Dynamic wealth loses two FSB licenses

Gareth Stokes, FAnews Online Editor

What happens when you cross the Financial Services Board (FSB)? Yesterday the regulator withdrew the licenses of two Dynamic Wealth Companies. The press release that flashed across my screen read: In terms of Section 9(2)(d) of the Financial Advisory and Intermediary Services (FAIS) Act, No 37 of 2002, the Registrar of Financial Services Providers hereby makes known that he has, with immediate effect, withdrawn the authorisations issued to the following companies: Dynamic Wealth Management (Pty) Ltd(FSP No 559) and Dynamic Wealth Stockbrokers (Pty) Ltd (FSP No 7652).

Moneyweb.co.za reports the two Dynamic Wealth entities have been involved in a months-long legal battle with the FSB, which is attempting to put them under curatorship. (The courts have not yet reached a decision on the November 2009 application). Could it be the FSB is using another channel to achieve their desired outcome? Could we be looking at another FSB versus Fedbond saga? Only time will tell...

The FSB letter triggered immediate court action from Dynamic Wealth. This morning I chatted briefly with one of the company directors, Prof. Chris Harmse. “There’s an urgent court appeal [the Pretoria High Court] at 10 am,” he said, “and we expect judgement on the matter by 2pm, after which we’ll issue a press release.” We’ll post this release on fanews.co.za the moment it becomes available...

Eight transgressions to sink an advice license

What seems to be the problem? We leafed through the FSB release to find out why the licenses were summarily withdrawn. They list eight “brief” reasons for the withdrawal of Dynamic’s licenses as follows:

* The so-called Association business of the companies in the form of “clubs” was open to the public and conducted in contravention of the law.

* The companies had over a substantial period of time misrepresented to the Registrar that their Association business was not open to the public.

* The companies had in many instances made themselves guilty of contravention of the law, defiance or circumvention of regulation and the directives issued by the Registrar.

* The companies have failed in their fiduciary duties towards their clients, neglected the interests of clients, have treated clients unfairly and in several known instances have caused their clients to suffer severe loss.

* The Registrar’s experience with the companies has left him as regulator without any confidence in the board of directors and executive management of the companies.

* In many instances the companies are either unwilling or unable to repay their investors what had been entrusted to them.

* The above conclusions were drawn after an in-depth inspection of the business affairs of the company, in which the JSE Ltd also participated, and a proper administrative process during which representations by the companies had been considered.

What must Dynamic Wealth do now?

A withdrawal of an FSB license is a serious matter. If the courts fail to grant a reprieve, the two divisions in question will have to take immediate steps to communicate the FSB decision to all affected parties. Dynamic Wealth will have to contact all of its clients and product suppliers to advise them of the withdrawal of its licences.

The company will also “with immediate effect” be prohibited from continuing with its existing business, or accepting new business. The tersely worded release includes instructions for any part-completed transaction to be transferred, with client consent, to another FSP.

Editor’s thoughts: The FSB / Dynamic Wealth wrangle was already in full force in February 2010, following a November 2009 application for curatorship. Moneyweb.co.za writer Julius Cobbett has published a number of detailed accounts of the dispute. The problem I have with the situation is investors are in limbo while the company and the FSB battle it out. And my question today is whether the FSB / Dynamic Wealth situation is being correctly handled – in the best interests of consumers? Add your comment below, or send it to gareth@fanews.co.za