The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Liquidators for a troubled Bahamian broker/dealer, which admitted to misusing almost $4 million in client monies without permission, were yesterday assessing how to deal with its asset “deficit” after it was place under Supreme Court supervision.

Raymond Winder, Deloitte & Touche (Bahamas) managing partner, told Tribune Business that he and fellow accountant, Mark Munnings, had to determine “how to allocate” the multi-million dollar loss between Tillerman Securities’ clients.

Disclosing that he met with some of the broker/dealer’s creditors yesterday, Mr Winder confirmed that Tillerman’s liquidation had been placed under the Supreme Court’s supervision earlier this week.

That move was another step in the agreement reached between Tillerman and the Securities Commission to end a near two-year legal battle, which saw the regulator drop its own winding-up petition in return for the broker/dealer consenting to its voluntary liquidation coming under the court’s remit.

“The Securities Commission had a matter they had initiated against the company, and as part of not moving forward with that and having it struck off, Tillerman’s liquidation had to be court supervised,” Mr Winder told Tribune Business.

“Today, I met with a number of the creditors [of Tillerman]. We’re looking at our options to deal with the shortfall or deficit we met there.”

Mr Winder confirmed that the financial hole’s size was “several million dollars”, and added that most of the creditors fall into the “fiduciary” category - meaning Tillerman was holding their assets in trust on their behalf, and did not actually own them itself.

“We will have a challenge trying to assess how we allocate the loss,” the Deloitte & Touche (Bahamas) managing partner said. “Who should bear the loss, and how they should bear the loss.

“The loss was created over an extended period, so while the losses were accumulating the company was still doing transactions. We will have to do an analysis to determine how best to allocate the loss.”

Converting Tillerman Securities’ voluntary liquidation into a Supreme Court-supervised process occurred on Tuesday this week before Justice Ian Winder, with the move unopposed and the Securities Commission withdrawing its own compulsory wind-up petition as agreed.

Christina Rolle, the capital markets regulator’s executive director, set out the terms of its ‘agreement’ with Tillerman in a May 5, 2017, letter, which confirmed the broker/dealer had agreed to voluntarily wind-up and appoint the Deloitte & Touche duo as liquidators on March 30.

“The Commission approved Tillerman Securities’ voluntary liquidation on the basis that the said liquidation is supervised by the courts,” Ms Rolle said. “The liquidators are currently in the process of applying to the Supreme Court for an Order placing the voluntary liquidation under the supervision of the court.”

Ms Rolle emphasised that Tillerman’s registration under the Securities Industry Act was “void and of no effect” as of October 1, 2016, meaning it was “not authorised to carry on any securities business in the Bahamas except so far as is beneficial for its winding-up”. Tillerman’s client accounts remain frozen by a Preservation Order granted earlier this year.

One source familiar with the Tillerman matter, but speaking on condition of anonymity, told Tribune Business yesterday that the liquidation agreement with the broker/dealer’s shareholders and directors had served its purpose in “getting rid of a rogue marketing participant”.

The Securities Commission had sought to petition for Tillerman’s winding-up after the broker/dealer admitted to using almost $4 million in client monies to fund its operating expenses and business development plans without first getting their permission.

Tribune Business previously revealed that apart from “the improper use of its clients’ funds”, Tillerman Securities has also been unable to meet the minimum $300,000 regulatory capital requirement for two years.

Detailing numerous serious breaches by the Bahamian-owned broker/dealer, in legal filings the Securities Commission added that Tillerman was also “insolvent”, with assets exceeding liabilities following several years of sustained losses.

Its application for Tillerman’s provisional liquidation, made late last year, came following an 18-month saga that concluded with the broker/dealer’s alleged failure to deliver on numerous promises to both reimburse its clients and remedy its regulatory capital deficiency.

Tillerman, though, had managed to temporarily thwart the Securities Commission’s winding-up bid, after persuading Justice Winder that the regulator had failed to comply with the disciplinary process set out in section 157 of the Securities Industry Act 2011.

The broker/dealer’s principals also alleged that they had agreed a ‘rescue plan’ with 13 clients, who had given “retroactive consents” to Tillerman borrowing their assets. The principals were managing director, Hans Christian Saunders; Anthony Dupuch; and attorney Craig Butler. 

The Securities Commission is likely to view the voluntary liquidation agreement as a ‘victory’, given that it ends a situation which - in its eyes - threatened the regulatory integrity and reputation of the Bahamas as a jurisdiction, plus the ‘orderliness’ of the capital markets.

But Roy Sweeting, the attorney representing Tillerman Securities, told Tribune Business in April 2017 that the voluntary winding-up, and appointment of liquidators, was “best outcome that could be achieved in the circumstances”.

The Glinton, Sweeting & O’Brien partner added that with his troubled client barred from doing business, it would have been “bled dry” had it continued its battle against the Securities Commission.

“I think it’s the best outcome that could be achieved in the circumstances,” Mr Sweeting told Tribune Business then of Tillerman’s voluntary winding-up agreement.

“I think they [Tillerman’s directors and shareholders] felt, and I agreed with them, that they had strong arguments to make against some of the decisions the Securities Commission made about their company.

“But they were looking at a long, drawn out fight over this thing, and doing that while prevented from doing business; it made no financial sense to continue with the fight.

“They were going to bleed them dry long before the fight was over. This way they, in fact, have a really good shot... at making their investors whole.”