DeVere client portfolios, seen by the publication, showed that the firm had put investors’ money in funds which have not been approved by The Financial Services Board (FSB) under section 65 of the Collective Investment Schemes Control Act (Cisca).
The regulation states that only foreign funds that have been approved by the regulator may be marketed in South Africa, and such funds must meet the same standards as those set for local collective investment schemes (CIS) in order to receive such approval.
According to Moneyweb, client portfolios show that deVere has been using offshore funds including MitonOptimal’s Special Situations Fund and Strategic Growth Fund Plus, and GAM’s MPS Growth Strategy Fund and MPS Balanced Strategy Fund.
By marketing such funds in South Africa, deVere could be breaching the Cisca rules, with the maximum penalty for such an offence being five years in prison, according to Moneyweb.
The firm’s spokesperson George Prior told International Adviser: “Should any client have a complaint about a product or service that they were introduced to by deVere, they can contact us directly.
“DeVere has 80,000 clients globally and this number continues to increase. As a responsible, proactive and growing organisation, we are committed to fixing any issues that may arise, putting right what might have potentially gone wrong.
“Like all firms, deVere does receive complaints from time to time, but the number of identifiable, legitimate complaints received by the firm is extremely low.”
The publication also revealed that MitonOptimal Special Situations Fund currently has two share classes in Guernsey, both of which charge an upfront fee of 5%, where in both cases 4% is paid to the adviser while 1% goes to the fund house.
In the case of GAM funds, these would be automatically excluded from the FSB’s approved foreign funds list as they are aimed at “sophisticated, professional, eligible, institutional and/or qualified investors”, according to the asset manager’s marketing material.
They also state that “GAM hedge fund products are only available to investors who are comfortable with the substantial risks associated with investing in hedge funds”.
The claims come just months after deVere Acuma, the firm’s South Africa advisory unit, admitted that it had failed to disclose commission charges of nearly £65,000 ($81,114, €75,198) taken from a client’s portfolio over four years.
In emails from the firm to the client, deVere acknowledged that the commissions were undisclosed but states that it was under no obligation to inform the client because they had chosen to invest via offshore trusts, based in Guernsey.