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Expert: First Citizens-type controversy unlikely in US

By \\\\\ Leah Sorias

The First Citizens Initial Public Offering (IPO) controversy would never have occurred in the United States because of the rigorous checks and balances in place, US-based financial expert John McGonegal has said.


McGonegal, who is the global head of sales at the New York Institute of Finance (NYIF), advised though that Government should continue the IPO despite what occurred.

On March 24 First Citizens former chief risk officer Philip Rahaman was fired following an internal audit by the bank on his purchase of 659,588 FIRST shares and the subsequent sale of 634,588 of those shares four months later. The bank said it had lost confidence in his ability to carry out his duties.

He had acquired the shares from the undersubscribed employee bucket when the government divested 19.3 per cent of its stake in the bank.

Later, Subhas Ramkhelawan who headed Bourse Securities, the firm that handled the share purchase, resigned as Stock Exchange chairman and as an Independent Senator.

The fiasco also led to four directors, including former chairman Nyree Alfonso exiting the State bank.

McGonegal said yesterday in the United States, people would have been “stopped in their tracks” if they had attempted such a transaction.

He was speaking at the Hyatt Regency (Trinidad) hotel, Port of Spain where the Trinidad and Tobago International Financial Centre (IFC) launched the inaugural International Capital Markets Programme offered by the NYIF in collaboration with the University of Trinidad and Tobago.

“The thing you have to realise is that no matter what capital market you are in, you cannot legislate ethics...clearly there was an ethical violation,” he said.

“In the current environment it would have been very difficult to pull off something like that in the US...the Sarbanes-Oxley (US legislation aimed at protecting investors from possible fraudulent accounting activities by corporations) would have stopped them right in their tracks. How would the Stock Exchange have dealt with this? Those people would have been barred from the industry if they were a banker or broker,” McGonegal added.

He said the NYIF programme would train financial professionals in bringing best practices to Trinidad and Tobago.

The programme will run from October 13 to 17 at UTT’s Chaguanas Campus.

IFC chief executive officer Varun Maharaj said the partnership between the IFC, UTT and NYIF will assist in expanding the skill set of the country’s growing pool of world-class financial services professionals, with modules to be offered on topics and issues not currently available at UTT.
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