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· e Financial Services Conduct Authority has withdrawn theoperating license of Ecsponent Financial Services (EFS) forillegally marketing high-risk preference shares in its holding companyto pensioners.
· During the investigation, the regulator found that EFS hadbeen marketing high-risk preference shares to pensioners, withoutappropriately assessing their risk profile.
e Financial Services Conduct Authority has withdrawn the operating license of Ecsponent Financial Services (EFS) for illegallymarketing high-risk preference shares in its holding company to pensioners. The authority also has slapped the company a fine of R3 million for misleading the pensioners. EFS is a subsidiary financial services group Ecsponent Limited. EFS marketed the products without conducting an appropriate suitability test to check that no undue risk was posed to its clients, according to the regulator.
The company has been told to re-evaluate clients retrospectively, work with the regulator on a strategy to deal with those clients, and
work toward redressal of their grievances. During the investigation, the regulator found that EFS had been marketing high-risk reference shares to pensioners, without appropriately assessing their risk profile.
The classes of shares that paid monthly dividends are sought out by pensioners. What EFS had done was that it mimicked a monthly pension
payment, which normally will have low risk; whereas its products had high risk, thereby misleading the credible investors. The argument of EFS that those who had opted for the instrument signed an undertaking to the effect that they understood about the product and its risks. But the court refused to accept their version and came to the conclusion that it misled the credible pensioners by deliberately hiding risk factors. .
