The Financial Sector Conduct Authority (FSCA) has debarred Mr Songeziwe Mbalo (Mbalo) for a period of 20 years and imposed administrative penalties of R9 million on Mbalo and Bhaca Green (Pty) Ltd (Bhaca Green), jointly and severally. A penalty of R50 000 has also been imposed on Mr Lungile Mgilane (Mgilane).
The regulatory action follows an investigation by the FSCA in respect of Bhaca Green, Messrs Mbalo and Mgilane. The investigation found that Mgilane rendered financial services to clients on behalf of Bhaca Green and Mbalo. At the time, neither Mbalo nor Bhaca Green was authorised as a financial services provider (FSP). Therefore, Mgilane contravened section 13(1)(a) of the Financial Advisory and Intermediary Services Act, No. 37 of 2002 (FAIS Act).
The FSCA further found that between January 2019 and December 2020, Mbalo and Bhaca Green collected funds from investors with a view to trade in forex on their behalf. However, the majority of the funds received from investors were used to pay purported returns to other investors and to cover Mbalo’s personal expenses, with only a small fraction used for trading purposes. This conduct constituted a contravention of section 7(1) of the FAIS Act, as Mbalo and Bhaca Green acted as unauthorised Category II FSPs when they offered and/or rendered advice, as well as intermediary services in respect of forex products.
Given the seriousness and extent of the misconduct, the FSCA has decided to report the matter to the South African Police Service (SAPS) and to share all the evidence obtained during the investigation with SAPS. The FSCA will provide active assistance to SAPS, if requested.
What is Fraud? “Fraud” is any activity that relies on deception in order to achieve a gain. Fraud becomes a crime when it is a “knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment” (Black’s Law Dictionary). In other words, if you lie in order to deprive a person or organization of their money or property, you’re committing fraud.