Ecsponent Financial Services’ licence withdrawn

Breach of financial sector laws also sees it hit by R3 million FSCA penalty.
The Pretoria-based headquarters of Ecsponent Financial Services. Image: Moneyweb

Financial regulator, the Financial Sector Conduct Authority (FSCA), on Friday announced the withdrawal of the licence of Ecsponent Financial Services (Pty) Ltd (EFS), a financial services subsidiary of beleaguered JSE-listed private equity group Ecsponent Limited.

Read: Embattled Ecsponent reports record R1.98bn half-year loss

The FSCA said in a statement that the regulatory action is a result of breaches of financial sector laws by EFS. The authority has imposed an administrative penalty of R3 million on Pretoria-based EFS for the breaches.

In April Moneyweb reported on the FSCA’s investigation into EFS, for selling and marketing high-risk preference shares of its holding company, Ecsponent Limited, to pensioners. The latest blow to EFS follows the FCSA provisionally suspending its financial services licence (FSP number 32968) in May.

Read:
FSCA inquiry into Ecsponent Financial Services
FSCA temporarily suspends Ecsponent Financial Services’ licence

“The FSCA had provisionally suspended this FSP’s licence on May 20, 2020, pending consideration of the outcomes of its investigation. The investigation looked at how EFS was selling and marketing the shares of its holding company, Ecsponent Limited, which is a JSE-listed entity not under the jurisdiction of the FSCA. The FSCA’s investigation focused solely on the advice and intermediary activities of the entity within its jurisdiction, EFS, and not Ecsponent Ltd,” the financial regulator noted in its statement.

“During the period of investigation Ecsponent Ltd raised capital through the sale of redeemable preference shares. These preference shares consisted of classes A, B, C and G. Ecsponent Ltd’s preference shares were marketed through the media; and leads generated in this fashion were dealt with by EFS, through a network of representatives.”

Read:
Preference shareholders bail out Ecsponent
Ecsponent’s preference shareholders fear losing everything

“During interactions with potential clients, EFS staff provided advice on the investment product, i.e. the classes of preference shares.

“While the classes of shares that paid monthly dividends were popular amongst pensioners as they mimicked a monthly pension payment, the one major difference between them and a pension investment was that they exposed investors to more risk,” the FSCA said.

EFS, which is headed by Floris Slabbert, did not comment on the FSCA’s decision. However, its parent group, Ecsponent Limited, noted the regulator’s verdict and penalty in a brief JSE Sens statement on Friday.

“The FSCA’s investigation focused solely on the advice and intermediary activities of EFS and not those of Ecsponent[Limited].

“The company advises security holders that EFS has, with effect from 11 February 2020, not provided financial advice on any new business and the company will resolve to unwind EFS,” the group added.

In a separate press statement issued later, George Manyere, CEO of Ecsponent Limited said: “We welcome the final outcome from the FSCA with regards to EFS’s licence and business in which Ecsponent Limited is the sole shareholder. This brings to conclusion a legacy issue and protracted investigation by the FSCA of more than seven years. Going forward, our focus remains on proactively managing our underlying assets for value.”

Meanwhile, the FSCA noted that its investigation into EFS entailed extensive interaction with the company.

The regulator said that this was “mainly because the FSP was of the view that it was not required to conduct suitability testing”, adding that it “relied on a specific financial service agreement wherein the investor instructs the advisor or intermediary not to perform a comprehensive financial needs analysis, but to render a specific financial service”.

EFS argued that by signing the agreement, the investor understood that a full analysis would not be undertaken by the advisor.

However, the FSCA said that in its own view such an agreement was unlawful, and that EFS could not rely on it.

Read: Ecsponent’s default puts R2bn in preference shares at risk

“The authority also found that EFS was in breach of suitability standards expected of FSPs as outlined in the FAIS Code of Conduct… After extensive consultation, EFS agreed to immediately cease advising unsuitable investors to invest in the preferences shares of Ecsponent Ltd,” the FSCA noted.

The FSCA added that EFS also agreed to the following measures:

* Conduct a re-evaluation of the risk requirements of all the clients who were advised to invest in the product, and to compare their risk requirements with the higher-risk nature of the product.

* To engage the FSCA on a strategy to deal with those investors identified as unsuitable. Such a strategy would likely include some action or agreement from the product supplier.

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After the horse has bolted?
These commissions and NGO’s, funded by the taxpayer are expensive, useless parasites. From The FSCA to the SAHRC, they pay huge salaries and jobs for cadres, with no tangible benefit to the taxpayer.

I’m thinking of a horse and a stable door.

There goes my reason for living,
There goes my FSCA license,
There goes my only possession,
There goes my everything.…

Please investigate the FSCA for not stopping this ponzi…they were warned they ignored. R3m fine …not enough

End of comments.

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