Licence Revocation: 77,000 clients, GHC8bn estimated in shut down of 53 fund managers

It is estimated that the 53 fund management companies closed down by the Securities and Exchange Commission (SEC) held about GHC8 billion of funds under management.

GHC2.5 in govt instruments, banks and listed equities

This amount includes GHC2.5 billion in government instruments, banks and listed equities.

Pension funds, CIS

It also includes pension funds and Collective Investment Funds (CIS) which are held by custodians.

GHC4b tied up in unlisted bonds and others

Approximately GHC4 billion have been tied up in unlisted bonds, direct private equity stakes, and other deals with small and medium-sized business.

Capped amount to be paid as interim relief

Deputy Director General of SEC Mr Paul Ababio told The Finder that an interim relief of a capped amount would be paid to all affected customers.

Govt considers other ways of cushioning groups

According to him, government was also considering other means of cushioning social groups, schools etc. who invested with the closed down fund managers.

Why immediate relief is critical

He explained that the need to provide immediate relief was necessary because, many clients of the affected firms were not getting their monies back.

Investors to be paid with recoveries

He noted that after the payment of the relief, the official liquidator would work to extract value from the underlying investments and investors would be paid from recoveries made.

77, 000 clients

Mr Ababio disclosed that per the data compiled so far, 77,000 clients have been identified as having invested in the affected firms and this is subject to validation.

SEC received over 2,000 complaints

According to him, SEC has so far received a little over 2,000 complaints from investors concerning the shutdown firms.

GHC15b funds under management with firms not closed down

The Deputy Director General of SEC disclosed that funds under management by firms that have not been closed down was approximately GHC15 billion.

Details of validation process out today

SEC in a statement regarding the closures, said by close of today, SEC together with authorized agents will provide further details about the validation process and specific locations, where investors can present their claims to be validated.

Investors urged to remain calm

In the interim, SEC urged all investors to remain calm, gather all receipts, statements and any other documentation related to their investment and the affected institutions.

No need for panic withdrawal

"There is no need to for any panic withdrawals on the firms whose licenses are intact and not on the revocation list."

According to SEC, the revocation of the licenses were pursuant to Section 122 (2) (b) of the Securities Industry Act, 2016 (Act 929 or "the Act"), which authorises SEC to revoke the license of a market operator.

It explained that the revocation of the licences of the specified companies became necessary as they had largely failed to return client funds, which remain locked up and in a number of cases, they have even folded up their operations.

"Essentially, they have failed to perform their functions efficiently, honestly and fairly and in some cases are in continuing breach of the requirements under relevant securities laws, rules or conditions, despite opportunities provided to them by the SEC within a reasonable period of time to resolve all regulatory breaches, " it added.

SEC's mandate

SEC, pursuant to its mandate under Securities Industry Act ( Act 929) to protect investors, maintain surveillance, monitor solvency and protect the integrity of the Securities market, carried out on site and off site supervisory activities including; the review of reports submitted by Fund Managers, On-site inspections of Fund Managers, Forensic audits, and Complaints Hearings.

Infractions identified

The statement said reviews and investigations identified infractions by the specified institutions, summarised as Guaranteeing of returns contrary to the directive of the Commission; Failure to honour client redemption requests; Failure to honour payment terms agreed at Complaints Hearings; Failure to place client funds with proper due diligence and the requisite standard of professional conduct, evidenced by over concentration of portfolios in high risk institutions and related party transactions resulting in severe liquidity challenges; Failure to segregate client funds from operational funds and in some cases using client funds to pay for operational activities;

Other infractions

Other infractions according to the statement were Closure of offices without following due process; Persistent regulatory breaches including; failure to submit reports as required; Corporate governance weakness with weak Board oversight, poor accountability, and override of Investment guidelines; and/or Failure to monitor and inject liquidity to comply with required levels.

Firms failed to rectify lapses identified by SEC

The statement said all efforts by the SEC to get Directors and Management of the affected institutions to rectify the above lapses yielded no positive results.

Liquidity challenges deteriorated

"Consequently, the liquidity challenges of the companies continue to deteriorate leading to twenty-one (21) of them closing their offices and absconding with clients' funds without due process, whilst those currently operating have severe challenges in meeting clients' requests for a return of their funds or investments.

SEC strikes

"Given the increasing number of challenges facing investors in retrieving their investments and the challenges facing the affected Fund Managers, which in turn pose risks to the stability of the financial system, SEC is sanitizing the Fund Management sub-sector through a revocation of licences in accordance with section 122 of Act 929.

The statement said SEC was committed to ensuring that the Fund Management Sub-sector remained supportive of the Capital Market growth and the economy as a whole and would continue to regulate and promote the growth and development of an efficient, fair and transparent securities market in which investors and the integrity of the market are protected.

Firms shut down

The closed down companies include Alpha Cap Limited, Beige Capital Asset Management Limited, Cambridge Capital Advisors Limited, EM Capital Limited, Energy Investments Limited, Fromfrom Capital Limited, Gold Rock Capital Management Limited, Heritage Securities Limited (formerly Futurepip Asset Management, Kamaag Kapital Limited (formerly Lifeline Asset Management, Kron Capital Limited, Mak Asset Limited, Man Capital Partners Limited, Mcottley Capital Limited, Mec-Ellis Investments (Ghana) Limited, Nickel Keynesbury Limited and SG Royal Kapita Limited.

Others are; Standard Securities Limited (formerly ASN Investments Limited, Tikowire Capital Limited, Ultimate Trust Fund Management Limited, Universal Capital Management Limited and Weston Capital Limited.

The statement also mentioned names of fund managers whose licenses were revoked as; All time Capital Limited, Apex Capital Partners, Axe Capital Limited ( Formerly United Asset Management, Blackshield Capital Management (formerly Gold Coast Fund Management, Brooks Asset Management Limited, Canal Capital Limited, Corporate Hills Investment Limited, Dowjays Investment Limited, Firstbanc Financial Services Limited, Frontline Capital Advisors Limited, Galaxy Capital Limited

Others are; Global Investment Bankers Limited, Goldstreet Fund Management Limited (formerly Goldstreet Investment Limited, Ideal Capital Partners Limited, Intermarket Asset Management Limited (formerly CDH Asset Management), Integrity Fund Management Limited, Kripa Capital Limited, Legacy Fund Management Limited (formerly Legacy Financial Services Limited), Liberty Asset Management Limited and Monarch Capital Limited.

The rest are; Mutual Integrity Asset Management Limited, Nesst Capital Limited, Nordea Capital Limited, Omega Capital Limited, Procap Finance Limited, QFS Securities Limited, Sirius Capital Limited, Strategic Hedge Capital Limited, Supreme Trust Capital Limited, Unisecurities Ghana Limited, Utrak Capital Management Limited and Wealth Vision Financial Services Limited.