Curators move in on Fidentia

The Cape Town High Court has ordered that Fidentia Holdings and two of its subsidiaries be placed under immediate curatorship. The court order, issued on 1 February 2007, affects the businesses of Fidentia Asset Management (Pty) Limited, Bramber Alternati

The court ruling is the result of an application brought by the Executive Officer of the Financial Services Board (FSB). Prior to their application, an FSB team conducted preliminary investigations into the manner in which Fidentia was conducting its businesses. Their findings made reference to "misrepresentation to clients", "misappropriation of client funds" and "inadequate corporate governance" amongst others.

The report alleges that the nature of the assets held by (Fidentia Asset Management) on behalf of clients had been artificially disguised to misrepresent the nature of the investments held on behalf of clients."

R406 million 'unaccounted' for

The FSB concludes that as much as R406 million of the R1.6 billion of assets under management cannot be accounted for. Instead of using these funds for investment purposes, Fidentia may have used them for funding its own business activities and buying other companies.

Of the total managed funds, R1.47 billion is from the Living Hands Umbrella Trust - a fund invested with Fidentia on behalf of the Mineworker's Provident Fund. Another R245 million was invested by Teta, the education and training authority for the transport sector.

Further investigation will be required before the extent of any financial losses can be determined.

Where to from here

This case has the potential to become the most damaging financial and investment scandal since the Masterbond collapse in 1992.

The court has instructed the curators to report back on March 27 "on any irregularities committed by either of the firms, their directors, key individuals, or management".

In the interim, the curators have control of the company and are instructed to act in the best interest of investors.