FSB must be probed – FAIS Ombud

Pillai’s move comes after he probed the FSB’s role in the Leaderguard Spot Forex scheme, which started falling apart about two years ago. The FSB has already come under fire for not acting earlier in the Fidentia scandal. Leaderguard was based in Mauritius. Pillai started looking at Leaderguard after he was asked to make a ruling on a complaint by a KwaZulu-Natal couple who lost their savings when the scheme collapsed, says the Sunday Times. He ruled that they should be compensated. Pillai forwarded his 79-page determination to the National Prosecuting Authority, the Finance Ministry, the Trade and Industry Ministry and the Reserve Bank for further investigation, citing the ‘criminal nature of certain violations’ and ‘regulatory failure’. In his finding, Pillai found ‘regulatory failure’ on the part of the FSB. He concluded that the FSB had approved Leaderguard as a foreign exchange scheme in which South Africans could invest. The FSB had delegated its authority to grant a licence to Leaderguard to the Forex Investment Association. It turned out that the CE of the Forex Investment Association, Chris Dela Guerre, was also the compliance officer and a director of Leaderguard. This was a clear conflict of interest, according to Pillai. Full Sunday Times report

Taking a closer look at Leaderguard, the Sunday Times notes that the company was based in and registered in Mauritius. Its sister company and its marketing arm in SA, Leaderguard Securities (LS), invested money for South Africans, most of them elderly pensioners. Pillai, upon receiving a complaint, found that Leaderguard Securities had been operating in terms of a ‘blanket exemption’ granted by the FSB to late applicants for a licence. In his determination on a complaint by the complainants, Pillai questioned the legality of the exemption. He found that, on a proper interpretation of the legislative provisions, Parliament had not intended that blanket exemptions be granted. Such exemptions would undermine the Financial Advisory and Intermediary Services Act and would allow unscrupulous providers to take advantage of an obvious loophole, he said. Full Sunday Times report