Tribunal can’t order FSCA to refund Oinvest investor his R346 000

　　An investor who lost R346 000 while trading on Oinvest has failed in his attempt to have the Financial Services Tribunal order the FSCA to reimburse his loss. He said the FSCA was liable, because it had not warned investors timeously of Oinvests contraventions of the FAIS Act.

　　The applicant said he traded with Oinvest “in good faith” in August and September 2020, based on the fact that Oinvest was listed on the FSCAs website as a regulated service provider at that time.

　　Basfour was authorised as a Category I FSP to render intermediary services in respect of forex investments and derivatives.

　　The applicant said the FSCA had withdrawn the licence of Basfour 3773 (Pty) Ltd, which traded as Oinvest, and debarred Jane Engelbrecht (Basfours sole director, key individual and a representative) on 14 October 2020, which was “one year and seven months after the FSCA was aware of all the contraventions of the FAIS Act by Basfour”.

　　The FSCA also imposed an administrative penalty of R58 608 810 on Basfour.

　　“The FSCA neglected their mandate and duty to warn me timeously. I therefore hold them accountable for the loss of R346 000 and submit that the FSCA should refund me my money,” the applicant said.

　　In response to the application, the tribunal said, “accepting for the sake of argument that he lost the money” because the FSCA was in breach of its statutory duties, “this is not something that falls under the jurisdiction or competence of the tribunal”.

　　Basfour was liquidated last year in terms of an agreement with the FSCA (see below).

　　Investors lost at least R58m

　　Basfours clients suffered losses of at least R58 608 810 between 1 January 2018 and 30 August 2019, the FSCA said in a media release announcing its enforcement action in October 2020.

　　The FSCA said it launched an investigation after having received several complaints from members of the public, which revealed that Basfour:

• 　　Provided financial advice to clients while it was not authorised to do so;

• 　　Traded as a principal with its clients while advising its clients to enter into such transactions and without disclosing that Basfour was the counterparty to the client transactions;

• 　　Unduly pressurised its clients to make deposits and trade on the platform;

• 　　Failed to process withdrawals timeously; and

• 　　Failed to disclose material information such as the fees and risks associated with the trading.

　　As a result, Basfour had contravened sections 7(1)(a) and 13(3) of the FAIS Act, Condition 3 of Basfours licence, section 2 and 11 of the General Code, and section 3(1)(b) to (e), (i) and (h) of the Forex Code.

　　FSCA and Basfour reach an agreement

　　In November 2020, Basfour and Engelbrecht applied to the tribunal for a reconsideration of the finding, the penalty and the 10-year debarment.

　　However, the reconsideration hearing was cancelled after the FSCA entered into an enforceable undertaking with Basfour and Engelbrecht in March last year.

　　In terms of the agreement, the FSCA agreed to:

• 　　Remit the R58m penalty imposed on Basfour; and

• 　　Set aside Engelbrechts debarment and allow her to continue to conduct financial services as a KI for PPM Brokers CC, “within the parameters of strict conditions”.

　　In exchange, Engelbrecht was required to liquidate Basfour and provide about R17m to the liquidators for, among other things, distribution to creditors, including investors.

　　The FSCA said it entered into the undertaking “to allow investors the opportunity to recover some of their funds”.

　　Basfours licence remained withdrawn.

　　A final liquidation order against Basfour was granted in the Durban High Court last year. The liquidators, Sechaba Trust, are waiting for the Master of the High Court to convene the first meeting of creditors. Anyone who wants to lodge a claim should send an email to oinvest@sechaba.co.za. You can also find more information here.

　　Conditions imposed on Engelbrecht

　　The undertaking imposed the following conditions on Engelbrecht:

• 　　She would be a KI of PPM only;

• 　　An additional KI would be appointed to PPM who would have the same area of responsibility as Engelbrecht for three years from the date of the undertaking.

• 　　While Engelbrecht was PPMs KI, PPM would not apply for any additional licences, extensions of the existing licence or amendments of any conditions under the licence;

• 　　PPM would engage an external compliance officer who would submit to the FSCA a full compliance report on PPM twice a year, certifying that PPM did not exceed its licensing parameters in any way;

• 　　PPM would not hold, keep in safe custody, control, directly administer or deal directly with any client assets, including cash funds; and

• 　　Engelbrecht would not apply for a relaxation of these conditions within the next 10 years.