Menzgold sues BoG, SEC

Menzgold Ghana Limited has carried out its threat to sue the Bank of Ghana (BoG) by dragging the Central Bank and the Securities and Exchange Commission (SEC) to an Accra High Court over the suspension of its operations.

According to a suit filed by its lawyer, Kwame Boafo Akuffo, the order by the SEC to Menzgold has harmed its reputation as a firm.

The suit averred that the SEC’s decision to shut down the business of Menzgold is “premature, hasty, arbitrary and clearly intended to affect its accrued rights and customers in a prejudicial manner.”

The company is seeking a declaration that the order by the SEC constitutes an abuse of its discretionary powers and “is arbitrary, capricious and contrary to Articles 23 and 296 of the 1992 Constitution.”

The Menzgold is therefore praying the court to set aside the SEC’s orders which have prohibited it from trading in gold collectibles and undertaking any new business related to its gold vault market.

Infractions

The Central Bank, in a notice on Monday, August 6, 2018, indicated that Menzgold’s deposit-taking activities are in breach of Section 6 (1) of Banks and Specialized Deposit-Taking Institutions Law (Act 930, 2016), as it has not been licensed to take deposits.

“The Bank of Ghana wishes to notify the general public that in spite of several cautions to Menzgold Ghana Company Limited to desist from the solicitation, receipt of money and the payment of dividends to its clients, the company persists in its deposit-taking activities in breach of Section 6 (1) of the banks and Specialised Deposit-Taking Institutions Acts, 2016 (Act 930).

“The Bank of Ghana wishes to reiterate that Menzgold Ghana Limited is not licensed and has no authority to engage in the solicitation, receipt of money or investments and the payment of dividends or returns to its clients,” a statement from the BoG indicated.

It revealed that the Central Bank was in talks with other relevant regulatory authorities to take appropriate action against the company.

Suspension

SEC ordered Menzgold Ghana Limited to stop trading in gold collectibles in a letter dated September 7, 2018.

The Commission revealed that the aspect of Menzgold’s business, which involves the purchase/deposit of gold collectibles from the public and contracts issued with guaranteed returns with clients, is a capital markets activity (issuance of gold-backed depository notes to the public) under Act 929 without a valid licence issued by SEC contrary to Section 109 of Act 929 with consequences under section 206 (1) of the same act.”

The company was, however, allowed to continue its “other businesses of assaying, purchasing gold from small-scale miners and export of gold.”

Rebuttal

But Menzgold argued that it’s unable to pay dividends due to the suspension of its operations by SEC.

A statement issued by management of Menzgold Ghana Limited explained that “the gold collectibles offered for trade by patrons of our gold vault market product are subjected to our quality controls and traded for profit which is shared as extra value with the product owner or trader.”

Menzgold Ghana pointed out that “any act, order or instruction, therefore, designed or decreed to forbid Menzgold from trading makes it impossible to generate any revenue whatsoever out of which extra values are charged and paid to those entitled.”

According to the statement, “Thought provoking as these ambiguities on the part of SEC may be, Menzgold Ghana is still committed to ensuring that its business operations return to normalcy as soon as possible, as the firm is deeply saddened by the social and economic inconveniences this decision, and directive of the SEC has caused our customers and the organization.”

Suit

Menzgold, in its statement of claim, averred that it has in several correspondences made it emphatically clear to the BoG and SEC that it does not accept deposits from customers or undertake deposit-taking business.

It said the company’s activities are restricted to, among others, allowing customers to sell gold on its vault market and this is neither within the present legislated scope of the Banks and Specialised Deposit-Taking Institutions Act, 2016, Act 930 nor within the present legislated scope of the Security Industry Act.

Menzgold is praying the court to set aside the directive of the SEC.