Woes pile up for troubled financial firm N-e-FG as FSCA appoints statutory manager

The Financial Sector Conduct Authority (FSCA) says it has taken further action against financial services group N-e-FG by appointing a statutory manager for the group’s retirement-fund-administration subsidiary, N-e-FG Administrators, citing its unsound financial position and its failure to comply with provisions of the Financial Advisory and Intermediary Services (FAIS) Act and the Pension Funds Act.

In a press statement released on Friday last week, the FSCA says: “The authority has appointed Krishen Ganas Sukdev as the statutory manager of N-e-FG Administrators, effective from May 30, 2022. Sukdev is a qualified actuary with extensive experience in the retirement funds sector. He has been appointed in terms of Section 5A of the Financial Institutions (Protection of Funds) Act. The appointment must be confirmed by the High Court on application by the FSCA within 30 days. The FSCA is currently working on this application and will file its papers with the Court within the prescribed period.”

This development compounds a series of woes to befall the Vanderbijlpark-based N-e-FG (New-e-conomy Financial Group), beginning in the second half of last year:

• On September 4, 2021, the unit trust management platform Boutique Collective Investments (BCI), on which N-e-FG ran three white-label unit trust funds, became aware of irregularities at N-e-FG and immediately cancelled its co-naming white-label agreement, according to Robert Walton, group business director of BCI. The trust deeds of the renamed funds were signed on September 14. Walton says investors in these funds, which are now directly managed by BCI, are completely safe.
• With effect from September 7 and 15, 2021 respectively, the FSCA provisionally suspended the Financial Services Provider (FSP) licences of N-e-FG Fund Management and N-e-FG Administrators, according to the FSCA FAIS Notice 134 of 2021.
• Thereafter, N-e-FG Administrators commenced business rescue proceedings due to it being “in a financially distressed position, as contemplated by Section 128 of the Companies Act”, according to the FSCA statement.
• With effect from December 21, 2021, the FSP licences of N-e-FG Administrators and N-e-FG Fund Management were withdrawn by the FSCA. In the FAIS Notice 20 of 2022, the FSCA cited the following reasons for the withdrawal: “Contravention of sections 8A(a) and 19(2) of the FAIS Act, and section 8(1)(a) of the Fit and Proper Requirements, and sections 2, 3(1)(a)(i), 3(b) and 3(1)(d) of the General Code of Conduct.”

The FSCA says it was necessary to appoint a statutory manager to manage the affairs of N-e-FG Administrators because it had “been closely monitoring [its] activities since the withdrawal of the licence and remains concerned about N-e-FG Administrators’ failure to manage the funds under its administration in a responsible manner. The FSCA’s withdrawal of N-e-FG Administrators’ FSP licence was subject to certain conditions aimed at ensuring that the interests of financial customers would be protected. N-e-FG has failed to comply with these conditions.”

The authority says: “The appointment of a statutory manager to manage N-e-FG’s affairs, specifically in respect of its pension fund benefits administration business, is in the best interest of financial customers as it will assist in ensuring that the benefit administration business is managed in compliance with the prescribed conditions for benefit administrators, and in accordance with the Pension Funds Act.”

When approached by Personal Finance for comment, Corné Jansen van Rensburg, N-e-FG Group CEO and Executive Chairman, said: “N-e-FG Administrators went into voluntary business rescue because of the unexpected provisional suspension of the FSP licence and through consultations with our legal advisors, including senior and junior counsel. We are currently in litigation with the entity that complained without prior cautionary announcement or notice from the FSCA. This matter will be addressed in a detailed reply. With the cooperation of our legal team, the FSCA was invited to appoint a statutory manager to ensure that N-e-FG Administrators handle matters within the ambit of the FAIS Act.”

Worryingly, as at the time of writing, the group’s website has not been updated to reflect any of the problems facing the company. Its FSP licence numbers are still displayed, as are the unit trust funds and other investments under its product offering, giving the impression that it is “business as usual”. When asked about this, Jansen van Rensburg responded: “This was an oversight and is being corrected. Instructions were issued to the webpage administrators, but it was not done for some reason or the other.”

Personal Finance then asked Jansen van Rensburg whether he could give assurances that investors' investments in vehicles other than the unit trust funds were safe.

• Private share portfolios: “All private portfolios were transferred to other portfolio managers per the investor's choice and as directed by the FSCA. Confirmation thereof has been provided to the FSCA and private clients,” Jansen van Rensburg said.
• Life annuities: N-e-FG’s life annuity product is offered through life insurance company Lion Life (previously Lion of Africa). It is with Lion Life that N-e-FG is in a dispute, and it appears that these investments could be at risk. Said Jansen van Rensburg: “We are confident that all investors will receive their investments, and actions are in place to do so. However, we need to emphasise that should Lion Life continue with its litigation, trying to avoid its responsibilities in terms of the Long Term Insurance Act Section 49A, we are not in a position to determine the outcome of such hearings. Furthermore, out of other activities, we kept up the payments of the annuitants’ income for five months, which we will be and are in the process of claiming back from the insurer Lion Life.”

In its statement, the FSCA says it is conducting a formal investigation into N-e-FG’s life annuity policies.

“If you have any dealings with N-e-FG in respect of such policies, you should inform the FSCA by contacting Louisa Basitere at [email protected]. Customers may also contact the statutory manager, Krishen Sukdev, at [email protected] to verify the legitimacy of such policies,” the FSCA says.

The authority says it will “continue to monitor the situation closely and take appropriate regulatory action to ensure that financial customers remain protected if any further wrongdoing is uncovered during the course of the investigation”.

Note: an attempt to get comment from Lion Life had been unsuccessful by the time of publication.

PERSONAL FINANCE