By Silindzelwe Nxumalo
LIKHWANE Beneficiary Fund says the FSRA’s Conduct is unlawful and harmful. This is after the FSRA approached the High Court where it accused Likhwane Beneficiary Fund of engaging in fraudulent and questionable practices in the conduct of its business.
In their court application, the FSRA submitted that these practices conducted by the Fund were endangering its reputation or threatening its solvency to the extent that its continued operations of the Fund were unsafe for its beneficiaries. In its answering affidavit, Likhwane Beneficiary Fund submitted that the FSRA is abusing the liquidation proceedings in circumstances where the Authority itself failed to perform its obligations and take steps to prevent the harm caused by the Fund through the investments with the then Ecsponent, now ESW.
The Fund averred that the FSRA had failed to take steps in assisting them to recover the investment made with ESW in the sum of E63 million. The Fund submitted that they had requested the FSRA to intervene and assist them in the recovery of the ESW investment. “Instead of hearing the concerns of the respondent (the Fund) and assisting it, the FSRA has failed to take any steps. To exacerbate the matter, the FSRA instead approved ESW as investment manager of the respondent for a period ending December 2023,” read the court papers.
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In the court papers, the Fund said that the incarnation of the FSRA had left it with no alternative but to pursue its proceedings against ESW and that it had already launched legal proceedings against ESW and others. Likhwane Beneficiary Fund further submitted that it had played open cards with FSRA at all relevant times as they had been in communication for most of the year.
They said when the FSRA concluded its investigation which was documented in the Desk Review Report, it issued a directive to the respondent on July 25, 2023, to cease and desist the new business and to take remedial steps to recover the ESW investment and Lingedla investment. “The directive was issued three weeks before the FSRA surreptitiously applied for the liquidation of the fund,” read the papers. The Fund stated that they were taken by surprise by the liquidation order, especially considering the numerous correspondence exchanges between the two parties over the last couple of months.
Likhwane Beneficiary Fund added that the FSRA had failed to disclose the full set of correspondence over the relevant period in its affidavit and failed to explain the need for liquidation application notwithstanding the 25 July directive. “The FSRA cannot have a legitimate desire to liquidate the fund. Instead, it is abusing the court procedures and the insolvency procedures to starve the fund from proceeding with the intended action against the FSRA and the ESW,” read part of the court papers.
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The Fund further argued that they would be demonstrating in the affidavit that the FSRA had failed to make out a case for the liquidation of the fund in that there was no basis for the FSRA to proceed with the applications on an ex parte basis. “Another reason is that the FSRA is not before the court with clean hands and that it is just and equitable for the provisional liquidation order to be discharged and the fund to be allowed to pursue the relevant claims it has against, inter alia, the FSRA, and the ESW Investment,” read part of the report. In the same court papers, the Fund averred that they had already taken steps to disinvest the E10 million from Lingedla.
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They stated that they had been communicating with the FSRA for the past few months as the FSRA had issued a directive to them on the 25th of July and instructed them to take immediate steps to recover the E10 million invested in Lingedla. They said that the directive had also instructed them to update the FSRA monthly on progress made to recover and return the assets invested in Lingedla.
“The fund complied. There is nothing to suggest that the fund will not continue to comply with the 25 July directive,” read the papers. In their court application, the FSRA had narrated that after the fund was struggling with getting back its E64 million investment made in the Ecsponent Eswatini which marked the beginning of their financial challenges they then invested in a foreign company.
The court application mentioned that their financial challenges were then aggravated when they made this E10 million investment to Lingedla (Pty) Ltd as depicted by their audited financial statements. FSRA further revealed that they had to do an investigation on the fund which revealed that a director of the Funds administrator, Likhwane Beneficiary Services was also a shareholder in Lingedla which the Authority deems as a glaring conflict of interest for this type of investment.
“And consequently, the Applicant needed to probe further the exercise of the trustee’s fiduciary duties within the operations of the Respondent (Likhwane Beneficiaries Fund),” read a part of the court application made by FSRA.
