The Companies and Intellectual Property Commission (CIPC) is in the process of finalising an investigation into the conduct of various regulators that led the failure of a number of property syndication schemes between 2010 and 2012.
The two year long CIPC investigation looks into Sharemax, one of the largest South African property syndication schemes at the time.
According to Moneyweb, the investigation will also look into a number of smaller schemes such as Realcor, Amatenda, and King Financial Services.
Around 40,000 investors invested over R11 billion in these schemes and were left with almost nothing.
A preliminary report, complied by CIPC, found there were some irregularities and possible criminal conduct within these syndication schemes.
The CIPC has invited regulators and other parties to respond to the findings at a hearing on May 14.
CIPC state that they have identified “legal inconsistencies, procedural anomalies and potential jurisdictional over-reach” in the events leading to the collapse of the schemes.
“Areas which may require the consideration of criminal proceedings, stemming from the potential misrepresentation of facts identified in some of the evidence obtained thus far, will be referred to the relevant regulators, with the final report constituting the referral report.”
The South African Reserve Bank (Sarb), the Financial Sector Conduct Authority (FSCA), the Independent Regulatory Board for Auditors (Irba), and the South African Revenue Service (Sars) have all been invited by CIPC to respond to the findings in their investigation.
The Hawks and the National Prosecuting Authority (NPA) have also been invited to respond.
The investigation started in 2022 and initially looked only at the Nova Propgrow Group Holdings scheme (Nova). The scope was broadened to include Sharemax and then extended to examine why other syndication schemes had failed.
In 2022, the commission said Nova should not be permitted to continue to operate without intervention and it was taking further enforcement steps by escalating the case to an inter-regulator level.
Did the Reserve Bank do its job?
The Sarb will be a major point of focus at the May hearing. The Sarb had initially investigated the schemes and said that the scheme’s funding models contravened the Banks Act.
Despite their investigation taking three years and looking specifically into Sharemax and Realcor they have not recommended anyone to be charged.
The NPA said in 2022 that it would not prosecute anyone associated with Sharemax’s alleged contravention of the Banks Act.
The Sarb did not provide any official written report illustrating its findings and as such the schemes could review anything.
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