The Financial Sector Conduct Authority (FSCA) has imposed heavy fines on two directors of Smart Billion Investments and debarred them from acting as financial services providers (FSPs). One director, Renault Otto Kay was fined R500 000 and debarred for five years; the other, Melusi Christian Ntumba, was fined R10 million and debarred for 10 years. Both contravened various financial sector laws.
The FSCA undertook an investigation of Smart Billion Investments after it received a complaint alleging that Smart Billion traded client funds without authorisation and failed to reimburse clients’ losses caused by Smart Billion.
The authority says in a press release that it found Smart Billion traded in contracts for difference (CFDs) on behalf of clients through an online trading platform, GT247. Smart Billion opened a trading account at GT247, pooled client funds, and traded in the name of Smart Billion. Clients deposited funds for trading purposes into Smart Billion’s bank account of which only a portion were used for trading. The remaining funds were used to pay clients’ withdrawal requests.
The FSCA found that Smart Billion and its directors contravened the General Code of Conduct for authorised FSPs and representatives, the Financial Institutions (Protection of Funds) Act, the Financial Advisory and Intermediary Services (FAIS) Act, and certain conditions contained in the suspension of authorisation of Smart Billion.
The FSCA considered, as an aggravating factor, that Kay agreed to act as Smart Billion's key individual only to secure a FAIS license for Smart Billion, whereafter his only role was to oversee platform trading. The FSCA considered that Kay did not perform the responsibilities bestowed on him as key individual to ensure that Smart Billion was operating lawfully.
The FSCA found that Ntumba, in his capacity as director, representative and chief executive of Smart Billion, contravened the Financial Institutions Act in that he did not observe the utmost good faith and did not exercise proper care and diligence with regards to client funds. Ntumba also caused, attempted, or conspired with, aided, abetted, induced, incited, or procured Smart Billion to contravene financial sector laws.
The FSCA considered as aggravating factor the fact that a “miniscule” amount of client funds were transferred to GT247, while the balance of the funds was used to repay clients and for personal and business expenses.
The Serious Commercial Crime Unit is investigating a criminal case against Smart Billion. The FSCA is providing assistance in the case.