FSB homes in on col­lec­tive schemes

Col­lec­tive in­vest­ments, which are gen­er­ally well reg­u­lated in South Africa, mostly of­fer you, the in­vestor, a safe and easy way to in­vest in the eq­uity, bond, prop­erty and money mar­kets. But re­cent fi­nan­cial dis­as­ters have forced the Fi­nan­cial Ser­vices Bo

Weekend Argus (Saturday Edition) - - GOOD WEEKEND -

The Fi­nan­cial Ser­vices Board (FSB) is mov­ing to pre­vent fur­ther rep­u­ta­tional dam­age and losses to in­vestors in col­lec­tive in­vest­ment schemes in the wake of the in­ter­na­tional fi­nan­cial sec­tor melt­down and the col­lapse of two non-com­pli­ant money mar­ket port­fo­lios.

In a multi-pronged ap­proach, the FSB is:

Lim­it­ing the growth of white la­bel funds, which are in­creas­ingly be­ing used by fi­nan­cial ad­vis­ers to take an­other cut of fees out of the pock­ets of con­sumers without adding any real value;

Hold­ing back on pos­si­ble changes to reg­u­la­tions is­sued in terms of the Col­lec­tive In­vest­ment Schemes Con­trol Act (Cisca) that would have per­mit­ted in­vest­ments in se­cu­ri­ties not listed on an ex­change, in­clud­ing greater ac­cess to the de­riv­a­tives mar­ket; and

En­sur­ing that col­lec­tive in­vest­ments are not pro­vided out­side of Cisca.

And, as a fur­ther warn­ing sig­nal to in­di­vid­u­als and or­gan­i­sa­tions that do not stick to the le­gal re­quire­ments when car­ing for the money of in­vestors, John Levin and Barend Petersen, the cu­ra­tors of the col­lapsed Ova­tion linked in­vest­ment ser­vices prod­uct com­pany, state, in their sixth re­port to the Cape of Good Hope High Court, that they are con­sid­er­ing su­ing:

The direc­tors of Ova­tion and its nom­i­nee com­pany, which was sup­posed to hold the as­sets of in­vestors in trust;

Absa Bank, which opened the bank ac­count through which the owner of Ova­tion, An­gus Cruik­shank, who com­mit­ted sui­cide, stole more than R200 mil­lion in in­vestors’ money. The money was stolen from the non-Cisca-com­pli­ant Com­mon Cents money mar­ket fund; and

The Ova­tion au­di­tors, KPMG, for not re­port­ing con­tra­ven­tions of var­i­ous Acts.

The cu­ra­tors also sug­gest that peo­ple who were per­suaded to in­vest in the fraud­u­lent Com­mon Cents money mar­ket fund could sue their fi­nan­cial ad­vis­ers.

The cu­ra­tors have proof that some ad­vis­ers ac­cepted in­duce­ments of lux­ury for­eign trips for get­ting clients to in­vest in the Com­mon Cents fund.

The FSB is also in­ves­ti­gat­ing whether the ad­vis­ers have con­tra­vened the fit and proper reg­u­la­tions. If they didn’t, it could jeop­ar­dise their li­cences to do busi­ness.

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