- Awaits complete validation to settle the remainder
Government has provided a GH¢1.4billion relief package to embattled customers of 27 collapsed fund management companies, including Gold Coast Ltd. – which hitherto had not received a penny due to a prolonged validation process.
A press release by the Securities and Exchange Commission (SEC) dated 18th November 2020 stated that government has authorised a partial bailout, which involves payment of up to GH¢50,000 to all customers of the remaining affected fund management companies while court processes on the liquidation petition and other matters continue.
This means that all 92,460 affected customers under this special arrangement will receive claims of no more than GH¢50,000, even if their deposits exceed that amount. Such customers, according to the press release, will be settled after the liquidation proceedings in court – in line with terms being applied under the bailout package for clients of the Fund Management Companies currently under official liquidation.
On the other hand, all customers whose deposits with these fund management companies are below the said amount will receive full payment of their claims. The release adds that of the total number of affected customers of the 27 fund management companies under this arrangement, Gold Coast Ltd. (now Blackshield Fund Management Company Limited) customers comprise 92 percent.
The decision, the release said, was born out of compassion and government’s commitment to protect its citizenry as well as its sensitivity to the plight of affected clients compounded by the disruptive impact of the COVID-19 pandemic, especially at a time it appears the validation will take much longer than expected due to the liquidation petition in court and other matters.
B&FT’s sources at the regulator’s office have revealed that as at present, GH¢7.4billion of claims have successfully gone through the validation process – of which the GH¢1.4billion is being provided by government as temporary relief to the affected customers.
The partial bailout will be channeled through the Amalgamated Fund Ghana Limited – the same Special Purpose Vehicle (SPV) being used to pay clients of the Fund Management Companies currently under official liquidation. Amalgamated Fund Ghana Limited is managed by GCB Capital Limited, a subsidiary of GCB Bank Limited. The SEC’s agent for receiving and validating claims is PwC.
In November last year, the Securities and Exchange Commission (SEC) – which regulates the activities of the fund management companies – withdrew the licences of 53 of them, following their failure to comply with the industry’s requirement and, in some cases, absconding with depositors’ funds.
In a public notice released by the regulator, SEC said there were no other means of saving these companies than revoking their licences as they have largely failed to return client funds which remain locked up, and in a number of cases have folded-up their operations. The continuous existence of these companies, from the regulator’s perspective, posed severe risks to stability of the capital market and the interests of investors – hence the decision to eliminate them from the system.
Some of the breaches which the regulator said led to the decision included guaranteeing returns, contrary to the directive of the Commission; failure to honour client redemption requests; failure to honour payment terms agreed at Complaints Hearings; failure to place client funds with proper due diligence and the requisite standard of professional conduct, evidenced by over-concentration of portfolios in high-risk institutions and related party transactions resulting in severe liquidity challenges.
Other offences include failure to segregate client funds from operational funds, and in some cases using client funds to pay for operational activities; closure of offices without following due process; persistent regulatory breaches including failure to submit reports as required; corporate governance weakness with weak board oversight, poor accountability, and override of Investment guidelines; and failure to monitor and inject liquidity to comply with required levels.
According to the regulator, all efforts to get directors and management of the affected institutions to rectify the above lapses have yielded no positive results.