It seems that the suit by the embattled gold dealership firm Menzgold against the Bank of Ghana and the Securities and Exchange Commission (SEC), does not have a very bright future, if the opinions of some lawyers are worth considering.
Three lawyers, (Kofi Bentil, Vice President of Imani Africa; Alexander Afenyo-Markin, Member of Parliament for Effutu; and Inusah Fuseini, MP for Tamale Central) speaking on Joy FM’s Newsfile, hosted by Samson Lardi Anyenini, another lawyer, shared these interesting insights into the Menzgold issue:
1. The Law is Clear on Menzgold
Menzgold has operated illegally for years without the necessary license. One of the company’s claims is that there is no law and no regulatory agency governing what it does.
Contrary to that, lawyer Kofi Bentil, Vice President of Imani, believes “there is no confusion about the law” and the law is very clear that the gold trading company’s activities fall under the regulation of the Securities and Exchanges Commission (SEC) which is mandated to regulate trading of commodities such as gold and their derivatives such as what Menzgold deals in.
“There is no problem with the law! The law sufficiently captures this kind of activity. It is securities trading. Securities trading is where you take somebody’s funds and you mix it with your skill and invest it in different ways and then gain a certain return which you share with the person. In this case, gold is used as the means to generate those funds and then with the skill, they trade it and they share the returns. It is classic securities trading,” the lawyer stated.
2. SEC Even Underutilized its Powers
The three lawyers have opined that the Securities and Exchanges Commission did not use all its available powers against Menzgold. Quoting the law concerned, they were in consensus that SEC had the legal powers to shut down the company but the commission acted in a manner suggesting it was not very sure of its powers, or it was afraid of making a mistake.
Under the law, securities trading without a license, attracts a fine of 4,500 penalty units (54,000 Cedis) from the violating company.
According to the securities Industry Act, the Commission has power to enter offices that are engaging in trading without a license, to take information, question people and even close down the place. They can bring in police to help them do that if necessary, and if the SEC officials are obstructed, persons obstructing them are subject to a fine of between 150 and 500 penalty units (between 1,800 and 6,000 Cedis) and even jail time, in case of default.
3. Customers are entitled to their principal
The consensus among the three lawyers is that customers are entitled to the return of their deposits or their gold. The freeze on new business does not stop Menzgold from returning customers’ principal; there is simply no ground for that.
Hon Inusah Fuseini stated that there “is no basis in law or in practice, by convention,” to deny customers their principal because of an issue with the regulatory authorities.
Using treasury bills as an example, he said Menzgold’s business is like buying treasury bills with a financial institution in the hopes of earning interest on it. If the payer of the interest is obstructed by regulators, you can go today and ask for your money back. If you make a 91-day deposit at a bank, in a bid to make interest on treasury bills, redeeming your deposit before the 91 days should only make you lose part of your interest. As for your principal, it should be intact.
The former Minister for Lands and Natural Resources added that if Menzgold cannot return customers’ principal, that only lends credence to the suspicions that people have about the company.
Lawyer Kofi Bentil was in agreement: “The principal is not encumbered. Anybody who is supposed to have bought gold and given it to Menzgold can go and take their gold back; either the gold physically or the money with which they bought the gold. Let’s be clear.”
4. Private Companies Cannot Take Deposits
A private company cannot invite people of its own accord, to come and deposit money with the company. Doing that is against the law, according to lawyer Ace Anan Ankomah.
Licensed quasi-public companies like banks can take deposits if they have the license. Menzgold however, was receiving monies without the license to do so, bringing the company in violation of the law on companies.