COSATU concerned at Ombud report on FSB 02-04-07

 

COSATU concerned at Ombud report on FSB

The Congress of South African Trade Union notes with concern the determination of Charles Pillai - the Ombud for Financial Services Providers - in the case of the Leaderguard network of companies, whose Leaderguard Spot Forex scheme started falling apart about two years ago. About 1600 people, most of them elderly pensioners, lost more than R300million. Pillai had taken up the case of Selwyn and Christine Comrie, who lost their savings when the scheme collapsed.

Pillai cited the "criminal nature of certain violations", "a clear conflict of interest" and "regulatory failure" on the part of the Financial Services Boards (FSB) - which is supposed to act as a watchdog in the financial services industry and which had approved Leaderguard as a foreign exchange scheme in which South Africans could invest. He considered that Leaderguard's directors traded recklessly, without regard for the interests of its clients.

Pillai views it as "deeply disturbing that the South African public are consistently exploited and defrauded of their savings [despite] the financial services regulatory framework in this country. The typical investor is in an invidious position" and "completely at the mercy of the financial services regulatory framework in this country". This is the unvarnished truth and it affects our members.

COSATU notes that Rob Barrow, head of the FSB, has repudiated Pillai's findings, as "incorrect" and "unfounded". It is regrettable that he has contradicted the Ombudsman in such a dismissive fashion yet then announced that he is engaging a senior counsel for an opinion which will not be delivered until next year.

COSATU is opposed to the outsourcing of FSB duties to the Forex Investment Association whose CEO was also Director of Leaderguard. This conflict of interest is rightly identified by Pillai but regrettably denied by Barrow. Under no circumstances should the responsibilities and functions of state institutions in particular supervisory bodies like the FSB be outsourced to industry associations for self-regulation.

COSATU calls on National Prosecuting Authority to thoroughly investigate all these allegations against the FSB, and for a Judicial Commission of Enquiry to establish how a state-owned institution handed its responsibility to an industry association. COSATU reiterates its view that the FSB needs to be transformed and restructured.