As widely expected some of the beneficiaries of government’s bail out of individuals, enterprises and institutions who had funds under management with duly licensed fund management companies which had their licenses revoked by the Securities & Exchange Commission last year, are complaining about the caps put on their refunds. Payment of locked up funds began on Thursday, October 8 and within the first two days of the process commencing, about GHc12 million had been refunded.
The process is being supervised by the Registrar General, Jemima Oware, serving as the official liquidator, with payments being made through GCB Capital, a subsidiary of GCB Bank. So far though payments only cover the 22 fund management firms that the RG has secured court approval to liquidate. Altogether2,850 investors submitted redemption requests, amounting to GHc563.65 million, but the ongoing first batch of payments is going to 170 investors who between them are to receive GHc7.77 million. However these payments are ultimately expected to cover the 40 odd fund management firms whose financial records are accessible to SEC.
But unlike with the financial; intermediation companies, whose depositors have been repaid their monies in full, caps have been put on the refunds of investments made with fund managers, at least pending the full resolution of their respective financial situations.
For instance, while individuals who are above 60 years can expect full refunds on investments made into pooled portfolios, those below 60 will get a maximum of GHc70,000. Similarly, while all faith based organizations, schools and hospitals are to be refunded in full, financial institutions and credit unions will only get half of their validated investments in pooled investment portfolios.
But investors whose refunds are subject to caps are questioning the rationale for being treated differently from those whose refunds are not capped. This, despite the caps being far higher than the GHc20,000 originally announced at the time SEC did its wholesale license revocation. Already, industry analysts and public policy commentators are gearing up for the threat of protest votes at the impending December 7 elections, from investors who are not given full refunds; this has become standard operating procedure for all sorts of vested interest groups who increasingly are confident that government would give into their demands so as not to lose their votes at the upcoming polls.
The fate of those with individually managed portfolios is not yet clear. Indeed, their case is more complicated because in most cases such investors had a say in what their monies were invested into and supposedly should therefore share responsibility for poor investment performance.
However, protesting investors are unlikely to get as much sympathy as their counterparts who have had their deposits with deposit taking financial intermediation companies refunded in full. This is because while the latter class of depositors parted with their monies based on guaranteed returns on investment made by institutions licensed by the state to do so, investments made with fund management companies were purely done on risk basis, usually deliberate high risk in search of commensurately high returns. Indeed, some of the fund managers who had their licenses revoked suffered that fate simply for disobeying SECs rules of not guaranteeing levels of investment yields.
Indeed, this has led some public policy analysts to question government’s decision to refund investments under fund management, using tax payers’ monies at all.