Johannesburg - On Tuesday the Financial Services Board (FSB) released a report into the events leading up to the collapse of the failed derivatives trader Dealstream Securities which may leave more questions than answers.
The report shows a two-year sequence of events, which appears to have culminated in private and institutional clients being left sorely out of pocket.
- January 2006: The JSE meets Dealstream MD Russell Leigh and complains that he is misrepresenting contract for difference (CFD) instruments, and that Dealstream was incorrectly representing its instruments as regulated by the JSE. The JSE requests Leigh to change the wording on the Dealstream website.
- January 23 2006: Another letter is sent from the JSE legal representatives regarding the above.
- February 28 2006: A further letter is sent from the JSE legal team.
- March 17 2006: Another letter from the JSE is sent to Leigh.
- July 11 2008: The FSB receives a complaint from a Dealstream client about an unusual request from Dealstream for a "lump sum" transfer into their trading account.
- August 6 2008: The FSB contacts Leigh by letter regarding the above complaint, and the registrar instructs Dealstream to stop selling CFDs until the firm is properly administered.
- August 12 2008: Leigh responds to the FSB, saying that Dealstream is a registered member of the JSE broking exchange and every transaction it makes is through the regulated single stock futures market.
- September 2 2008: Dealstream fails to meet a margin call from Rand Merchant Bank (RMB). This trend continues for three weeks before RMB calls in the margin on the Dealstream account, after news that Leigh has fled and the company has collapsed.
- September 18 2008: The JSE receives a complaint regarding Dealstream from client G Alpino, who says that funds that were supposed to be in the Investec trust account have been removed. Leigh responds, telling the JSE that it was a normal course of business and the funds were held in a pooled client account.
- September 19 2008: According to interviewed Dealstream employees, Leigh instructed them to make excuses for reasons why trades could not be executed and there were insufficient funds in their accounts.
- September 19 2008: The registrar of Securities Services and Financial Services Providers instructs Dawood Seedat to conduct an investigation into the affairs of Dealstream.
- September 22 2008: The JSE sends a member of its surveillance department to the Dealstream premises, who finds them locked up.
- September 23 2008: Seedat and his team arrive at Dealstream's Melrose Arch offices. They seize documents and meet Dealstream staff. Non-executive director Saul Cohen (who works for investor Argil, and is also an employee of auditing firm Ernst and Young) arrives at the Dealstream offices, and informs Seedat that Leigh has fled the country and has no intention of returning.
- October 6 2008: The FSB releases its report into Dealstream, and confirms that in its two-year trading history the business has never produced a set of audited financials.
- Fin24