The FSCA has fined Ralliom Razwinane, whose company facilitated investments into VBS Mutual Bank, R3 million and debarred him for 10 years.
Razwinane was the owner and key individual of Gundo Wealth Solutions (Pty) Ltd, which was involved in brokering investments from municipalities into the now-defunct VBS Bank.
He is one of 14 people named by the National Prosecuting Authority (NPA) in an indictment for their role in the VBS scandal. They are accused of theft, fraud, money laundering, corruption, racketeering, and contravening the Prevention of Organised Crime Act and the Prevention and Combating of Corrupt Activities Act.
Gundo Wealth Solutions was liquidated in 2021 and is now known as Private Wealth Insight.
The FSCA said its investigation found that Gundo Wealth and Razwinane advised two of its clients, the Polokwane Local Municipality and the Community Schemes Ombud Service (CSOS), to invest surplus funds in deposits with VBS Bank.
The Polokwane municipality invested R349 million in VBS between September 2016 and May 2017 and the CSOS invested R80m in November 2017 and January 2018.
The NPA’s indictment alleges that Razwinane also brokered deposits by the Free State Development Corporation into VBS, but the FSCA’s statement made no mention of this.
Thembi Simelane, who was appointed Minister of Justice and Constitutional Development in June, received a “commercial loan” of R575 600 from Gundo Wealth in 2016 to buy a coffee shop in Sandton. At the time, Simelane was the mayor of Polokwane.
Simelane has denied any impropriety, claiming she was unaware of Gundo’s involvement with VBS and that her role as mayor did not involve procurement decisions.
Simelane said she took the loan to start a business as an alternative income source after leaving public office. She said the loan was repaid in full, and she chose this option instead of withdrawing from her retirement savings because of the high tax implications.
The Minister of Justice has oversight of the NPA, which is pursuing cases against VBS fraud- and corruption-accused persons and companies.
Inappropriate advice
The FSCA said Razwinane’s advice was inappropriate because it circumvented the Public Finance Management Act, the Municipal Finance Management Act, and National Treasury regulations. Moreover, it was found that the advice was not based on a demonstratable analysis of the clients’ risk profiles and financial or investment needs. Thus, Gundo Wealth and Razwinane contravened section 8(1) of the General Code of Conduct for Authorised Financial Services Providers and Representatives.
The FSCA further found that Gundo and Razwinane did not render financial services honestly and fairly with due skill, care, and diligence as required by section 2 of the General Code.
Additionally, Gundo and Razwinane were found to have contravened section 3(1) of the General Code by failing to disclose to their clients the fees and commission that they earned from VBS for rendering the aforementioned advice.
The FSCA found that Gundo Wealth and Razwinane failed to co-operate fully with the investigators, in contravention of section 139(2) of the Financial Sector Regulation Act.
The Authority concluded that Gundo and Razwinane no longer meet the fit and proper requirements relating to honesty and integrity and therefore contravened section 8A(a) of the FAIS Act.
Razwinane’s debarment means he is prohibited from providing or being involved in the provision of financial services; acting as a key person of a financial institution; and providing specified financial services to a financial institution, whether under outsourcing arrangements or otherwise.
The FSCA said it previously communicated its intention to withdraw Gundo’s FSP licence and fine it R2m.
“However, in the meantime and before making final decisions, information came to the FSCA’s attention that Gundo Wealth was finally liquidated on 17 August 2021. Gundo Wealth’s licence has lapsed as a result of its liquidation. It is therefore not authorised or licensed to render financial services, effective from the date of its liquidation.”
Established in 1982 as the Venda Building Society, VBS became a mutual bank and later expanded its services to include deposits, loans, and transactional accounts. It gained some prominence for offering competitive interest rates on municipal investments.
VBS collapsed in 2018 after it was disclosed that the bank had been involved in a large-scale fraud and corruption scheme.
A forensic investigation by the South African Reserve Bank found that about R2 billion was looted from the bank through fraudulent schemes involving executives, board members, and politically connected individuals.
The fraud primarily involved municipal funds being unlawfully deposited into the bank, and bribes were paid to officials to secure these deposits. This scandal led to the liquidation of VBS, and many municipalities lost substantial amounts of money.
