Geraldine Ssali, former deputy MD, NSSF comments of David Jamwa case

I have been forced to come out of the ‘Kamooli’ on the issue of Jamwa being given a 12-year sentence. I should also mention that I have never got a chance to meet him or even talk to him.

However, as a Finance professional, I have never really understood his crime on this very transaction of liquidating a bond 3 weeks earlier than Maturity. Bonds carry risk (Now in hindsight these bonds were Crane Bank Bonds which Bank is now no more).

Bonds are financial instruments used to trade, which means they are also speculative in nature and also carry risk however minimal. So a manager can make a decision to exit his position early if they feel the opportunity cost foregone on the remaining interest is not better than the next best alternative use for that money! For example, if a 1 year lucrative Fixed Deposit opportunity is identified and is closing, I can choose to exit in anticipation for more income from a higher yielding FD. This is normally referred to as tactical trading. It’s therefore normal to make gains and/or losses in the course of trading.

This is the reason Directors and Officers liability insurance exists – To cover any losses incurred in the process of doing legitimate business as anticipated.

Otherwise, anybody who cried “Bail out” in 2015 should be punished when their businesses made losses including economic losses.

The judges with all due respect to them may have looked only at the “liquidity” position of NSSF and ignored all the other factors like it’s price, coupon rate/interest rates, exchange rates, tax status, credit rating, commissions, etc and all the other stuff that may be considered “boring”. They have set the wrong precedent/ message in the Market.

The indirect implications of this ruling are that the judgment has killed a percentage of the secondary and primary bond market. Financial Analysts and Fund Managers may not be willing to participate in these bond markets unless they can demonstrate beyond reasonable doubt, the dire need for liquidity.

Worse still, this is tactical trading so a board resolution should not be the answer. Those who carry the gift of making the decisions only agree parameters and thresholds within which to operate and they get on with the job. Imagine if a trader on Wall Street needed a board resolution to sell a share in Walmart……More unnecessary red tape and bureaucracy causing missed income opportunities. It’s is virtually impossible in the world of finance where quick decisions are expected in order to benefit from these trades and make money. This is pure gains and losses on Speculative Financial Instruments that should not become imprisonable offenses otherwise, the Financial and Banking Industry will struggle to get willing managers in this Financial Institutions.

I would challenge those Honorary judges. I suspect a political melancholy than a genuine cause of financial loss. In the Audit world  the internal and external auditors of NSSF may not have picked it up due to the materiality standards – loss of UGX 2.7 billion against UGX 3.8 Trillion ( 2007) may not distort the accounts of the Fund to the extent that they still give a true and fair view of the affairs of the Fund.

On the strong message needed on managers “not playing with worker’s money”, they could have got him on all the other sins like Temangalo along with his board and the rest of the lot that was involved but not on this one I’m afraid. A bad decision made in good faith should not become criminal.

Geraldine Busulwa Ssali, former NSSF Deputy Managing Director