Financial advisor hit with R3m fine, 10 year ban for role in VBS looting

The looting of an estimated R2 billion that killed Venda Building Society Mutual Bank (VBS Bank) has led to allegations against many well-known people, including politicians and senior government officials. Very few beneficiaries of the stolen money or those who supported the theft have been brought to book.

This week, one of the individuals faced consequences. The Financial Sector Conduct Authority (FSCA) announced that it fined Ralliom Razwinane, at the time the representative of Gundo Wealth Solutions, R3 million and debarred him from working in the financial services industry for ten years for soliciting deposits for VBS Bank.

The FSCA says it investigated Gundo Wealth and Razwinane for suspected breaches of financial sector laws regarding the advice rendered to clients to invest in VBS Bank. “The FSCA’s investigation found that Gundo Wealth and Mr Razwinane advised two of its clients, the Community Schemes Ombud Services (CSOS) and Polokwane Local Municipality, to invest surplus funds in deposits with VBS Bank.

“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,” according to the FSCA.

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In essence, Razwinane was found to have contravened sections of the General Code of Conduct for Authorised Financial Services Providers and Representatives.

The FSCA’s comment was firm: “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.

“Additionally, Gundo Wealth and Mr Razwinane 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 Bank as a result of rendering the aforementioned advice. The FSCA found that Gundo Wealth and Mr Razwinane failed to fully co-operate with the investigators, in contravention of Section 139(2) of the Financial Sector Regulation Act, 9 of 2017.”

The FSCA added that, after considering all relevant facts, it concluded that Gundo Wealth and Razwinane no longer meet the fit and proper requirements relating to honesty and integrity.

Razwinane is prohibited from providing or being involved in the provision of financial services and debarred from acting as a key person of a financial institution or providing specified financial services to a financial institution.

The FSCA also wanted to withdraw Gundo Wealth’s financial services provider (FSP) licence and hit it with a R2 million penalty. However the firm was liquidated in August 2021, and the licence lapsed immediately.

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Curatorship

VBS Bank was placed under curatorship by the Minister of Finance at the time, Nhlanhla Nene, within days of taking over the ministry from Malusi Gigaba.

The subsequent investigation by Advocate Terry Motau on behalf of the Reserve Bank’s Prudential Authority concluded that R2 billion was looted from the bank over several years, with the stolen money used by the perpetrators to buy luxury houses and expensive cars.

In his 2018 report, The Great Bank Heist, Motau said he was specifically tasked with establishing whether any of VBS Bank’s business was conducted to defraud depositors or other creditors or for any other fraudulent purpose.

He also had to investigate whether the bank’s business conduct involved questionable or reckless business practices or material non-disclosure, with or without the intent to defraud depositors and other creditors, and whether there was any irregular conduct by VBS shareholders, directors, executive management, staff, stakeholders, or related parties.

He found all of the above, saying there was little doubt about wrongdoing. “I have investigated … the sorry affairs of the VBS Mutual Bank. My report will reveal that the perpetrators of the heist at VBS made away with almost R2 billion.

“I trust that, in this case, arrests will be made,” he wrote in his report.

This article was republished from Moneyweb. Read the original here.