The Non-Bank Financial Institutions Regulatory Authority's (NBFIRA) face off against Capital Management Botswana (CMB) will play out next week at the Court of Appeal as the regulator still fights to place the asset manager under statutory management.
NBFIRA lost the suit at the High Court in April when Judge Omphemetse Motumise dismissed their application that sought confirmation of the appointment of Peter Collins as Statutory Manager for CMB.
Motumise had also granted a counter-application filed by CMB in which they wanted an order setting aside the appointment of Collins.
NBFIRA actions were prompted by complaints by the Botswana Public Officers Pension Fund (BPOPF), which is attempting to recover more than P400 million at one time under CMB’s management.
Now NBFIRA feels hard done by the court a quo (High Court) in that the test applied to arrive at the decision of not confirming the appointment of Collins is flawed.
While they reckon it was not the only issue, it has direct bearing on the whole case as it has denied the regulator to safeguard and enhance the safety of the non-bank financial institution.
NBFIRA according to its court papers filed on June 8, 2018, their case is premised on that CMB is an asset manager and subject to both NBFIRA and the Security Act.
As accordingly it was a securities institution and needed to be safeguarded if there are signs of irregularities and a statutory manager appointed to investigate.
NBFIRA argues that according to Section 46 of the Securities Act accordingly permits and enables the appointment of a statutory manager.
“It is in the event of the appointment pursuant to section 46 (4) that confirmation of the court is required in terms of section 46 (5) of which the confirmation will accordingly occur after the appointment that was made in terms of section 46 (4) unless the court is satisfied that the regulator was not entitled to make appointment and the grounds for making the appointment no longer exist,” stated the court papers.
NBFIRA maintains that it is necessary to appoint a statutory manager urgently among other things to protect the interests of the clients of the securities institution, the safety and soundness of financial institutions.
The regulator says based on that it appeared that the asset manager may be financially unsound and in breach of a financial services law.
“As the regulator we realised that the asset manager may be committing financial crime. It has also failed to comply with the provisions of section 21 of the securities act in that it has not filed the audited financial statements with us.”
NBFIRA argues that it will be an injustice to the clients of CMB since it has come to their attention as evidenced by a letter dated January 24, 2018 from Bona Life that they have not kept a sufficient records and has failed to properly account to its client.
This would mean that the appointment would be undoubtedly protecting the interests of clients and would enable the regulator to have affairs of the respondents investigated and reported on.
NBFIRA says that CMB has been cagey with auditors never singing the financial statements while the statutory manager, Collins was threatened with forced removal and information and information deliberately withheld.
BPOPF’s sour relationship with CMB
BPOPF as the second appellant in the court filings are fighting in NBFIRA’s corner as they have been trying to recover more than P400 million from CMB.
The pension fund is having a bitter relationship with the asset manager, as it is not happy with the manner in which the funds were managed.
The bitter relationship between the pair can be traced back to 2017 when a dispute arose. According to records in September 2017, CMB issued a call for further funds from BPOPF of which there was refusal to honour the call. The pension fund had contended that the call by the assets manager was invalid and on December 1 the same year they issued a notice in which it terminated CMB as General Partner resulting in CMB’s automatic termination as the fund manager, starting a process to recover the lost millions to CMB. This led to the report of the assets manager to the regulator in the process triggering nasty battles in and out the courtroom.
Now, according to BPOPF court papers also filed on June 8, they defend their move saying there was a need to report CMB to NBFIRA to protect itself and its members.
The pension fund maintains that the asset manager was not complying with their partnership agreement and that it had defaulted on the obligation in terms of the Security Act to file audited financial statements.
BPOPF argues that NBFIRA was entitled to appoint a statutory manager after gathering all the facts about CMB’s conduct.
“Accordingly NBFIRA evidently by the time the court heard the application for confirmation it had the evidence, which underscored the need for the appointment of a statutory manager,” the court papers state.
Moreover, BPOPF reckons that there was no miscarriage of justice since the facts that emerged after CMB was placed in statutory management demonstrated that the decision by NBFIRA was just.
The pension fund reasons that the appointment was preceded by an inspection having considered fully the matter, the regulator considered necessary to appoint a statutory manager for CMB urgently.
“Rightly so it was pointed out that this was essentially done for the protection of pensioners, life insurance policy holders and the public at large.”
The asset manager in contention says there was no need to appoint a statutory manager and that NBFIRA had no right in the first place to do so.
According to their court papers of June 22, 2018, CMB wants the appeal thrown out on the grounds that it was never in the first place the duty of NBFIRA to appoint the statutory manager.
CMB argues that the decision by NBFIRA to appoint the manager did not constitute administrative action and that it was not final.
CMB explains that the distinction between the current legal matrix and administrative law should be maintained.
“If NBFIRA was not entitled to take the decision, then the refusal by the High Court to confirm the appointment of the statutory manager ought to undo all the consequences of his appointment,” stated the court papers.
CMB still maintains that NBFIRA’s application to confirm the statutory management was hastily done and that it was not NBFIRA’s function to do so.
CMB argues that even where the jurisdictional requirements of section 46 (4) of the Securities Act were present and permitted an urgent appointment, it still remained the function of the court to legitimatise any such appointment by an order.