Asset manager 36ONE loses appeal, R350k fine sticks | Fin24

Asset manager 36ONE loses appeal, R350k fine sticks

Jan 24 2020 20:32
Londiwe Buthelezi

Asset manager 36ONE must pay the R350 000 imposed on it last year by the Financial Sector Conduct Authority for marketing hedge funds in Cayman Islands, the Financial Services Tribunal has ruled.

This tribunals decision comes almost a year after the regulator's initial ruling that 36ONE should be penalised for “soliciting” investments into unapproved funds.

The tribunal said the asset manager did not have the approval of the Registrar of Collective Investment Schemes to promote its 36ONE Hedge Portfolio and 36ONE Offshore Portfolio, both based in the Cayman Islands. These funds, which gave investors access to US dollar-denominated versions of local hedge funds, were marketed by 36ONE between August 2015 and 1 March 2018.

36ONE’s website and periodic client newsletters contained information about the two hedge funds which the FSCA said constituted “soliciting” investments. However, no investments flowed into these funds because the website did not allow 36ONE clients to invest online. They were only able to “explore” more information. The FSCA fined the asset the company for contravening the Collective Investment Schemes laws.

But 36ONE took the matter to the Tribunal for review, arguing that it did not promote offshore products because it did not permit investment through its website. It said only one local investor put their money in one of the hedge funds under scrutiny and not through the asset manager’s website. But the Tribunal upheld the FSCA’s view that this did not exonerate 36ONE.

“The fact that a promotion was ineffective does not mean that the act was not one of promotion. It is the act which is prohibited, irrespective of success,” said the Tribunal in its ruling.

36ONE also contested the amount of the fine since no investments came through its website or other mediums that the FSCA deemed to have solicited money into the hedge funds in question. But the Tribunal ruled that since 36ONE managed assets worth over R14bn, R350 000 was appropriate.

“When considering an appropriate administrative penalty for contravention of a financial sector law by a financial institution, a penalty that strikes a balance between effective deterrence from contravention of financial sector laws and unreasonably harsh penalties must be sought,” said the ruling.

36one asset management


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