Fast little loans
The Financial Services Board (FSB), despite having extraordinary powers to take action against miscreants in the financial services industry, is increasingly giving the impression of being a sleeping watchdog that allows thieves to slip by under its nose.
At a recent symposium, the FSB huffed and puffed about how it plans to get tougher on offenders, but even the financial ser-vices industry is becoming increasingly concerned that the FSB is not doing the job that it should. And if it doesn’t, there is a loss of investor confidence.
The FSB is simply not doing a good enough job to give consumers confidence that they will not be misled into investing in some foreign currency scam, an imploding, crooked property syndication or yet another Ponzi scheme. It is still “buyer beware”.
Last week, the FSB revealed the glaring gaps in its processes when it confessed that last year it had given the all-clear to Herman Pretorius, enabling him to pull a total of R1.8 billion from 3 000 investors into his Relative Value Arbitrage Fund (RVAF), a Ponzi scheme masquerading as a hedge fund. The FSB gave the all-clear after Personal Finance asked the regulator to investigate Pretorius in May last year.
RVAF collapsed last week, when Pretorius shot business associate Julian Williams, of Basileus Capital, before turning the gun on himself.
It took until Thursday this week for the FSB to offer a half-hearted explanation – rather, an excuse – of why Pretorius was allowed to continue taking in money even though he was not registered as a financial services provider (FSP) with the FSB.
Gerry Anderson, the FSB’s deputy executive in charge of bringing order to the financial advice industry, says Pretorius was not registered as an FSP because “the information available did not require him to be registered as such”.
He says that after Personal Finance asked the FSB to investigate Pretorius last year, his office “engaged with Mr Pretorius. The explanations received from Mr Pretorius were that he was involved in managing private equity and that under no circumstances did his activities extend to the solicitation of individual clients for investment purposes.
“After receipt of another inquiry ... during November 2011, a further engagement with Mr Pretorius took place. A spate of complaints were received during May/June (this year), and as a result, despite the information provided by him earlier, a formal inspection was initiated into the activities of Herman Pretorius.”
Well, Mr Anderson, this is simply not good enough. The FSB is there to stop financial scams. It has extraordinary powers to do so. It is about time these powers were put to proper use. It does not help to apply the powers after the frauds have taken place – as happens all too often.
The FSB also needs to take tougher action against financial advisers who mis-sell scams to investors, particularly the elderly. This includes acting against advisers who sold high-risk property syndications – and especially if the schemes were fraudulent and sold to pensioners.
Anderson does say that an investigation into advisers who sold RVAF is under way, as is an investigation into those who sold imploding property syndications.
Let us hope that these investigations are a lot more thorough than the now obviously pathetic attempts to investigate Pretorius.