SEC Releases Investor Compensation Plan Worth GHS 1.5 Billion

The Securities and Exchange Commission (SEC) of Ghana has announced the release of GHS 1.5 billion to compensate investors affected by the 2019 revocation of fund management licenses.

This compensation package aims to provide relief to individuals whose investments were locked up in failed fund management firms such as Blackshield Capital Management (formerly Gold Coast Fund Management) and Kron Capital.

According to the SEC, the GHS 1.5 billion will be distributed in three phases. The first tranche of GHS 700 million is scheduled for release in August 2024, followed by GHS 400 million in October and another GHS 400 million in December of the same year. This staggered disbursement plan is intended to ensure a smooth and effective payout process to the affected investors.

The announcement is seen as a significant step toward addressing the long-standing grievances of investors who have endured years of uncertainty and financial stress. The new bailout follows an earlier payout of GHS 4.46 billion, which was aimed at providing compensation to investors with validated claims. So far, 84,202 investors have received payments under this scheme, with 82% of the claims being fully settled.

As part of the latest bailout package, SEC has outlined specific criteria for compensating the affected investors. According to the Commission, investors will receive the higher of GHS 50,000 or 15% of their outstanding claims. This top-up aims to increase the percentage of fully compensated investors to about 91%. SEC hopes that by the end of this bailout program, the majority of investors will have received complete compensation for their losses.

The funds will be distributed through the Amalgamated Mutual Fund (AM Fund), managed by GCB Capital Ltd. The AM Fund has been chosen to manage the disbursement process due to its expertise in fund management and its reputation for reliability. SEC emphasized that this structured approach to distributing the bailout funds will help prevent any further complications or delays in the compensation process.

Communication and Consultation

SEC has also assured investors that AM Fund managers will soon hold consultations with them to clarify how to access the new funds. These consultations will provide investors with detailed instructions on the disbursement process, as well as offer advice on options for those who may wish to leave their claims in the AM Fund for future management.

This direct communication with investors is an important part of the SEC’s strategy to ensure transparency and build trust. In the wake of the 2019 revocation of licenses, many investors expressed concerns about a lack of clear communication from the affected fund management firms. By facilitating these consultations, SEC hopes to address those concerns and give investors the information they need to make informed decisions about their investments.

The 2019 revocation of fund management licenses sent shockwaves through the Ghanaian investment landscape. Several fund management firms were found to be operating in violation of SEC regulations, leading to the loss of investor confidence and a liquidity crisis in the sector. The revocation affected tens of thousands of investors, many of whom saw their life savings disappear overnight.

The government, through SEC, has since been working to mitigate the effects of this crisis by introducing bailout packages and regulatory reforms. The initial GHS 4.46 billion payout was the first major effort to compensate investors, and it helped to provide much-needed relief to thousands of affected individuals. However, many investors were still left with significant losses, leading to continued calls for additional compensation.

This latest GHS 1.5 billion bailout is a clear signal that the SEC is committed to ensuring that affected investors receive the compensation they deserve. The three-tranche disbursement plan, combined with the involvement of GCB Capital Ltd. as the fund manager, is expected to streamline the compensation process and prevent any further delays.

Moreover, the decision to compensate investors with the higher of GHS 50,000 or 15% of their outstanding claims reflects the SEC’s understanding of the financial burden that many investors have borne over the past few years. By increasing the percentage of fully compensated investors to 91%, the Commission hopes to restore confidence in Ghana’s financial markets.