At the end of last month, it emerged that the deVere group had sold its South African business to Brite Advisors, which has operations in a number of jurisdictions around the world. deVere is an international financial consultancy that had been operating in the country since 2008.
Over the last few years, however, deVere’s local operation had come under significant scrutiny from the local regulator. The Financial Sector Conduct Authority (FSCA) and its predecessor the Financial Services Board have been looking into the company’s conduct since at least 2016.
Investigations by Moneyweb revealed how the company had, by its own admission, failed to disclose all of the commissions it was earning on investments recommended to some South African clients. deVere had also invested certain clients into products that were not locally approved.
The FSCA’s investigations culminated in the regulator indicating to deVere that it intends to take ‘extensive’ steps against it.
“We have finalised the investigation and we have communicated to deVere our intention to take extensive regulatory action,” FSCA head of investigations Gerhard van Deventer told Moneyweb. “They have had the opportunity to reply and we have given the papers to senior counsel to obtain legal advice on some of the issues raised by the investigated parties. We will be making a final decision early in the new year.”
Given this situation, it may be understandable that deVere is looking to exit the country. It may also make sense for another advice firm to want to take over its client base. Former deVere employees have indicated to Moneyweb that despite losing a significant amount of business in the last year, deVere South Africa would still likely have had more than R1 billion in assets under advice.
Brite Advisors was not, however, a licensed financial services provider (FSP) in South Africa. It is therefore not just taking over deVere’s clients, but also its licence. This comes with a high degree of risk.
“An FSP licence is dependent on the entity complying with all the requirements set by the FSCA,” Van Deventer explained. “If the entity is sold these requirements must still be complied with.
“If the FSCA withdraws the licence of the entity, the selling of the business will not impact on the withdrawal of the licence,” he noted.
In other words, if the regulator decides that an appropriate sanction is to take away deVere’s licence, Brite Advisors will no longer be able to operate in South Africa on that licence.
Moneyweb made a number of efforts to seek an explanation from Brite Advisors as to why it would purchase deVere South Africa under these circumstances. Numerous requests for comment were ignored.
However, a spokesperson for deVere told Moneyweb that:
“Brite is aware of the FSCA situation and believes, as we do, that it is without foundation.”
The relationship between Brite Advisors and deVere has already raised questions in other parts of the world. Earlier this year Brite Advisors purchased deVere’s business in the USA just a few months after the Securities and Exchange Commission (SEC) had fined this operation $8 million.
The SEC found that deVere had failed to disclose all of the commissions it was earning, or the conflicts of interest they represented. It also found that deVere provided “materially misleading or incomplete” statements regarding certain products it was marketing.
Brite Advisors also purchased a UK-based company called deVere Recruitment. This business was established in 2007 and company filings indicate that since 2012 its liabilities have always exceeded its assets.
Within a few months of the acquisition, the newly named Brite Advisory Holdings submitted company accounts showing that the company was now dormant. Moneyweb was unable to get an explanation from Brite Advisors for this purchase, but when asked about the links between the two companies, a deVere spokesperson said that:
“Brite bought deVere Recruitment 12 months ago. There is no link between deVere or any of its staff or shareholders.”
Where does Brite come from?
Brite Advisors was founded by its CEO, Mark Donnelly. He is a British citizen currently resident in Australia.
Many of its staff are former deVere employees, according to their LinkedIn profiles.
These include Dr Richard Johnson, who was deVere’s country manager in Australia until 2017, Ross Mills who was a deVere area manager between 2015 and 2019, and Steve Kneale who was a senior wealth manager with deVere in France and Switzerland between 2008 and 2013.
Donnelly has a varied history. In 2004 he pled guilty to a charge of theft in the UK, although he did not serve any jail time. This related to shipments of goods from a company called Metro Sport, which he had founded but since sold. The goods were shipped to Australia, but no invoice was raised for them.
According to two online profiles, he has since engaged in a range of business ventures, including property development, fast food, and financial advice.
When asked whether his criminal record raised questions about Donnelly’s credibility in an industry that relies so heavily on trust and whether deVere was confident that its former clients would be best served by his company, a deVere spokesperson would only say that:
“We are unable to comment on Brite personnel.”
A number of requests to deVere for Moneyweb to be directed to someone at Brite who could comment were ignored. Moneyweb also sent a request for comment to Donnelly through LinkedIn, which received no response.