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Judges ratify curatorship application

Johannesburg. – Last year there were grounds to place the operations of Dynamic Wealth and some of its associate companies into curatorship.

The way in which the investments in its income portfolios were converted into preferential shares in Specialist Income Limited (SIL) alone constitute sufficient reason to grant the application for provisional curatorship.

This was the unanimous decision of five judges in the Supreme Court of Appeal last week.

In February 2010 the Financial Services Board (FSB) submitted an application to the North Gauteng High Court in Pretoria for Dynamic Wealth and some of the other companies to be placed into curatorship under its control.

This application, based on an FSB inspection report regarding the activities of Dynamic Wealth, was dismissed eight months later.

In September last year then acting Judge Hennie de Vos decided that the inspection report was only secondary proof of the fact and did not adequately prove that curatorship was justified.

Last week the judges of appeal ruled that De Vos had erred in not granting the application.

They determined that the 169-page inspection report and 2 000 pages containing 110 appendices, constituted sufficient proof of the need for provisional curatorship. They said the inspection report contained proof of Dynamic Wealth's serious contravention of five statutory regulations.

An application to place SIL into curatorship which accompanied the application for appeal was rejected by the judges, even though they considered there had certainly been “inappropriate behaviour” and “blatant deception” in establishing SIL.

Circumstances at Dynamic Wealth and SIL had however changed to the extent that curatorship would no longer serves any purpose.

The Dynamic Wealt­h Stockbrokers and Dynamic Wealth Management licences had been withdrawn by the FSB in June and the company no longer existed.

Other than the untraceable R110 000 owing to 18 investors, the money that had been managed by Dynamic Wealth Stockbrokers and Dynamic Wealth Management was paid to investors.

SIL is all that remains of the former Dynamic Wealth operations. The judges of appeal determined that even though SIL had ostensibly severed all ties with Dynamic Wealth, it was still a financial services company that could be subject to an application for curatorship.

The court however took into account that SIL was no longer under the control of the persons who had been responsible for its problems. The decision by former investors (now preferential shareholders) in SIL – whose funds Dynamic Wealth had handled so irresponsibly – that they would prefer SIL not to be placed under curatorship was also taken into account.

The court of appeal also said that curatorship would be an extremely expensive exercise for investors who had already suffered significant losses.
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