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FAIS Ombud

Latest Enforcement Committee Orders

The Enforcement Committee of the FSB recently published interesting details of two settlement cases.

Magnum Opus

It appears that Magnum Opus Investment Managers administered a collective investment scheme without being duly licenced, or being authorised as agents of a registered collective investment scheme.

“The contravention was as a result of a misinterpretation of the law with the respondents believing that if a collective investment scheme is not marketed to the public, the collective investment scheme would fall outside of the FSB’s regulatory ambit.”

“The respondents undertook to rectify the contravention according to the Registrar’s instructions by winding up the fund entirely with the assistance of an independent party that was approved by the Registrar.”

The parties agreed to a penalty of R50 000.

I spoke to Alan Holton, an associate of Moonstone Compliance, who shared the following views:

Hi Paul,

I think the devil is in the detail.

The mitigating factor was that “The contravention was as a result of a misinterpretation of the law with the Respondents believing that if a collective investment scheme is not marketed to the public the collective investment scheme would fall outside of the FSB’s regulatory ambit.”

The definition of a ‘collective investment scheme’ means a scheme, in whatever form, including an open-ended investment company, in pursuance of which members of the public are invited or permitted to invest money or other assets in a portfolio, and in terms of which etc., etc . . .

On the website of Magnum Opus it states: “Magnum Opus does not market to the public. If you want to know more about investing in the fund, kindly get in touch with us via the Contact page.”

I think they overlooked the “permitted” part of the definition and focussed on “invited” which they interpreted as marketing – which they claim not to do. Apart from which, the fact that members of the public are asked to get in touch with them must surely be considered to be a form of invitation?

Joy Finance and Impact

What happens after a FSP loses its licence?

Joy Finance applied for FSB authorisation which was granted “…in April 2008”. On 15 April, days later, its licence was withdrawn, and Joy Finance was debarred from applying for a new FSP licence for a period of five years.

During October 2008, Joy Finance entered into a “strategic alliance” with Impact Corporate Brokers CC in terms of which Joy Finance would transfer its financial services clients to Impact.

Between November 2008 and April 2013, Impact conducted financial services related business with Joy Finance who was not duly licensed to render financial services.

This was a contravention of section 7 (3) of the FAIS Act which provides that an authorised FSP may only conduct business with a lawfully licensed party.

It was also in contravention of section 2 of the General Code of Conduct which stipulates that financial services must be conducted honestly, fairly, with due skill care and diligence, and in the interests of clients and the integrity of the financial services industry.

Unfortunately, the EC order does not provide details of what “financial services” were rendered.

The parties agreed on a penalty of R200 000

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