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Former PIC officials implicated in VBS heist banned from financial services sector

Two former Public Investment Corporation (PIC) officials have been debarred from the financial services sector after they were found to be unfit and improper in terms of the standards of the Financial Advisory and Intermediary Services Act.

The information was revealed by Felicity Mabaso the divisional executive for licensing and the business centre at the Financial Sector Conduct Authority (FSCA) in her testimony at the Mpati commission.

The PIC’s former chief risk officer Paul Magula and the head of legal Ernest Nesane both sat on the board of VBS to guard the PIC’s interests, which has a 25% stake in the mutual bank.

Magula and Nesane both admitted to turning a blind eye when almost R2-billion was looted from the bank in exchange for bribes as shown in Advocate Terry Motau’s report on the heist.

“The two gentlemen have already been debarred from the financial services industry and our investigations team is looking into this and at the appropriate time the necessary action will be taken in terms of how we need to proceed with this matter,” said Mabaso.

The pair’s ban was initiated by the PIC which has that authority as the financial services provider.

Mabaso told the commission that the FSCA’s investigation into the demise of VBS is in its final stages and some of the individuals involved will either be debarred or have their licenses withdrawn.

Despite admitting to Motau’s investigators that he received hush money while he was at VBS, Magula told the commission that he was not aware of the corruption that was taking place at the bank and had relied on the “misrepresentation” made to the board through audit reports.

Mabaso said when considering a debarment, the FCSA looks at the allegations against the individual and whether “the person still meets the fit and proper requirements of honesty and integrity and if there is sufficient evidence that the person no longer meets the requirements that would result in a debarment”.

According to the Act a person who has been debarred may not “render financial services or act as a representative or key individual of a representative of any financial services provider”.

Debarred individuals can apply to be reappointed as financial professionals but only once the FSCA has interrogated their applications and the seriousness of the irregularities and conduct that led to their debarment irrespective of whether or not their term of debarment has elapsed

“We have to test that the person has indeed been rehabilitated before you accept them back into the financial system,” said Mabaso.

Mabaso’s testimony also focused on the FCSA’s supervision of the PIC between January 2015 and December 2018 and the state asset manager’s compliance with the laws administered by the regulatory body.

She told the commission that the compliance and irregularity reports received by the FSCA from the compliance officer and auditor did not find any issues of non-compliance and irregularities during the period in question.

Evidence leader Jannie Lubbe highlighted that because of evidence already led in the commission, it is known that there were various media reports around the Ayo Technology Solutions transaction where the PIC invested R4.3-billion in the company. The PIC was hauled before the standing committee on public accounts in parliament in December 2018 to answer for the investment which was said to be overvalued by members of the investment team.

Following an internal investigation into the transaction, the PIC suspended two officials for flouting investment and governance procedures when they were processing the transaction.

Mabaso said this information which would have been included in the irregularity reports submitted by the PIC to the FSCA has still not been reported by the state asset manager.

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Tebogo Tshwane
Tebogo Tshwane

Tebogo Tshwane is an Adamela Trust financial journalism trainee at the Mail & Guardian. She was previously a general news intern at Eyewitness News and a current affairs show presenter at the Voice of Wits FM. Tshwane is passionate about socioeconomic issues and understanding how macroeconomic activities affect ordinary people. She holds a journalism honours degree from Wits University. 

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