In the Guernsey Press today it has been reported that there has been CALLS for a significant change of regulatory approach at the Guernsey Financial Services Commission following investigations surrounding investment business Providence.

Read more at: http://bit.ly/2dFYuT9

The article goes on to say:-

Former Treasury minister Deputy Charles Parkinson raised the matter as the States debated the GFSC’s annual report and accounts and questioned whether the commission should take more interest in the investment propositions rather than its focus on compliance.

It follows the news that islanders with thousands of pounds invested in funds operated by Providence, the Guernsey-headquartered investment business, could be facing losses following global regulatory moves.

Following the debate in the States, Deputy Parkinson said the current approach seemed to be that as long as a fund complied with the regulations, the Guernsey Financial Service Commission was satisfied.

‘I feel to protect the reputation of Guernsey; the GFSC may want to be more cautious in approving funds investing in high-risk areas’.

Outside of what has been said above…..how did they get a licence in the first place?

The deputy may be correct, however surely, the big question is how was a licence issued in the first place. There were many investment professionals questionings what Providence was up to before it all hit the fan. Why weren’t the same questions being asked by the regulators?

The same also goes in Jersey…….conflicts and returns who should have known?

Lumiere Wealth Limited, a Jersey regulated independent financial adviser which forms part of the Providence Group, is all under investigation: http://bit.ly/2dnHtcb

No doubt at the end of this enquiry there will be public statements, people banned and even maybe the first fine (civil penalty). However, the same questions about the GFSC may also be levelled at the JFSC because Lumiere Wealth Limited was part of the Providence Group.

Remember these Lumiere people were not hiding what they were doing under a bushel. Their boasts of interest busting returns were well published and promoted by prominent ambassadors. However, the simple question everyone should have been asking:-

“If it sounds too good to be true, it usually is.”

This was a catchphrase used by the Better Business Bureau (BBB) to alert the public to shady business practices since at least 1954. Also the phrase “too good to be true” was also applied in 2008 to Bernard Madoff.

Bernie, you may remember, was found guilty of running a $50 billion Ponzi scheme. Members of the investment community concluded that Madoff’s “too good to be true” investment returns should have raised red flags.

It now looks like we now have a mini-Madoff in the Channel Islands!!!

At the end of this episode, everyone (regulators, the advisory industry and even the clients) will need to take a look at what they did and how they did it and learn from this story albeit it is not the first of these types of cases.

This story has some way to go, but it looks like a can of worms (if not conflicts) that should have been spotted earlier.

Originally Published on September 9, 2016 http://bit.ly/2dtAzTy