The FSCA-appointed trustees of four retirement funds that were administered by N-e-FG Administrators have filed a R147-million claim against the funds’ auditors, Forvis Mazars.
The trustees assert that Forvis Mazars should have detected that the money in the funds had not been invested according to the investment mandates but had been misappropriated by the former trustees.
The current trustees, Malcolm Campbell and Henry Dul, brought the claim on behalf of the N-e-FG Umbrella Retirement Fund (Provident), the N-e-FG Umbrella Retirement Fund (Pension), the Optimal Provident Preservation Fund, and the Optimal Retirement Annuity Fund (previously the Lion of Africa Retirement Annuity Fund).
The FSCA appointed Campbell and Dul as the funds’ independent trustees in March 2023, in terms of the section 26 of the Pension Funds Act (PFA).
According to the trustees’ Particulars of Claim, between 1 March 2013 and 28 February 2021, N-e-FG Administrators (Pty) Ltd was the plaintiffs’ benefit administrator, N-e-FG Fund Management (Pty) Ltd was their consultant and investment adviser, and Forvis Mazars was the funds’ auditor.
The FSCA stripped N-e-FG Administrators and N-e-FG Fund Management of their licences in December 2021, citing contraventions of the Financial Advisory and Intermediary Services Act, the Determination of Fit and Proper Requirements, and the General Code of Conduct. Their licences were provisionally suspended in September 2021.
The Authority placed N-e-FG Administrators under statutory management in May 2022. The statutory manager, Krishen Sukdev, has reported that the estimated value of missing money or assets was R470m. However, the losses might be higher, because the whereabouts and value of all the assets was unknown or appeared to be unrealisable.
Trustees’ allegations
The trustees’ claim against Forvis Mazars – filed in January this year – is primarily grounded in allegations of breach of contract and negligence.
They allege the auditors failed to fulfil its obligations under the agreements (letters of engagement) with the plaintiffs for each of the relevant financial years. These obligations included fulfilling its duties under the Auditing Profession Act and performing audits in accordance with the International Standards on Auditing (ISAs).
The trustees assert that Forvis Mazars’ mandate required it to detect material misstatements, assess internal controls, and report any irregularities that could affect the funds’ financial integrity. They allege that if Forvis had complied with its contractual obligations, it would have identified the material misstatements and irregularities in the financial statements and reported them to the funds, which would have taken steps to prevent or mitigate the losses.
Specifically, the claim alleges that Forvis Mazars “falsely stated” it had independently confirmed that the funds’ money was invested in collective investment schemes managed by Allan Gray, Coronation, and PSG.
The trustees assert that Forvis Mazars stated the audits had been conducted in accordance with the ISAs and the Regulatory Reporting Requirements for Retirement Funds, whereas this was not the case. If the audits had been so conducted, they allege Forvis Mazars would have determined that money had not been invested in the collective investment schemes.
The total claim in respect of all four funds is R174 460 869, plus interest.
Moonstone approached Forvis Mazars for comment, but none was received by the time of publication.
The firm told News24 that because the matter is ongoing, it could not comment on the specifics of the case. “We have responded to industry regulatory bodies investigating the matter and remain committed to working openly and transparently to provide any further assistance in the investigation,” Forvis Mazars was quoted as saying.
Regulatory action
In August this year, the Financial Services Tribunal dismissed the reconsideration applications brought by three of the four N-e-FG executives who were sanctioned by the FSCA in November last year.
N-e-FG founder Stephanus Cornelius (Corné) Jansen van Rensburg and Frederick (Eric) Young du Preez were each fined R30m and debarred for 30 years. Jeremia Jesaja Steyn Jansen van Rensburg was fined R8m and debarred for 20 years.
Elia Christiaan Janse van Rensburg, who was debarred for 10 years, withdrew his reconsideration application shortly before the Tribunal hearing, stating he intended to file a new application.
The sanctions were imposed for contraventions of the FAIS Act, the Financial Institutions (Protection of Funds) Act, the General Code of Conduct, and the Fit and Proper Requirements.
The FSCA’s regulatory action followed an investigation – launched in September 2021 – into N-e-FG Administrators, which later rebranded as Phahamisa Administrators (Pty) Ltd, and N-e-FG Fund Management. The investigation later included a related entity, The Wealth Strategist (Pty) Ltd.
N-e-FG’s operations came under scrutiny in mid-2021 when Lion of Africa Assurance Company lodged a complaint with the FSCA.
The Authority’s investigation found that:
- About R111.8m of client funds were unlawfully invested with Phahamisa Investments (Pty) Ltd, an unauthorised FSP. These funds were redirected into the Phahamisa Venture Capital Fund, which issued loans to various private entities – many of which were linked to N-e-FG’s executives.
- The funds were not invested in unit trusts as mandated but used in a manner inconsistent with clients’ expectations and regulatory requirements.
- Investment decisions were made by Corné Jansen van Rensburg and Du Preez, who issued investment statements that misrepresented the true nature of the investments.
Sad situation my parents lost everything!