The FSCA has slapped a 30-year ban on Craig Warriner (pictured), the former trustee and fund manager of BHI Trust, effectively barring him from offering or participating in financial services for the rest of his life.
The 60-year-old was issued with the debarment order on 7 May. In addition to barring him from providing financial services, the order prohibits Warriner from “acting as a key person of any financial institution, and providing specified financial services to a financial institution, whether under outsourcing arrangements or otherwise”.
The St Stithians old boy surrendered to authorities and confessed to fraud in early October last year. He admitted to misusing the trust’s funds irresponsibly for 22 years. Following his confession, BHI Trust was provisionally sequestrated on 25 October and formally sequestrated on 7 February. Warriner remains in jail as he awaits his next court appearance, scheduled for later this month.
Within days of Warriner handing himself over, the FSCA confirmed it was investigating BHI Trust and “other persons” for potentially conducting unauthorised financial services and collective investment scheme (CIS) operations. The FSCA stated that none of the parties under investigation are authorised FSPs or licensed CIS managers. The investigation was extended to include regulated entities that may have promoted BHI Trust’s products.
Gerhard van Deventer, the FSCA’s head of enforcement, told Moonstone that although Warriner was not authorised to render financial services, the Authority, in terms section 153(1)(a) of the Financial Sector Regulation Act, may debar a person under certain circumstances even though such person is not authorised or licensed.
Van Deventer explains this could occur if such a person has contravened a financial sector law in a material way or aided or abetted an entity to commit contraventions of a financial sector law.
“The principle behind the extended jurisdiction for debarments is simply to keep unwanted persons out of the industry, even if they were not in it in the first place. This is especially important in unregistered business,” he says.
According to Van Deventer, the Authority found that Warriner contravened certain financial sector laws in a material way, most notably rendering unauthorised financial services.
“The investigation is ongoing. It must also be kept in mind that the investigation extends to other parties – for example, financial services providers that placed their clients with the BHI Trust. In addition, the FSCA is also actively assisting the NPA in its prosecution task,” Van Deventer says.
Although the FSCA is not at liberty to disclose the exact number of FSPs being investigated, Van Deventer says the investigation includes “several” authorised FSPs.
“We have also requested members of the public – through a media release – to come forward if their funds were placed with BHI by their financial adviser,” says Van Deventer.
Read: FSCA asks BHI Trust investors to come forward with information on FSPs
Global & Local
An FSP frequently associated with BHI Trust in the media is Global & Local Investment Advisors. According to Citywire, many BHI investors claim that Global & Local actively promoted BHI Trust to its clients.
Van Deventer confirmed that Global & Local is “one such FSP” that placed clients with BHI Trust.
The FSCA’s website shows that Global & Local’s licence was suspended on 20 March.
“The Authority was of the view that Global & Local no longer met the ‘fit and proper’ requirements. This is a ground for suspension of the licence. The suspension relates to the relationship between BHI and Global & Local,” he says.
Gert de Wet and Sumaya Mohamed from Kaap-Vaal Trust were appointed as joint provisional trustees of BHI Trust by the Master of the High Court in October last year. On 15 April, the Master officially confirmed them as the final trustees.
In a report filed in terms of section 81 of the Insolvency Act earlier this month, the joint trustees stated they obtained a search and seizure warrant under section 69 of the Insolvency Act for data directly related to BHI Trust from the computers and devices of Global & Local’s employees.
The data is currently being processed and evaluated.
Read: BHI Trust ‘was run as illegal scheme from inception’
A circular sent to creditors in April stated that the joint trustees were considering further applications. In correspondence with Moonstone this week, the joint trustees said no further search and seizure applications have been undertaken to date.
‘An illegal scheme since its inception’
Preliminary investigations by the trustees of the sequestrated BHI Trust have confirmed Warriner’s declaration that the trust operated as “an illegal scheme from its inception”.
Warriner was quoted as saying that BHI Trust took money and traded it on a short-term basis.
“You see, money goes in; I take it. People want money out, so I rob Peter to pay Paul. That is after 2008, and then what happens is that because you are showing decent returns, it becomes the Ponzi pyramid scheme … And the money comes in and it goes out.”
Van Deventer says the FSCA’s findings so far concur with those of the trustees.
“But the FSCA does not make findings relating to common law crimes, only to contraventions of financial sector laws,” he adds.
According to the circular sent by the joint trustees, legal proceedings were being considered to declare the BHI Trust an illegal scheme. The trustees have since confirmed they are pursuing this action with their legal teams.
