The FSCA is dealing with many cases involving key individuals (KIs) who failed to perform their statutory duties, resulting in financial losses to clients, according to the Authority’s Regulatory Actions Report for 2022/23.
It said the decisions by the FSCA and the Financial Services Tribunal (FST) relating to Smart Billion Investments (Pty) Ltd are important reminders of the oversight responsibilities of KIs and the main roleplayers of FSPs.
Smart Billion, which is now in liquidation, traded in CFDs on an online trading platform at GT247 (Pty) Ltd.
Smart Billion opened a trading account at GT247 in its own name, pooled clients’ funds and traded on the platform. Smart Billion calculated and distributed each client’s profits or losses. Not all clients’ funds were used for trading. When a client requested a withdrawal, Smart Billion used deposits from other clients in the bank account to pay the withdrawal requests.
In 2022, the FSCA fined Melusi Ntumba, the chief executive of Smart Billion, R10 million and debarred him for 10 years. Ntumba has lodged a reconsideration application against the decision.
The Authority also debarred Smart Billion’s KI, Renault Otto Kay, for five years and fined him R500 000.
The FSCA found that Kay contravened section 42 of Board Notice 194 of 2017 because he was unable to maintain the operational ability to fulfil the responsibilities imposed on Smart Billion and therefore no longer met the fit and proper requirements as envisaged in section 8A of the FAIS Act.
In February this year, the FST dismissed Kay’s application for his debarment and fine to be reconsidered.
Read: Key individual asks for R500k fine and five-year debarment to be reconsidered
Points highlighted by the tribunal
The FSCA’s report drew attention to the following points from the tribunal’s decision:
- “Kay failed in his statutorily imposed responsibilities to manage and oversee the activities of Smart Billion. Kay failed in his obligations as key individual and admitted that there was no oversight; his only responsibility was to source traders and manage general online trading.”
- “His professed lack of knowledge of anything the company did is feigned, and although the Authority accepted some of his explanations, I, on reconsideration do not. His version is improbable and to the extent true, shows a reckless, if not intentional, disregard of his duties as key individual.”
- “In sum, he did not manage the rendering of financial services and he did not oversee the rendering of financial services at all. He had no management policies, procedures and systems of corporate governance, risk management and internal controls in place to ensure compliance by the FSP with the FAIS Act.”
The FSCA said the FST’s decision leaves no room for doubt about the responsibilities of a KI.
KIs cannot justify non-performance on the ground that they were not involved in the day-to-day business of the FSP, or they did not have knowledge of the compliance failures.
KIs must carefully consider their responsibilities when they are appointed. Their duties and responsibilities are specific, particularly with reference to compliance by the FSP with financial sector laws. They must ensure that they have the operational ability to manage and oversee the financial services-related activities of the FSP, the FSCA said.
