The Securities and Exchange Commission (SEC) has distanced the recent revocation of the licenses of the 53 fund management companies from the banking sector shake-up stating that the latter is not responsible for the current happenings in the securities sector.
According to SEC, although some collapsed fund managers had their funds locked up in savings and loans and microfinance companies that were placed into receivership by the Bank of Ghana, assertions that both instances intertwine with one another ought to be critically examined.
Since the news of the fund managers broke, many have argued that the banking sector crisis provided the last trigger that compounded the woes of some of the affected fund management companies.
But speaking on The Point of View on Citi TV, Director General of the SEC, Rev. Dr. Daniel Ogbarmey-Tetteh maintained that it will be inaccurate for anyone to suggest that the cleansing of the securities sector was a rippling effect of the reforms made by the Bank of Ghana because the two situations may just have occurred alongside.
“I wouldn’t say it was a consequence of [the banking sector crisis]. I would like to say that, it would have happened simultaneously because it’s an ongoing activity and we found out that, the fund managers may invest with a particular entity and they roll over instead of taking the money. It could be that at the time that the investment was made, things were okay. But in the course of time, things could have gone bad without maybe the fund managers picking up the signals."
“So, to say that, it is a consequence of the crisis, I think that it won’t be an accurate representation of the situation, because the reality is that there is interconnectedness between the fund managers and the funds regulated by the BoG. Interestingly, some of the fund managers regulated by the Bank of Ghana also placed money with other fund managers. So I think, to say that, this one led to that won’t be fair”, he stressed
The 53 fund management companies who have lost their licenses were said to be managing a customer base of about 56,000 whose funds run in excess of GH¢8 billion out of the total GHc25 billion of the entire securities sector.
But this, Dr. Obarmey-Tettey says is not entirely true because some of the said funds have been insured against other securities which mean that lost funds as a result of the crackdown will actually be lower than the GHS 8 billion in contention.
“As of March this year, the total asset of the managers within the industry was GHS 25 billion. Out of the 8 billion of funds that have been affected out of this enforcement action and we are managing, GHS 2.5 billion will be GoG bill, listed equities and banks. Some are also in pension funds. So you will find out that not all of the GHS 8 billion is necessarily money that has been lost and has become toxic. So it is inaccurate to say that 8 billion has been lost”, he said.
The latest set of license revocations by the SEC follows similar actions by the Bank of Ghana against a number of banks, microfinance companies, and Savings and Loans companies over the last two years.
Those whose licenses were revoked were found to have engaged in various infractions including engagement in related-party deals that were difficult to liquidate.
SEC also explained that the revocation is “in accordance with its mandate of protecting investors and the integrity of the capital market.”
The financial sector clean-up, commenced by the Akufo-Addo administration in August 2017, has led to the collapse of nine universal banks, 347 microfinance companies, 39 microcredit companies or money lenders, 15 savings and loans companies, eight finance house companies, and two non-bank financial institutions.
Customers who have funds locked up in these companies, the regulator said, will be expected to go through a validation process where they submit their respective claims for payments.
Details of the validation process and specific locations where investors can present their claims to be validated will be provided by SEC.
The capital market regulator announcing the mass shut down exercise last Friday said customers’ ability to access their funds will depend on the kind of investment their respective fund managers had made.
Unlike the banking sector reforms where a receiver was immediately appointed to take over collapsed banks, the capital market regulations stipulate that the resolution of these fund managers be done through an official liquidator which will be appointed by a High Court working through the Registrar-General.