The applicant, Cawood Attorneys, an investor in the trust, had applied for the sequestration order after its own investigation into BHI Trust. The Master of the High Court confirmed the provisional appointments of two liquidators appointed this week — Gert de Wet, the chief executive of Kaap Vaal Trust; and A Mohamed.

Cawood Attorneys issued a statement noting that despite reports of R2-billion to R3-billion in the media, there are no actual figures available to indicate what the BHI Trust was worth “either before or after the circumstances that led to [Craig] Warriner handing himself in. However, based on the private and confidential discussions with other investors who have approached Cawood Attorneys to assist them in the process of registering their claims against the Trust, it is determined this sum is significant.”

Complex and intricate investigation

Cawood Attorneys has, however, confirmed that the investigations are proving to be “far more complex and intricate than at first believed”. In his founding affidavit, attorney Werner Cawood says he was first introduced to the BHI Trust around 2018, at which point he invested about R4-million and was able to withdraw the investment with no problems. In 2021, financial adviser Riaan Lessing suggested the BHI Trust as a possible investment.

Cawood says he had no reason to believe the trust was not legitimate because the trustee and apparent head of the BHI Trust, Warriner, was presented as an authorised representative of Axiam Capital Management.

In his founding affidavit, Cawood says “Administration of the trust was outsourced to Rubicon … another well-known entity in the financial industry” — all of which led him to believe the funds were in good, qualified and capable hands. 

Warning signs were there

The minimum investment was R50,000 and by the end of January 2021, Cawood Attorneys invested just over R108,000 in the BHI Trust. The trust’s documents indicated that it invested in only seven stocks on the JSE: British American Tobacco, Standard Bank, MTN, Naspers, Sasol, Billiton, SAB and Richmond.

One can only assume that “Richmond” was meant to refer to Richemont and the reference to SAB should have sounded another warning bell. South African Breweries or SAB delisted from the JSE in 2016 — a full five years before Cawood Attorney’s investment in 2021.

FSCA investigation under way

The Financial Sector Conduct Authority (FSCA) has confirmed that it is investigating the BHI Trust and Warriner following media reports of criminal charges against Warriner and his arrest relating to charges of fraud and theft.

“The focus of the FSCA investigation is on the activities of the BHI Trust and the possibility that it was conducting unauthorised financial services business and unauthorised collective investment scheme business. The FSCA confirms that none of the parties under investigation are authorised as financial services providers or licensed as collective investment schemes managers,” the regulatory body told Daily Maverick.

The FSCA has on numerous occasions warned the public of the dangers of conducting financial services business with unauthorised entities. Conducting unregistered business is a criminal offence.

When investors buy financial products and services from entities that are not licensed as financial institutions, they do so at their own risk, and they do not enjoy the protection and risk mitigation measures associated with appropriately licensed and authorised entities. A classic example of this was earlier this year when United African Stokvel investors found themselves without recourse when the scheme stopped making payments, resulting in the cumulative loss of millions of rands.

Licensed financial institutions are subject to strict laws and oversight by the regulator, ensuring that the businesses are well-governed and treat their customers fairly. The FSCA says it has extended its investigation to include regulated entities that may have promoted the products of BHI Trust. 

“If found to have done so, this is a serious contravention of financial laws, and may be subject to a fine, debarments of individuals involved from the sector and possibly removal of licence,” the regulator warns. DM