- The Insure Group, which collected premiums on behalf of insurers and brokers, was placed into curatorship in 2018.
- Insurers are yet to recover the R1.7 billion they lost after the group invested the premiums it was collecting into risky assets.
- SA's market conduct regulator for financial institutions, the FSCA, is waiting for a curator's report and an appeal hearing to decide how to move forward with the case.
The Financial Sector Conduct Authority (FSCA) is not ruling out the criminal prosecution of the directors of the defunct Insure Group, as its liquidator is still trying to recover some of the R1.7 billion lost when the insurer went into curatorship.
The financial marker regulator placed Insure Group Managers, who used to collect premiums on behalf of insurance companies and brokers, into curatorship in 2018.
When the insurer entered a liquidity crisis, the regulator discovered that instead of passing the premiums on, the group had held onto them for 45 days and invested them in risky and cash-hungry assets without the insurers' knowledge.
During a conference organised by PSG Konsult last week, former FSCA divisional executive for regulatory policy, Caroline da Silva, said some R1.7 billion lost through these risky investments had still not been recovered.
Da Silva questioned the difference in treatment between the Insure Group and VBS, noting the swift action by prosecuting authorities, the media and government structures to hold those involved in the banking saga to account.
To date, the only sanctions that the Insure Group directors had been subjected to was the decision by the FSCA to strip them of licences allowing them to be financial service providers.
Not ruling out criminal prosecution
On Friday, the FSCA's divisional executive for enforcement, Brandon Topham, told Fin24 that the regulator was waiting for the Insure Group's curator to wrap up its work and to produce a final report.
The regulator also needs to wait for the Financial Services Tribunal to conclude its hearing into the matter.
"Once the Tribunal hearing is finalised, and a report received from the curator, a decision will be made whether a criminal case must be opened or not," said Topham.
Topham said the FSCA has the power to debar financial service providers, pending an appeal at the Tribunal. However, the decision to open a criminal case can only be made once a full report is received from the curator.
The Tribunal will hear an application by Insure Group directors on 7 July to appeal the FSCA's decision.
Even though the charges levelled by the FSCA against the directors are serious, Topham said they have a right to appeal to the Tribunal as provided for in the Financial Sector Regulation Act. They can even take the FSCA's decision on review at the Supreme Court of Appeal.
The FSCA debarred the directors for five years.
Topham said the severity of the transgression determines the period of debarment.
But once that period ends, the criteria for a person to re-enter the financial services industry is robust.
If a criminal case was ever pursued against debarred individuals and they were found guilty, it would be difficult for them to ever obtain a licence from the FSCA again, especially if the crime is related to financial misconduct.
As for recovering the monies lost, Topham said the curator was still in the process of liquidating the Insure Group's assets and determining the amounts due to insurers.
But there was still no clarity on how much of the R1.7 billion will be recovered.