Ap­peal Court vin­di­cates FSB in its bat­tle with Dy­namic Wealth

Some years ago, Per­sonal Fi­nance re­vealed that the Dy­namic Wealth group was, among other du­bi­ous ac­tiv­i­ties, run­ning so-called ‘in­vest­ment clubs’ that con­tra­vened the col­lec­tive in­vest­ment scheme reg­u­la­tions. The Fi­nan­cial Ser­vices Board in­ves­ti­gated and

Weekend Argus (Saturday Edition) - - GOODDRINKING -

The Fi­nan­cial Ser­vices Board (FSB) won an im­por­tant but pyrrhic vic­tory re­cently when the Supreme Court of Ap­peal over­turned a Pre­to­ria High Court judg­ment that re­jected the FSB’S ap­pli­ca­tion to place the now de­funct Dy­namic Wealth group of com­pa­nies un­der cu­ra­tor­ship last year.

Judge Mal­colm Wal­lis, who wrote the judg­ment, with four other judges con­cur­ring, found that Act­ing Judge AJ de Vos had erred in re­ject­ing the FSB ap­pli­ca­tion.

How­ever, Judge Wal­lis found there was lit­tle point in now grant­ing the cu­ra­tor­ship ap­pli­ca­tion be­cause Dy­namic Wealth has ef­fec­tively closed down fol­low­ing the with­drawal of the fi­nan­cial ser­vices provider li­cences of two of its sub­sidiaries, Dy­namic Wealth Man­age­ment and Dy­namic Wealth Stock­bro­kers, and Met­ro­pol­i­tan Col­lec­tive In­vest­ments tak­ing con­trol of the seven unit trust funds that Dy­namic Wealth man­aged and mar­keted us­ing Met­ro­pol­i­tan’s col­lec­tive in­vest­ment schemes li­cence.

The Supreme Court awarded costs against Dy­namic Wealth in favour of the FSB.

Judge De Vos’s er­ro­neous de­ci­sion in Fe­bru­ary last year en­abled Dy­namic Wealth to con­tinue its ways, in­creas­ing in­vestors’ po­ten­tial losses.


The Pre­to­ria High Court re­jected the FSB’S cu­ra­tor­ship ap­pli­ca­tion mainly on tech­ni­cal grounds, rul­ing that an FSB in­spec­tion re­port, on which the ap­pli­ca­tion was based, was in­ad­mis­si­ble.

The FSB’S grounds for the cu­ra­tor­ship ap­pli­ca­tion in­cluded its claim that a num­ber of in­vest­ment port­fo­lios of­fered by Dy­namic Wealth un­der the guise of in­vest­ment clubs were, in fact, il­le­gal col­lec­tive in­vest­ment schemes.

The FSB ap­pli­ca­tion for cu­ra­tor­ship gained mo­men­tum when an­other fi­nan­cial ser­vices com­pany, Cor­po­rate Money Man­agers (CMM), into which one of the in­vest­ment clubs had placed R230 mil­lion, ran into trou­ble in 2009. This money is now at risk.

Af­ter the in­ter­ven­tion of the FSB, Dy­namic tried to avoid at­ten­tion by con­vert­ing the in­vest­ment clubs into com­pa­nies. For ex­am­ple, the club in­vested in the trou­bled CMM money mar­ket fund be­came Spe­cial­ist In­come Lim­ited (SIL).

Con­vert­ing the “in­vest­ment club” port­fo­lios into com­pa­nies re­duced the rights of in­vestors, be­cause they be­came share­hold­ers rather than in­vestors with a pref­er­en­tial claim to any as­sets.

Judge Wal­lis ruled that the Pre­to­ria High Court had erred in not ad­mit­ting the FSB’S in­spec­tion re­port and that the Dy­namic Wealth com­pa­nies should have been placed un­der cu­ra­tor­ship.

He also found that Dy­namic Wealth’s “in­vest­ment clubs” were, in fact, un­li­censed in­vest­ment schemes that should have been sub­ject to the Col­lec­tive In­vest­ment Schemes Con­trol Act.

Over the years, fol­low­ing re­ports about and in­ves­ti­ga­tions into the com­pany’s ac­tiv­i­ties, Per­sonal Fi­nance re­ceived a num­ber of what tran­spired to be hol­low threats of le­gal ac­tion from Dy­namic Wealth.

Among other things, Per­sonal Fi­nance re­vealed that Dy­namic Wealth:

Was run­ning il­le­gal “in­vest­ment clubs”;

Was plac­ing in­vestors in off­shore in­vest­ment struc­tures that were not sub­ject to lo­cal reg­u­la­tion; and

Had a busi­ness re­la­tion­ship in­volv­ing prop­erty bridg­ing fi­nance with At­tie du Plooy, who had run an il­le­gal pyra­mid struc­ture, Jean Multi- Man­age­ment, which was closed down by the Re­serve Bank.

J e a n Mul t i - Mana g e ment re­ceived R200 mil­lion from An­gus Cruik­shank, the owner of now de­funct linked-in­vest­ment ser­vices provider Ova­tion. Cruik­shank stole the money from the il­le­gal Com­mon Cents money mar­ket fund, and com­mit­ted sui­cide when the FSB moved in on him.

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