ELABORATE STRUCTURES PUT IN PLACE TO OBSCURE THE FLOW OF MONEY
claim to the property and continue collecting rent.
When Personal Finance revealed in August that financial services company Dynamic Wealth was demanding that Absa make good on any losses on R230 million it had channelled into CMF, Absa rejected the claim.
Russon said Absa had “fulfilled the function of clearing agent and the function of custodian”.
Dynamic Wealth, meanwhile, is also facing an FSB application to place it and various of its entities under curatorship, based on its investor clubs and investment portfolios that the FSB believes are unregistered collective investment schemes.
It was from one of these portfolios that Dynamic Wealth invested R230 million in CMF.
At the time, Russon said Absa approved all the assets when they were included in the CMF portfolio. In doing this, Absa relied on the Cisca-required credit ratings of the instruments, which were provided by an approved rating agency, namely Global Credit Ratings.
Included in the attachments to Van Romburgh’s report is an agenda for a meeting on June 25, 2008 between CMM and Absa Capital Investor Services. The agenda reflects questions about non-credit rated promissory note issuers, including Thunderstruck; the payment of promissory notes into incorrect bank accounts; and problems with identifying instruments that were issued for withdrawals from the cash assets held by Absa on behalf of investors.
In the wake of the CMM report, Chanetsa says while the FSB seeks to put measures in place “to protect investors’ interests, it is impossible for us to anticipate all possible contraventions or attempted circumventions of our measures.
“For instance, there is often a grey area between inspired industry innovation and subtle circumvention. We are constrained to strike a balance between a proactive as against a reactive approach.”
He gave the assurance that new measures are now being introduced, including a move to limit the proliferation of white label funds. Consideration is also being given to bringing credit rating agencies into the regulatory net and making increased use of on-site visits to fund managers and their third parties before and after approval.