A man who brokered a VBS Mutual Bank deal for Polokwane municipality and also gave minister Thembi Simelane a loan that has since landed her in hot water has been fined R3m and also barred from providing financial advice for 10 years.
The Financial Sector Conduct Authority (FSCA) says their investigations revealed that Gundo Wealth Solutions and its appointed representative Ralliom Razwinane did not render financial services honestly, fairly with due skill, care, and diligence.
According to FSCA, they also found out that Gundo Wealth and Razwinane advised two of its clients, the Community Schemes Ombud Services and Polokwane local municipality to invest surplus funds in deposits with VBS.
"The FSCA found the advice to be inappropriate because it circumvented the Public Finance Management Act, 1 of 1999, Municipal Finance Management Act, 56 of 2003 and Treasury Regulations.
"Moreover, it was found that the advice was not based on a demonstrable analysis of these 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, 2003 (General Code)."
Daily Maverick and News24 investigations revealed that when Simelane was still Polokwane's mayor, Razwinane brokered a deal that saw the municipality invest R349m in the now-defunct VBS.
The publications also said forensic investigations found that VBS paid a kickback, worth R24.2m, to Razwinane for brokering investments from various municipalities and state entities through allegedly corrupt transactions and breaches of the Municipal Finance Management Act.
They also revealed on 26 August that Simelane, who is now minister of justice and constitutional development, had used a "commercial loan" of R575 600 from Gundo Wealth to buy a coffee shop in Sandton.
The FSCA said Razwinane and Gundo Wealth 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, as a result of rendering the aforementioned advice.
The financial body also said both Gundo Wealth and Razwinane failed to fully co-operate with the investigators, thereby contravening section 139(2) of the Financial Sector Regulation Act, 9 of 2017.
"Taking all relevant facts into account, the FSCA concluded that Gundo Wealth and Razwinane no longer meet the fit and proper requirements relating to honesty and integrity and therefore contravened section 8A(a) of the Financial Advisory and Intermediary Services Act, 37 of 2002.
"The FSCA has imposed an administrative penalty of R3m on Razwinane and debarred him for 10 years. Razwinane is accordingly 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 had previously communicated its intention to withdraw Gundo Wealth's license and also impose an administrative penalty of R2m on the company.
"However, in the meantime and before making final decisions, information came to the FSCA’s attention that Gundo Wealth was finally liquidated on August 17 2021. Gundo Wealth’s licence has lapsed as a result of its liquidation. It is therefore not authorised nor licensed to render financial services, effective from the date of its liquidation."
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