Selfmed

Finweek English Edition - - COMPANIES & INVESTMENTS -

The plot is thick­en­ing in an ugly power strug­gle be­tween Selfmed Med­i­cal Scheme and the in­dus­try reg­u­la­tor, the Coun­cil for Med­i­cal Schemes (CMS). Selfmed has turned to the courts to pre­vent the reg­u­la­tor from car­ry­ing out what it feels is an un­fair bid to put the scheme un­der cu­ra­tor­ship. As a pre­cur­sor, in Septem­ber the Coun­cil for Med­i­cal Schemes (CMS) hit Selfmed with a search and seizure that saw its in­ves­ti­ga­tors con­fis­cating lap­tops from the med­i­cal aid’s Cape Town head of­fice.

“The lead­er­ship will never walk away and sur­ren­der the scheme to the CMS,” says Selfmed chief ex­ec­u­tive of­fi­cer Leon Bester as he read­ies for a long haul.

“We in­her­ited a sink­ing ship with no re­serves, a ter­ri­ble rep­u­ta­tion, dis­as­trous mem­ber­ship de­cline [and pa­thetic ad­min­is­tra­tion], opin­ion withheld and qual­i­fied f inan­cial state­ments, no in­de­pen­dence [from San­lam, then ad­min­is­tra­tor],” he says, and de­scribes how Selfmed has trans­formed into “a lit­tle gem”. Then-reg­is­trar, Pa­trick Ma­sobe, was “nowhere to be found”, re­calls Bester, to help the min­now re­cover dam­ages in­curred by San­lam (which ad­min­is­tered Selfmed from 1975 to 1997).

“When Selfmed was worth noth­ing, Where does On­line Share Trad­ing (OST) trump BOE or Ned­bank’s of­fer­ing? The crux of the mat­ter is that as a re­tail in­vestor, you want ac­cess to the best qual­ity tools and the op­por­tu­nity to the best re­search you can af­ford.

1: Recog­nised su­pe­rior per­for­mance: Ac­cord­ing to the In­vestors Monthly an­nual stock­broking awards, the OST plat­form is the sec­ond best plat­form in 2012. BOE is ranked 6th in the same sur­vey. Its of­fer­ing is de­scribed as “among the most com­pre­hen­sive in the in­dus­try”.

2: Costs: Ac­cord­ing to a sur­vey con- [CMS] did not want it,” Bester ar­gues. “Now that there are su­perb re­serves and mem­bers get qual­ity ser­vice, then sud­denly the reg­is­trar seeks to an­nex or hi­jack the scheme!”

Selfmed is a self-ad­min­is­tered med­i­cal aid with just R270m in an­nual con­tri­bu­tions and 20 000 mem­bers. This pales against the Big 3 – Dis­cov­ery (2.4m mem­bers), GEMS (1.6m), and Boni­tas (700 000) – which con­trol more than half the 8.5m-strong mar­ket.

The lat­est in the CMS-Selfmed war, ar­guably trig­gered by the reg­u­la­tor’s in­spec­tion in April, is part of a rather com­plex and long bat­tle. In 2010, the CMS came sec­ond when the North Gaut­eng High Court con­cluded it should pay Selfmed and Bester R400 000 for dam­ages as part of a le­gal tus­sle. Crit­i­cally, the court “re­jected as un­true” Ma­sobe’s ev­i­dence, which it also la­belled con­tra­dic­tory.

A sub­se­quent en­counter, at the ap­peals court last year, some­what eased the coun­cil ’s bruised PR im­age, although not en­tirely, y, when it was able to p par­tially y over- ducted by Mon­ey­web ear­lier this year, BOE Pri­vate Clients charges a min­i­mum of R70 per trade, bro­ker­age com­mis­sion of 0.7% on trades un­der R200 000 and R152.76 per quar­ter for monthly ad­min­is­tra­tion fees. In con­trast OST charges R50 per trade, a f lat rate of 0.5% and R50 a month. The ad­min­is­tra­tion fee is typ­i­cally waived if you trade more than three times a month.

3: Stan­dard on­line search­able statis­tics data­base: Traders who com­pare the OST ver­sus BOE of­fer­ing high­light that OST has some “quite funky” search ca­pa­bil­ity al­low­ing you to fil­ter out stocks fit­ting a cer­tain pro­file. Anec­do­tally, it also ap­pears to be an eas­ier-to-use turn the pre­vi­ous rul­ing.

In a sep­a­rate tus­sle, San­lam was last year forced to pay Selfmed R458m (a fur­ther R129m went to Topmed, un­der Len Dea­con’s watch) in set­tle­ment. The three­way law­suit stemmed from claims that San­lam’s health­care unit plun­dered its clients’ re­serves. De­spite trans­fer­ring a mas­sive R587m to the ag­grieved pair, CEO Jo­han van Zyl de­nied that San­lam had plun­dered its former med­i­cal aid clients.

Now, as part of yet an­other pro­tracted round in the never-end­ing bat­tle, the pre­emp­tive Bester wants to stop the reg­u­la­tor from its ap­par­ent bid to ob­tain an ex parte or­der. He fears the or­der would pre­vent Selfmed, much like Med­shield, from de­fend­ing it­self against “one-sided lit­i­ga­tion” by CMS boss Mon­wabisi Gantsho, who re­placed Ma­sobe in 2010. Pity, Med­shield, which Bester cites to sup­port his ar­gu­ment, isn’t such an ideal ex­am­ple.

Ac­cord­ing to court pa­pers, Med­shield trustees em­bez­zled mil­lions of scheme funds meant for mem­bers’ health needs. Act­ing g like “a law unto them­selves”, , their trad­ing plat­form.

4: Qual­ity of re­search: Each year, there’s a re­search an­a­lyst rank­ing that high­lights the best eq­uity re­search an­a­lysts. In the 2012 sur­vey there were two from SBG Se­cu­ri­ties (which pro­vides re­search to OST) – Irina Gavrilova in the Con­struc­tion, Build­ing Ma­te­ri­als & Ma­chin­ery sec­tor and Jonathan Kennedy-Good in the Telecom­mu­ni­ca­tions sec­tor. There were no rep­re­sen­ta­tives from BOE or Ned­bank who were win­ners this year.

5: In­vestor Ed­u­ca­tion Cour­ses: OST is par­tic­u­larly strong in the ed­u­ca­tion space and of­fers reg­u­lar ed­u­ca­tion cour­ses.

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