REGULATORY RESPONSE : FSCA confirms 80 Eight uncovered and reported 2021 fraud after firm challenges R2.5m penalty

The Financial Sector Conduct Authority (FSCA) has clarified that 80 Eight South Africa itself discovered and reported the 2021 contraventions that led to a R2.5-million administrative penalty.The regulator issued the brief update on Wednesday, 22 July at the request of 80 Eight, formerly known as Ela Asset Management.This follows the FSCA’s 17 July announcement that 80 Eight and its key individual and chief executive, Faadil Moti, had been penalised R2.5-million jointly and severally. The regulator also directed the company to prepare and implement, within two months, a policy protecting clients and other parties against losses caused by theft, fraud and other dishonest acts.Former employee Mohammed Bashir was debarred for 20 years.In its latest statement, the FSCA said the contraventions “were self-discovered and reported to the FSCA by 80 Eight”. It also confirmed that they occurred in 2021.The clarification addresses a central point raised by 80 Eight in its right of reply. The company said it found an internal fraud incident in November 2021 and voluntarily reported it before the FSCA began an investigation.80 Eight said it immediately took measures to protect clients, engaged its banking partners, informed affected clients, notified insurers and began remediation. It also said criminal proceedings were instituted against those responsible.The company said it cooperated fully with the FSCA over several years by responding to requests, participating in interviews and supplying extensive documentation.However, 80 Eight disputes aspects of the regulator’s findings, as well as the penalty and some of the directives imposed.It argued that the decision did not adequately recognise its self-reporting, cooperation, client-protection measures, governance changes and remediation. It said it had strengthened its compliance framework and operational controls since 2021, and that no similar incident had occurred.“The events in question relate to historical circumstances from nearly five years ago and do not reflect the business, governance framework or operational environment that exists within 80 Eight today,” the statement signed by Moti said.Its legal advisers are reviewing the decision, and 80 Eight intends to use the legal remedies available under the Financial Sector Regulation Act. Its business continues to operate.The FSCA’s clarification does not withdraw or amend its findings or sanctions. Its investigation found that 80 Eight failed to ensure clients did not suffer losses through theft, fraud and other dishonest conduct by employees. The regulator said Bashir’s misconduct caused clients substantial financial losses.The update does, however, place on record that the company uncovered and disclosed the conduct itself – context that was absent from the FSCA’s original public statement. DM