The former head of Gundo Wealth Solutions, Ralliom Razwinane, who provided a loan to justice minister Thembi Simelane and solicited investments for the collapsed VBS Mutual Bank, has been barred from operating in the financial services sector.
The Financial Sector Conduct Authority (FSCA) found Razwinane and Gundo to have demonstrated a lack of honesty and integrity, and imposed an administrative penalty of R3m on Razwinane and debarred him for 10 years.
Razwinane is 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.
Gundo Wealth Solutions was liquidated in August 2021 and is now known as Private Wealth Insight.
Simelane, who was mayor of Polokwane municipality at the time, negotiated a R575,600 loan with Razwinane from Gundo, a company appointed by the municipality to provide investment brokerage services.
The municipality invested R349m with VBS.
The FSCA investigation into Gundo and Razwinane related to suspected breaches of financial sector laws concerning their advice to clients on investing surplus funds in VBS, including the Community Schemes Ombud Services and the Polokwane local municipality.
“The FSCA found the advice to be inappropriate because it circumvented the Public Finance Management Act, Municipal Finance Management Act and Treasury regulations,” the FSCA said in a statement on Wednesday.
The Municipal Finance Management Act prohibits municipalities from depositing funds in mutual banks.
“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 Mr Razwinane contravened the general code of conduct for authorised financial services providers and representatives,” the FSCA said.
“The FSCA further found that Gundo Wealth and Mr Razwinane did not render financial services honestly, fairly with due skill, care and diligence as required in terms of section 2 of the general code.”
Gundo Wealth Solutions and Razwinane were found to have contravened the general code by failing to disclose to their clients the fees and commission that they earned from VBS for rendering the advice.
Gundo Wealth and Razwinane had also failed to fully co-operate with investigators, in contravention of the Financial Sector Regulation Act.
“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 the Financial Advisory and Intermediary Services Act,” the FSCA said.
The FSCA had intended to withdraw the financial services provider licence of Gundo Wealth and to impose a R2m administrative penalty. But it discovered that the company had been liquidated and its licence had therefore lapsed.
In late August President Cyril Ramaphosa asked Simelane to submit a report and update him on the Gundo loan, drawing criticism from opposition parties for his slow response. Concern has been raised that Simelane, as head of the prosecution and justice system, is conflicted with regard to the Gundo loan.
ActionSA has laid a criminal complaint of forgery against Simelane regarding the loan agreement and has confirmed with the Hawks that charges of corruption and forgery were being investigated.
Presidential spokesperson Vincent Magwenya appealed for patience on the matter at a media briefing on Wednesday. He acknowledged that Simelane was at the helm of several law enforcement agencies that might be investigating her, and said the question of potential conflict of interest was a primary concern for Ramaphosa.
“The matter is top of mind. He is processing and thinking it through. In so saying I am asking for patience. These considerations are not at the expense of the department. He is going to deal with the matter quite soon,” Magwenya said.
“There is no evidence yet to suggest the issue is having an impact on the functions of law enforcement agencies ... There is also no evidence there is instability or interference in the department or agencies and no formal charges have been brought against her.”
Update: October 16 2024
This story now contains comment from presidential spokesperson Vincent Magwenya.
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