The Securities and Exchange Commission (SEC) has offered a comprehensive response to developments that have trailed its announcement detailing the commencement of payment to customers of 22 collapsed Fund Management Companies (FMCs) that have been duly validated and under liquidation.
The announcement, which was contained in a Press Release dated August 28, 2020, was greeted with uproar, particularly, by a Coalition of Aggrieved Customers of the Collapsed FMCs who organised a press conference where they described the actions of the SEC as deceptive and discriminatory. This was then followed by picketing at the premises of the Ministry of Finance where some of the leaders of the group were arrested for what the Police labeled as an illegal protest.
In view of this, the SEC, in a new statement, has sought to clarify its position on the bailout package, dispel the inaccuracies that were contained in the Coalition’s press conference as well as specifically address claims made by the management of Blackshield (formerly Gold Coast Fund Management), whose members constitute 82% of the Coalition, regarding the Commission’s interactions with them.
Purpose of bailout
The Commission reiterated that validation is a necessary pre-condition for accessing the government bailout. As such, the exclusion from the current payment of all firms other than the twenty-two that have been duly was in line with due process. “Receiving Government’s bailout is predicated on completion of validation and securing of liquidation orders. It is therefore a question of timing and nothing else,” the statement added.
The Commission debunked Blackshield’s claims that a directive it issued in 2017 directing it (Blackshield) to discontinue its Structured Finance product was responsible for a ‘bank run’, with customers making panic withdrawals which resulted in a backlog of payments fueling more panic, stating that the FMC was duly informed of the illegality of its guaranteed returns scheme and was asked to unwind its operations in 2018.
“It is noteworthy,” the statement read, “that complaints received at the Commission about the failure of Blackshield to pay clients started in 2018. A total of 153 complaints valued at GH¢147 million was received in 2018, representing 25% of total complaints received at SEC. In 2019, a total of 1,161 complaints from Blackshield’s clients (representing 52% of total complaints) were received valued at GH¢782 million.”
Blackshield’s failure to honor an agreed-upon payment plan and the actions taken by its customers to report the FMC to relevant authorities was cited.
Proposal for an alternate product
Furthermore, the statement described as an untruth, Blackshield’s claim that the Commission turned down its application for an alternate product – an instance mentioned by the Coalition for its claim that the SEC had access to all relevant customer data required for validation.
According to the statement, between December 2018 and March 2019, SEC gave audience to Blackshield for discussions and also gave an opportunity for a presentation on the said alternate product. The FMCs proposal was fraught with problems which it failed to address even after numerous opportunities were extended it.
“Some of the issues identified with the application for which Blackshield was asked to address was the omission of basic documents including but not limited to the following: audited Statement of Affairs, Legal Due Diligence report, Board and Shareholder Resolutions and Valuation Reports of their assets,” the statement highlighted.
Actions taken by the management of Blackshield, particularly filing an application in court on June 8, 2020 after what it termed as an unfair hearing before the Administrative Hearings Committee (AHC) over the matter of the revocation of its license has only served in stalling the validation process for its customers.
Addressing a key issue raised by the Coalition at their press conference, which referenced a letter by Frederick Boamah (PhD) of Akufo-Addo, Prempeh & Co. – legal representatives of Blackshield – the Commission in its statement said: “it is untrue that the SEC has had full access on three occasions to all client information of Blackshield and therefore the SEC cannot claim that it did not have records for validation.”
It added: “Blackshield submitted data in excel and the incompleteness of the excel sheet became evident after claims were submitted by investors. The excel sheet data enabled our agent to examine 2,275 claims (about 3% of the 82,204 claims filed) valued at GH¢26 million.
After persistent requests for access to all the records of Blackshield was unsuccessful, the SEC had to engage the assistance of a law enforcement agency who was able to retrieve the server on August 19, 2020. Our agent is therefore now able to proceed with the validation of the remaining claims filed against Blackshield.”
The Commission called for the cooperation of Blackshield for the sake of its customers as it reiterated its commitment to including customers of every collapsed FMC that has been duly validated in the phased payment of government’s bailout.