Big fund manager fined R100m after one of its unit trusts lost 66% in three days

The Financial Sector Conduct Authority (FSCA) has fined Metropolitan Collective Investments (METCI) R100 million after one its unit trust lost two-thirds of its value in half a week.

The Third Circle MET Target Return Fund lost 66% of its value from December 8 to 11 in 2015. The losses came amid a period of massive volatility in South Africa, ahead of the shock replacement of finance minister Nhlanhla Nene with the ANC unknown Des van Rooyen. 

The FSCA found that METCI did not have proper risk management processes in place to manage and exercise proper control, oversight and governance over the fund. It also found that the extent of the fund’s exposure to derivatives was contrary to the prescripts of the relevant financial sector laws as well as the fund’s own investment policy statement and mandate.

METCI, which is part of Momentum Metropolitan Holdings, was also found to have published misleading statements in certain minimum disclosure documents (MDDs) for the fund.

Over that period, the fund was almost wholly invested in derivatives. This, the authority found, was misleading as the MDDs did not disclose the nature of the Fund as well as risks associated with the Fund.

Moneyweb reported on Wednesday that Momentum Investments will appeal the decision.

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