Director fined R500 000 for rendering unlicensed financial services

The FSCA has imposed an administrative penalty of R500 000 on Shoayb Joosub for acting as an FSP without a licence.

In a press release issued last week, the Authority said the fine followed an investigation in respect of Anglorand Islamic Investments (Pty) Ltd and Joosub. The investigation covered the period 1 January 2010 to 31 December 2015.

“During the investigation period, Mr Shoayb Joosub, through Anglorand Islamic, rendered financial services to approximately 270 Sukuk clients whilst not approved as a representative of any FSP,” the Authority said.

The FSCA added that it had taken into consideration Joosub’s submissions and mitigating factors.

“Therefore, the FSCA has imposed an administrative penalty of R500 000 (inclusive of costs) on Joosub,” the Authority said.

Legal hurdles

The FSCA’s investigation into Joosub and Anglorand Islamic was not without its legal hurdles.

In a judgment from the Pretoria High Court on 24 March 2017, Joosub, named as the director of Anglorand Islamic Investments, sought interim relief in an urgent application. The respondents in the case were seven employees of the then Financial Services Board (FSB) and the Minister of Defence.

Joosub’s application had two parts.

In Part A, Joosub asked the court to stop FSB employees from using their investigative powers. He wanted to delay his examination until Part B was decided. Additionally, he wanted to prevent the respondents from using their powers under the Inspection of Financial Institutions Act against him.

Part B, to be decided later, involved Joosub seeking access to the complaints and other documents used in the inspection of Anglorand Islamic Investments. He also wanted a review of the FSB’s decision to inspect Anglorand Islamic and its related entities.

Joosub argued that his right to fair administrative justice, as outlined in the Constitution, would be violated if he had to proceed with the examination without access to relevant documents or complaints.

However, Judge EM Kubushi ruled against Joosub, stating that the potential harm he mentioned was only incidental. Joosub had not provided enough evidence for an interim interdict, so the application was dismissed, and Joosub was ordered to pay the legal costs.

Sukuk as an investment product

The Corporate Finance Institute (CFI) describes Sukuk (Islamic bond or “Sharia-compliant” bond) is an Islamic financial certificate that represents a portion of ownership in a portfolio of eligible existing or future assets. According to the CFI, Sukuk can be considered as an Islamic version of conventional bonds.

“Sharia (Islamic law) prohibits lending with interest payments (riba), which is considered usurious and exploitative in nature. Thus, bonds are forbidden in Islamic finance,” the institute explains.

Africa’s first sovereign rand-denominated Al-Ijara Sukuk was listed on the JSE on 29 November last year.

The initiative was spearheaded by the South African government in partnership with Rand Merchant Bank (RMB) and FNB Islamic Banking.

At the time Amman Muhammad, chief executive: Islamic Banking FNB Commercial, said Sukuk financial instruments were highlighted in the 2023 Budget Speech as an alternative source of funding for South Africa.

“There is a clear gap in the local capital markets for Sharia-compliant products – with significant available funds and limited investment opportunities. The ZAR Al-Ijara Sukuk begins to bridge this gap for the Islamic finance institutions and establishes a benchmark from both a structural and pricing perspective for other issuers going forward,” said Muhammad.

Terry Msomi, National Treasury’s director: debt issuance and management, said the launch of the Sukuk – “a significant milestone in government’s funding strategy” – was a key step in broadening the country’s investor base.

South Africa raised R20.380 billion in the initial issuance.

According to RMB, the issue will most notably benefit state-owned corporates and Islamic financial institutions “that have never had access to high-quality liquid asset instruments that yield profit as opposed to interest”.