Investec has terminated its business relationship with Global & Local, the financial intermediary associated with the R2,7 billion BHI Trust financial scandal that has rocked South Africa. Photographer: Waldo Swiegers/Bloomberg via Getty Images
Global & Local is directing customers to transfer their investments to Integrity Asset Management after Investec terminated its business relationship with the intermediary associated with the R2,7 billion BHI Trust financial scandal that has rocked South Africa leaving scores, possibly thousands of investors, with huge financial losses.
In letters sent to its clients via email on 9 November Investec said: “We regret to inform you of our decision to terminate our agreement and all relationships with Global and Local (Pty) Ltd. As a result, your Investec Corporate Cash Manager (CCM) account administered by the intermediary will be closed in 90 days of this notice.”
In its own letter to clients on 10 November Global & Local described the decision by Investec as “one sided” and involving a “contractual dispute” saying it is “wholly unfair” for its clients to be “treated in this fashion”.
This comes after Global & Local was named in media reports for referring clients to the dubious BHI Trust, a risky investment that warned in the terms and conditions of its contract with clients that “the investor acknowledges that he understands that the investment is not registered under any law and that it is unregulated”.
The trust went under provisional liquidation in late October after co-trustee Craig Warriner handed himself over to the police and asked in the Randburg Magistrate’s Court to plead guilty to fraud for his “irresponsible” handling of the trust.
He is currently being held at the Johannesburg Central Prison, while police investigate a charge of fraud that his co-trustee Christian Ashcroft opened against him on 4 October, as well as a second charge of fraud against undisclosed individuals and entities opened at Sandton Police Station last week. It is understood that the second charge relates to two individuals and 11 entities, including companies based locally and abroad.
Forensic investigator Bart Henderson told the Mail & Guardian this week that 90% of the 35 BHI Trust investors referred to him had been referred to the trust by Global & Local.
Henderson on Saturday noted that Global & Local is now steering its customers affected by Investec’s decision to Integrity Asset Management, a firm that according to Company Intellectual Property Commission records, has a director who is also a director of Rubicon Administration, BHI Trust’s Administrator. Global & Local provided this advice to clients in a letter on Friday.
However, the director, whose name is known to the M&G, responded to questions about his directorships on Sunday saying there was “no conflict of interest” as he had been appointed as a director of Rubicon Administration in 2022, specifically “to attend to the winding down of the company” and he had not been involved while it was the administrator of BHI Trust. He said Rubicon Trust had split from Rubicon Administration Services in 2018.
In its letter cutting ties with Global & Local, Investec advised clients to “instruct the intermediary to transfer the full credit balance in your CCM account into your primary bank account or a nominated account held in your name with immediate effect and by no later than the 90th (ninetieth) day from the date hereof”.
“Investec shall prohibit any payments from your CCM account to third parties. Upon expiry of the notice period and in the event that the Intermediary has failed to transfer the credit balance out of any of your CCM accounts, Investec will suspend the relevant CCM account/s and any credit balance due to you shall only be claimable (in full) by you subject to due diligence processes by Investec.
Investec said in the letter that it was terminating the relationship “pursuant to clause 20.1” of its “Terms of Business”. According to term 20.1 the “agreement shall terminate, subject to clause 20.3, on no less than ninety (90) days’ written notice of termination by either party which may be given for any reason whatsoever”.
According to clause 20.3 “if the Intermediary is in breach of any of the obligations, undertakings and/or warranties contained in this Agreement, and if such breach is capable of being remedied, and such breach as not been remedied to the satisfaction of Investec within five (5) Business Days from the date of written notice given by Investec to the Intermediary, Investec shall be entitled, at its election, without prejudice to any other rights which Investec may have in terms hereof or at law, to cancel the Agreement with immediate effect”.
In response to the M&G’s questions about the nature of Investec’s relationship with Global & Local and whether any of its clients had been exposed to the BHI Trust, Investec said its CCM is “an online cash management platform, which enables regulated intermediaries to manage cash investments on behalf of their clients”.
“The intermediary fulfils all operational functions and transactions on behalf of the underlying clients in line with a signed client mandate. All investment and transactional decisions are made between the intermediary and their end client in accordance with the mandate signed between the two respective parties,” Investec said.
“Investec is not party to the investment process, and continuously evaluates its client relationships in the ordinary course of business and in line with our regulatory obligations.
In response to Investec’s notification to clients, Global and Local sent a letter of its own to clients on 10 November stating that it is aware of the bank’s decision to terminate the accounts it has been managing.
“Please note this was sent out at very short notice, and we were not able to notify you beforehand of the situation. Please note that we have had a contractual dispute with Investec Bank which has resulted in a one-sided decision,” Global & Local said.
“It is wholly unfair to you, as our valued client, to be handled in this fashion.”
In its letter Global and Local steered their customers affected by Investec’s decision against it to Integrity Asset Management, a firm which shares a common director with Rubicon Administration, BHI Trust’s Administrator.
Global and local said in the letter: “As a proposed solution, we have contacted integrity Asset Management, as one of our long-standing and trusted services providers, to assist you should you wish to.”
“The Investec CCM account remains a great tool for you to manage cash capital. We are certain that Integrity Asset Management … can manage you account in the way you have been accustomed to,’” the letter read.
It advised clients to either open a new CCM account with Integrity Asset Management and transfer their funds to this new account or to their local bank account.
In his response to questions, the director of Integrity Asset Manager, said Global & Local wanted to offer clients “an alternative to merely holding their short-term liquidity in bank accounts, which generally offer no or lower interest rates.”
“The Investec CCM platform, on the other hand, offers clients with attractive interest rates for their short-term liquidity requirements. Like Global and Local formerly, Integrity Asset Management and many other authorised financial services providers are Investec CCM intermediaries … Integrity Asset Management agreed to engage with clients wanting to consider Integrity Asset Management as a service provider,” he said.
“It is each client’s prerogative to engage with Integrity Asset Management or not. Should they wish to open an Investec CCM account, as administered by Integrity Asset Management, a new Investec CCM account is to be opened in the client’s name. This, after the client take-on processes, per regulatory and Investec CCM’s operational requirements, have been concluded.”
He said there was “no conflict of interest” regarding the directorships he holds with the three entities.
“I was appointed director of Rubicon Administration Services in November 2022 to attend to the winding down of the company and for no other reason at all. I was not involved in the company when it was the administrators of BHI. Per my knowledge, Rubicon Administration Services ceased to offer administration services to BHI Trust during 2019 and became dormant thereafter,” he said.
“My co-director and I split Rubicon Trust from Rubicon Administration Services during 2018. Rubicon Trust has operated as a completely separate and independent company since then. Rubicon Administration Services is indeed the founder of Rubicon Trust, but that is a historic fact – this does not imply any involvement between the entities anymore.”
The director said he currently serves as non-executive director of Integrity Asset Management.
“Integrity Asset Management has no and has never had any relationship with BHI Trust. Integrity Asset Management serves as a service provider to Global & Local’s clients like any other authorised financial services provider … In my mind, there is thus no conflict of interest in Global & Local indicating to their clients that Integrity Asset Management could assist clients with the opening and administration of Investec CCM accounts on the clients’ behalf, should the clients so wish,” he said.
Global and Local director Michael Haldane had not responded to questions about Investec’s decision to cut ties with the company at the time of publication. However, the company indicated that it would respond “in due course”.