ESWIG: EX-FSRA CEO INVOLVED IN TRANSFER OF E335M

MBABANE – ESW Investment Group (Pty) Ltd has accused former FSRA CEO Sandile Dlamini of being involved in a purported fraudulent scheme that resulted in the transfer of over E335 million outside Eswatini.

ESW Investment Group (ESWIG) was previously known as Ecsponent Swaziland. The company made the allegation in its combined summons, where it is demanding a sum of E335 240 000 from the Financial Services Regulatory Authority (FSRA), Ecsponent Limited South Africa and GetBucks (Pty) Limited South Africa. Other defendants are Dave Van Niekerk, Edwin Soonius, the former FSRA CEO, Dlamini, Lindiwe Vilakati and Anthony Hay. According to the combined summons, Dlamini allegedly knew about measures to control ESWIG in order to ensure the fraudulent transfer of the amount of E335 240 000 to South Africa.

Returns

The money had been invested by a number of individuals and other entities in ESWIG to obtain higher returns. However, E335 240 000 of the invested E406 932 005.55 was allegedly transferred to South Africa, and the investors want their money back. The transfer of the investment funds, according to the combined summons, was allegedly done under the auspices of Dlamini, who was at the time, the CEO of FSRA, and its officials under his control, and/or cooperated with him. The plaintiffs (ESWIG) and Ligagu Investments (Pty) Ltd), informed the court that the transfer of the investment funds could, and should, have been prevented by FSRA under the auspices of Dlamini and those under his authority, in the exercise of their duties and responsibilities.

“The sixth defendant (Dlamini), by virtue of his complicity in the fraudulent scheme, failed to comply with his duties and responsibilities in terms of sections 4,5,6 and 8 of the FSRA Act, by failing to foster through the regulation and prudential supervision the safety and soundness of the investments; the highest standards of conduct of business in relation to the investments; the fairness, efficiency and orderliness of the Eswatini non-banking sector and the protection of stakeholders,” reads part of ESWIG’s combined summons. The veracity of these allegations is still to be tested in court. The defendants are yet to file their answering papers. ESWIG is represented by Sidumo Mdladla of SV Mdladla and Associates.

Dlamini, according to ESWIG, allegedly failed to enforce functions that were necessary to suppress illegal, dishonourable and improper practices and financial fraud in order to prevent the transfer of the investment funds to a secured environment. He is also alleged to have failed to supervise the conduct of Ecsponent South Africa, Van Niekerk, to take measures for the protection of investment funds and to prevent the transfer of the investment amounts, contrary to a secured environment for the investors to obtain higher returns. “The said failures by Sandile Dlamini were in bad faith as he knew before the investments were transferred to South Africa, that Escponent SA and Dave van Niekerk, assisted by the other defendants, put measures in place to control the first and third plaintiffs (Escponent and Ligagu Investments) and, therefore, the investments, to ensure the fraudulent transfer,” further reads the papers.
ESWIG submitted that the alleged measures to control it and Ligagu, and, therefore, the investment funds, implemented by Ecsponent SA and Van Niekerk, assisted by the other defendants, purportedly included causing Soonius to act as a representative on behalf of it (ESWIG), as it did not have a qualified CEO resident in Eswatini.

This, according to ESWIG, is provided for in Regulation 9(4) of the Licensing Rules of 2013, derived from the Securities Act. The measures, according to ESWIG, to control it and Ligagu, also included causing it (ESWIG) and Ligagu to be controlled by Escponent SA, GetBucks SA, Van Niekerk, Soonius and Vilakati. The control of ESWIG, according to the combined summons, was further through causing the investment group not to have an appointed compliance officer as the purported compliance officer was allegedly controlled by Ecsponent SA to ensure the fraudulent transfer. Other control measure, according to ESWIG, were allegedly causing ESWIG not to submit copies of reports of internal audits, if any, conducted on the latter since its inception; causing ESWIG not to submit audited financial statements dating back to the 2010 financial year; causing ESWIG not to have a complaint handling policy system, which suppressed complaints through these channels by investors and causing it not to keep a complete registry of all emaSwati investors in its offices.

Further, ESWIG alleged that as a control measure, ESWIG was allegedly caused not to submit valuation reports of all investment products for the funds collected; not to have the required separate bank account for its business operations, for receiving investments from investors controlled by the bank, as provided for in Sections 81 and 84 of the Securities Act. “This effectively denied the bank any control over the investment amounts.”

Argued

ESWIG argued that the required regulation, monitoring, supervision and enforcement, as provided for in sections 4, 5, 6 and 8 of the FSRA Act, would and should have caused the FSRA to intervene and prevent the implementation of the alleged fraudulent scheme and/or the transfer of the investments to South Africa. “All the above failures were known to Sandile Dlamini before the transfer of E335 240 000 invested funds to South Africa and he, in bad faith and as part of the fraudulent scheme, failed to prevent the failures causing the expatriation of the investment funds. Sandile Dlamini’s failure to act and prevent the scheme was in bad faith within the meaning of Section 18 of the FSRA Act, as he deliberately failed to regulate, monitor and supervise the investments, as aforesaid, and in particular, failed to enforce any remediation of the failures, thereby permitting the fraudulent scheme to run its course.” ESWIG submitted that Dlamini’s purported deliberate failure allegedly was as a result of his conflicting relationship with Ecsponent SA and Van Niekerk, causing him to act in concert with Ecsponent and Van Niekerk and not prevent the said fraudulent scheme. The matter is pending in court.

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