CAPE TOWN - The financial Financial Sector Conduct Authority (FSCA) has imposed an administrative penalty of R100million on Metropolitan Collective Investments (MetCI) for contravening various sections of the financial sector laws.
According to a statement by the regulator yesterday, the FSCA conducted an investigation into MetCI, subsequent to one of its unit trust funds, the Third Circle MET Target Return Fund, losing about 66percent of its value between December 8 and 11 in 2015.
The FSCA found that MetCI did not have proper risk management processes in place to manage and exercise proper control, oversight and governance over the fund.
It also found that the extent of the fund’s exposure to derivatives was contrary to the prescripts of the relevant financial sector laws, as well as the fund’s own investment policy statement and mandate.
“MetCI was found to have breached the exposure limits, in that the fund was predominantly exposed to derivatives, and it did not have the cover in place as prescribed by financial sector laws. MetCI was also found to have published misleading statements in certain minimum disclosure documents (MDDs) that it published in relation to the fund. It stated that the fund was predominantly invested in cash and the money market, whereas the fund over a period was almost wholly invested in derivatives. This, the authority found, was misleading, as the MDDs did not disclose the nature of the fund, as well as risks associated with the fund,” reads the statement.
Theo Terblanche, the executive head of retail investments at Momentum Investments, said the company disagreed with the extent to which the FSCA has found against it, according to a report by Moneyweb.
“We will definitely be appealing the decision,” he was quoted as saying.