Public Service Commission Act, 1997
R 385
Business Practices Committee Report 77Financial Research Foundation (Pty) Ltd4. Letter from the Financial Services Board |
The BPC received a letter from the Financial Services Board on 4 February 1999 in which it was stated:
"The FSB has been approached by members of the public who have lodged complaints against the above company (FRF). These complaints fall outside the jurisdiction of the FSB. Attempts to have the SAPS assist in these complaints have been futile. It is our considered opinion that the actions of the above company do constitute harmful business practices. Enclosed please find the original complaints lodged with this office for your further investigation".
The documents received from the FSB inter alia revealed that:
| a) | The auditor of FRF, on 22 January 1999, lodged a complaint with the Public Accountant’s and Auditors’ Board in terms of section 20(5) of the Public Accountant’s and Auditors’ Act (No 80 of 1991) in respect of alleged material irregularities in the conduct of the affairs of FRF. |
In his letter to the Public Accountant’s and Auditors’ Board the auditor stated:
| ▪ | " The extent of summonses received from clients and suppliers is considerable; |
| ▪ | The company is unlikely to fulfil contractual obligations to clients; |
| ▪ | Complete reliance for cash flow funding on rests a loan promised by an external company ". |
| b) | In a letter dated 15 December 1998 to the directors of FRF, marked for the attention of Aileen Friedman, the auditor stated that: "It is apparent that the company’s liabilities exceed its assets". |
| c) | In a letter dated 14 January 1999 to the auditor, Reyneke disagreed that the company’s liabilities exceeded its assets. It was also stated in this letter from Reyneke inter alia that: |
"It is admitted that the company received various summonses from clients for alleged non-performance of interest calculations. Most of these are defended as, in our opinion, the company is not liable. Some of these had been settled.
It is correct that summonses have been received from creditors of the company, although we are not aware of the exact amount. The company does not accept further deposits from clients. When the bank accounts were frozen, the life-line of the company had in fact been cut off. The direct debit order system by way of which clients have to pay money to the company had also been cancelled by the bank.
The company has entered into negotiations since approximately October 1998 with another firm, Foundation Finance Auditors, with the view to amalgamate the respective businesses, or to make other suitable arrangements ensuring that the company could meet its commitments with regard to clients and creditors. Naturally funds are required at this point in time to achieve this purpose. These funds are being raised by Foundation Finance Auditors off-shore and should be completed by not later than the end of February 1999.
In view of the foregoing it is our opinion that no irregularities have taken place or is taking place. It is reiterated that adequate steps have been taken for the prevention of any loss likely to be caused to creditors and/or clients".
