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
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.