Tribunal upholds seven-year ban on accountant linked to R70 million investment scheme
A chartered accountant has lost his bid to overturn a seven-year debarment imposed by the Financial Sector Conduct Authority (FSCA) after helping market an unauthorised investment scheme that raised approximately R70 million from investors.
The Financial Services Tribunal dismissed Junaid Ebrahim Salejee’s application for reconsideration, finding that he had contravened financial services regulations by canvassing and marketing investments offered by Acqumen Fund Limited, which was not authorised to operate as a financial services provider.
The tribunal upheld the FSCA’s decision to prohibit Salejee from providing financial services for seven years, finding that his involvement in the scheme went beyond administrative duties and included engaging with prospective investors, distributing marketing material and explaining the investment product.
In its decision, the tribunal found that Salejee’s conduct was deliberate or at least reckless, particularly given his professional position as a chartered accountant and his involvement in an earlier application for regulatory authorisation.
Investment scheme promised 14% annual returns
According to the ruling, Acqumen Fund began operating the investment scheme around September 2015, inviting members of the public to subscribe for ordinary shares linked to debentures secured against immovable property.
Investors were promised projected returns of approximately 14% annually, comprising a 7% cash dividend and 7% capital growth.
Between 250 and 300 investors ultimately participated in the scheme, raising approximately R70 million in share capital for Acqumen Fund.
The tribunal noted that aggregate flows through the relevant bank accounts during the period of the alleged contraventions amounted to approximately R255m.
The FSCA investigation found that Acqumen Fund and related entities were not authorised financial services providers.
The authority also found that Salejee and Acqumen Fund director Mahomed Ebrahim Amod canvassed, marketed and advertised the unauthorised business in contravention of Regulation 3(a) of the Financial Advisory and Intermediary Services regulations.
The alleged contraventions occurred between September 15, 2015, and November 21, 2023.
Accountant argued he was merely performing administrative duties
Salejee challenged the FSCA's findings, arguing that the marketing and advising were undertaken by other individuals, including the scheme's sales representative, Ridwaan Adam, and Amod.
He maintained that his own conduct was administrative or informational, performed in the course of his employment, and that he received no financial benefit beyond his salary.
However, the tribunal found that Salejee had attended meetings with prospective investors, distributed Acqumen Fund's prospectus and marketing material, explained the investment product and admitted that he had dealt directly with some clients.
He was also a signatory to a bank account that received investor payments and was involved in checking share certificates for compliance and accuracy.
The tribunal further noted that Salejee had encouraged members of his own family to invest and had assured an investor that the investment was safe because he and his family had invested their own money in the fund.
It found that distributing the prospectus and explaining the product to prospective investors amounted to canvassing and marketing, regardless of whether Salejee was a director or received commission.
The tribunal said his conduct went beyond clerical support and included steps through which investment decisions were solicited and secured.
Licensing concerns raised years before investigation
The tribunal also considered Salejee's involvement in a 2016 application for Acqumen Management Services to register as a financial services provider.
The then Financial Services Board advised in March 2017 that the application should instead be made in Acqumen Fund's name because the fund dealt directly with clients.
The application was subsequently withdrawn, with the company undertaking to restructure it to comply with the law.
However, no further application was submitted, and Acqumen Fund continued operating under the same business model for approximately six-and-a-half years.
The tribunal found that Salejee was aware of the licensing issue and had been professionally involved in the application process.
It rejected his contention that he innocently believed the business did not require authorisation, finding that his continued marketing of the investment after the licensing application was withdrawn demonstrated deliberate or at least reckless conduct.
The tribunal said Salejee had failed to confront the unresolved licensing question despite being well placed to understand its significance.
Seven-year ban found reasonable
Salejee also challenged the fairness of the FSCA's process, arguing that factual disputes were decided without allowing him to cross-examine witnesses.
The tribunal dismissed this argument, finding that he had received notice of the intended decision and the investigation report, and had been afforded an opportunity to make written representations.
It said procedural fairness did not ordinarily require an oral hearing or cross-examination during administrative decision-making.
On the sanction, the tribunal noted that the FSCA had initially proposed a 15-year debarment but reduced it to seven years, taking into account Salejee's more limited role compared with Amod.
The authority also considered that Salejee was not a director, held no equity interest giving him control, received no benefit beyond his salary, co-operated with the investigation and had invested his own money in the scheme.
However, the tribunal found that his conduct had been sustained over several years and that investors had suffered losses attributable in part to conduct he helped facilitate.
It concluded that the seven-year debarment was reasonable and that there was no basis for further reducing the sanction.
The application for reconsideration was dismissed.