Tag Archives: Cope MP

Your pension choice a worry for govt

2 Sep

Author: Bruce Cameron

Publications: iOL

Date Published: 2 September 2012

Questions about FSB’s scam control

The Financial Services Board (FSB) could soon find itself being grilled by Parliament for not being more effective in curtailing scams that recur with alarming regularity, with losses of billions of rands of the savings of consumers, including retirement fund members and pensioners, who fall prey to the schemes.

And National Treasury concedes that the FSB is not doing enough to protect you.

The latest scam to hit the headlines was the high-drama collapse of a Ponzi scheme masquerading as a hedge fund, the Relative Value Arbitrage Fund (RVAF).

The scamster, Herman Pretorius, shot his business associate, Julian Williams, during an altercation, before turning the gun on himself following a belated FSB raid more than a year after the scam was first reported to it.

The roughly 3 000 investors in RVAF, most of whom are from the Western Cape, invested about R2 billion in the scheme. Once again, many are pensioners, who now face destitution because their money went into a high-return, extremely high-risk, unregulated “investment”.

Personal Finance asked the FSB to investigate the scheme in May last year, and the FSB merely accepted replies given to it as fact, allowing what amounted to a gigantic Ponzi scheme to continue operating under its nose. (A Ponzi scheme uses the capital of the most recent investors to pay out high returns to earlier investors, who, in turn, spread the word about the “fantastic” returns.)

After the bubble burst, the FSB attempted to justify its laxness by making a claim to the effect that Pretorius was virtually exempt from FSB action because the product he was flogging was not subject to regulatory oversight.

Cope MP Nick Koornhof raised the issue at parliament’s finance committee meeting this week, asking how the FSB will be transformed in line with government’s twin-peak policy where all market conduct of financial institutions will be placed under the control of the FSB.

“How long must we wait for it? There have been so many tragedies since Fidentia. How long must we wait for real action, for the FSB to have all the teeth it needs?” he asked.

Koornhof told Personal Finance that he will raise the issue again next week with the committee and ask for a special meeting to call the FSB to account.

His concerns were echoed by Ismail Momoniat, deputy director-general of the National Treasury, who told the committee he believed the FSB has sufficient legislative teeth. The problem, he said, is how the teeth are used.

He candidly admitted that the FSB should have picked up on some of the attacks on retirement funds and other scams.

However, Momoniat says, ways have to be found of dealing with campaigns to vilify the FSB and others by parties such as Arthur Brown, who faces criminal charges relating to the implosion of Fidentia, and Simon Nash, who is facing criminal charges arising from the alleged illegal removal of pension fund surpluses in the 1990s.

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