ACTIONS ON PAY-OUTS TO CLIENTS OF FUND MANAGEMENT FIRMS
The Ghana Securities Industry Association (GSIA) has noted the Securities & Exchange Commission’s (SEC’s) release on the actions taken on liquidated asset management firms. The SEC’s release is no doubt timely given the severe distress investors who invested their cash through these firms have been under, more so, when there has been a lot of uncertainty regarding payment of their investments as promised by Government.
Fund Management Firms still in operation
There is adequate cause for concern, however, on the lack of traction on pay-outs to clients of firms whose licenses were not revoked. To date, less than Ghs 90 million out of Ghs 1.58 billion due these investors has been paid in cash. This represents less than 6% of the total amount due. We are yet to realise the fulfilment of a promise by Government to pay up to 20% more in cash, leaving 80% in bonds. A commitment to pay clients of firms whose licenses have been revoked while customers of operating firms are still waiting for cash pay-outs sends the wrong signals to the industry; the pay-off for having a license revoked may be more than that for keeping an investment firm in operation.
Fund Managers are generally aggregators, so most fund management firms presented ‘grouped’ claims on behalf of their clients, and not individual claims, to the Receiver of collapsed MFIs and S&Ls. This resulted in treatment of claims presented as single claims by Fund Managers and not as individual investors of fund management firms.As such, a large number of investors of fund management companies remain unpaid.
Communication from various government sources that about 96% of investors have been paid has served to cause more worry in the sector as investors demand their cash from fund management firms who are still waiting for these funds. This communication means that the proposed 20% cash pay-out from government will be seen as totally inadequate and not representative of the said 96% pay-out.
Our proposal on the way forward
In order to ease the tensions in the industry we propose the following;
- Government, through the Ministry of Finance, should urgently increase the proposed cash pay-out to fund management firms to levels that properly reflect its communication to the public, ensuring that about 96% of its clients are paid.
- A revised public messaging that correctly captures the situation on the ground be released: that so far only Ghs 87 million out of Ghs 1.58 billion has currently been paid in cash to the sector. Updates to this position can then be made as any additional cash payments are made.
We believe that these actions will greatly ease the liquidity pressure in the sector and clarify the situation with respect to investors funds held with Fund Managers.
Issued on behalf of the Governing Council, GSIA