transaction to make sure it’s within the SEC’s rules.

    Mack,

    If you want the answers to those questions, I suggest attending the hearings of the SEC regarding this matter. I’m sure it will all come out eventually, but there’s no chance Caledonian, CIMA or the SEC is going to give out that information.

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  3. Mack Boland, do you live in the Cayman Islands? Based on your comment it doesn’t seem like you do. FYI Cayman Islands is known as a tax haven for a reason.

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  4. Lloyd Mongo, you seem to be clueless about the concept of auditing. Any good auditor can find even a penny’s worth of error. They can figure out what is bogus and what is real from auditing the books of accounts, unless they are as clueless as are you about auditing.

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