The Securities and Exchange Commission (SEC) is probing fund managers for investing as much as GH¢5 billion ($920,575,000) in risky ventures they’re struggling to retrieve for clients.
According to the Deputy Director-General of SEC Paul Ababio, the funds are stuck in short-term unlisted bonds, direct private-equity stakes and related-party deals for small- and medium-sized businesses.
The SEC has, therefore, started forensic audits to determine how to retrieve money for investors which may include selling off the fund managers’ assets, he said.
“If part of their portfolio is distressed, we have to understand it to know what solution to deploy. We’ll look at what can be done for investors — we’ll look at liquidation.”
This industry clean-up has become necessary after a recapitalisation exercise by the central bank exposed weaknesses in the system. Even though this strengthened the banking industry, it also reduced the number of lenders by almost a third.
Mr Ababio said Twenty-one firms are being audited, which will be completed by the end of the year.
In all, fund managers reported that GHC9 billion was tied up, of which GHC4 billion was held in Treasury bill-linked instruments with banks, savings, and loans companies or microlenders, he said.
After setting aside GHC11.2 billion to bailout the banking industry and GHC925 million to rescue microlenders, the government plans to invest at least GHC3 billion to help savings and loans companies, the finance ministry said in April.
The funds will be used mainly to ease pressures from investments linked to T-bills.
Meanwhile, Mr Ababio explained that SEC rules forbid fund managers from directly underwriting corporate debt or taking straight private-equity positions, even though they can lend to businesses through reputable financial institutions and invest in a private-equity firm, which then acquires stakes in companies.