Wednesday, February 21, 2018

First Citizens executive cleared $12m shares purchase


no breach: Nyree Alfonso

Mark Fraser

No regulatory rules were broken when First Citizens senior executive Phillip Rahaman purchased 659,588 shares during the State bank’s initial public offering (IPO) last year, chairman Nyree Alfonso said yesterday.

“If you can identify to me what rule or regulation was breached, I will be happy to direct the group internal auditors and even the PriceWaterhouseCoopers forensic auditors to investigate it. But you cannot use morals and ethics because everyone’s are different,” Alfonso said in a telephone interview.

Last month, Finance Minister Larry Howai ordered an audit into the IPO process.

Alfonso said she and several others had already been interviewed by the foreign-based team.

Most of the 659,000-plus shares were sold on January 14 at a profit of about $12 million.

The Stock Exchange did not identify Rahaman as the seller.

But he was named in the bank’s 2013 annual report as the First Citizens executive who owned more than 600,000 shares.

As chairman of the group and as a lawyer, Alfonso said she saw nothing out of the ordinary in Rahaman’s transaction. 

“If he made a profit legitimately then what is the problem? Tell me what he did wrong. If you tell me there was something wrong with his source of funds that is something else; he purchased through another brokerage firm-not (First Citizens Investment Services). We asked if everything was alright and they said yes. So far as I know, he had the money and he made an investment,” she said. 

If, however, he had fronted for a family member or friend (to purchase the shares at a discount on their behalf) then that would have disadvantaged another, she said. 

“This is a complete minor furore. No regulatory rule was broken. Is that because no rule has been broken (the argument against him) is now moral, ethical reasons?” she said.

She said Rahaman’s purchase did not breach any part of the allocation agreement that had been given to the bank by the Divestment Sector of the Ministry of Finance, who followed a “facsimile” model of what had been allocated for the creation of National Enterprises Ltd (NEL). 

“Did he buy in a bucket he wasn’t supposed to? No. It wasn’t insider trading. Did he know anything? Did he know the employee bucket would have been undersubscribed? I didn’t know that and I’m the chairman,” she said. 

Employees also had the option to buy up to 5,000 shares at a ten per cent discount; so the majority of his shares were bought at the full $22 price per unit.  

“One purchase is colouring an otherwise beneficial investment opportunity. This issue has caused the bank distress. I maintain this IPO was successful. We had a good IPO that had many micro- and macroeconomic benefits. We created wealth for over 12,000 shareholders including companies and individuals,” she said.

Rahaman, she said, had not been suspended or otherwise penalised, because there was no apparent reason to do so. 

But investor lobbyist Peter Permell yesterday compared Rahaman’s purchase to a Home Mortgage Bank transaction in 2007, when seven million shares valued at $110 million was acquired by Stone Street Capital. Then prime minister Patrick Manning had reversed that action citing whether or not it was legal, government policy “frowned upon” such behaviour. 

Permell yesterday requested Howai and Prime Minister Kamla Persad-Bissessar do the same in this case. 

Alfonso said she did not see how the HMB case was relevant to this First Citizens issue.