Disgraced financial adviser Craig Warriner, who turned himself in to authorities last month and confessed to running a Ponzi scam that allegedly ran into billions of rands, is facing legal action from his former employer, Axiam Capital Management.

Company directors Grant Dykes and Colin Huber have confirmed that Axiam suspended Warriner as an employee and removed him from the company’s licence, on viewing the court papers after his arrest.

“Axiam is taking disciplinary action against him and we have started debarment proceedings against him. Axiam has briefed counsel to draft criminal charges against Warriner,” Dykes said.

According to Axiam, the BHI Trust (where Warriner is a trustee) could best be described as “an unregulated, casual business venture of like-minded individuals in a private investment club”.

The company says it only recently became aware that Warriner was fraudulently using its company credentials as well as its financial service provider (FSP) number in various types of documents.

Investec pulls the plug

At the end of last week, financial services company Investec informed clients that it has cut ties with intermediary firm, Global and Local. The letter said: “In terms of the notification sent to the Intermediary, Investec has given the Intermediary 90 days’ notice to close all Corporate Cash Manager (CCM) accounts introduced by the Intermediary.” Clients have been advised to ask Global and Local to transfer any credit balances in their CCM accounts to their primary bank account or a nominated account in their name within 90 days.

The background

Warriner asked to join Axiam in 2005 so that he could gain the necessary training and experience, and write the exams to obtain an FSP number for his own entity.

Dykes says Warriner wanted to maintain his qualifications and complete his annual professional development requirements, so he remained on the Axiam licence while he applied for his FSP number. “This is an arduous process. He has still not received this licence. We feel betrayed by Craig Warriner,” Dykes said.

Warriner qualified as an authorised representative in 2012, but Axiam maintains that, even as an authorised representative, Warriner had no agency and was not authorised to initiate or conclude any investment mandates on Axiam’s behalf.

In April 2005, the trustees of BHI Trust opened an account with Axiam. The trust then opened its own account at a reputable broker, and signed an investment mandate with Axiam to manage these investments. Dykes pointed out that Axiam never had access to client funds, since the funds can only move between the broker and the client’s nominated bank account.

However, the BHI trustees terminated Axiam’s investment management mandate way back in February 2013.

Previous investigations

One of the scary facts emerging from the BHI can of worms is that Warriner’s admission of guilt did not come entirely out of the blue. The Financial Sector Conduct Authority (FSCA) has confirmed that it received complaints about the BHI Trust as far back as 2017 and 2018. The complainants alleged that the trust was conducting unregistered collective investment scheme business and FSP business, taking client deposits and charging higher-than-­normal industry fees.

Following those complaints, the FSCA launched a full investigation into the BHI Trust, Craig Warriner, Rubicon Administration Services, Axiam Capital Management, Global & Local Investment Advisors, and Global Capital in September 2020.

“The scope of the investigation included possible contraventions of the Financial Advisory and Intermediary Services Act and the Collective Investment Schemes Control Act,” the FSCA stated.

The FSCA said it is not at liberty to disclose the details of its 2020 investigations, but has confirmed that several financial sector laws were contravened. And in light of recent events and more information coming to light, the FSCA investigation has now been extended to include possible contraventions of the Financial Institutions (Protection of Funds) Act.

The FSCA said this week it had expanded its investigation to include FSPs that may have advised or assisted clients to invest in BHI Trust products. “The main focus of this part of the investigation is to determine whether these providers acted with due care and diligence,” the regulator said. It reiterated that neither the BHI Trust nor Warriner were licensed with the FSCA in any way.

Investec pulls the plug

At the end of last week, financial services company Investec informed clients that it has cut ties with intermediary firm, Global and Local. The letter said: “In terms of the notification sent to the Intermediary, Investec has given the Intermediary 90 days’ notice to close all Corporate Cash Manager (CCM) accounts introduced by the Intermediary.” Clients have been advised to ask Global and Local to transfer any credit balances in their CCM accounts to their primary bank account or a nominated account in their name within 90 days.

Companies linked to BHI

Forensic investigator Bart Henderson says investors who placed money in the BHI Trust through Global & Local have started asking questions in recent weeks.

“I advised one investor to withdraw their funds from BHI over the weekend… and on the Monday they got a reply from Kaddy Cost at BHI,” he says.

The communication from BHI said: “We [confirm] receipt of your request. We have come to understand that Mr Craig Warriner, Managing Trustee and Portfolio Manager of BHI Trust[,] has been implicated for allegedly committing fraud. The extent of the fraud charges, or what they may be related to[,] is uncertain to us at the moment. Where this leaves your investments in BHI Trust is also at this point uncertain.”

Henderson says Global & Local Investment Advisors has been punting BHI Trust as a suitable investment for years. Global & Local founder Michael Haldane proclaims on the company’s website: “I only recommend what I’ve invested in personally.”

Rubicon Administration Services charges Global & Local investors administration fees, but Cost of BHI was also listed as a director of Rubicon; and so was Haldane. “Kaddy Cost [BHI] and Haldane [Global] appear related and [their relationship] appears less than arm’s length,” Henderson says. Global & Local maintains all required books and records for the funds.

Curators freeze BHI’s Nedbank account

Joint trustees Gert de Wet and Sumaya Mohamed have confirmed that, as at 25 October, the only money left in BHI’s transactional Nedbank account was just under R5-million (R4,785,164.96). The account was temporarily frozen by the Financial Intelligence Centre until 9 November, and the trustees have asked Nedbank to pay the funds over to BHI Trust’s estate account.

At this stage the trustees have only just begun their investigation and it is unclear whether there is more money to be recovered, possibly in other bank accounts or investments. The return date for the final sequestration of the Trust is set for 7 February 2024. However, as per a circular to investors, the February date is not expected o hamper the trustees in the recovery of assets and/or funds, which vest in the trust by way of various provisions entrenched in the Insolvency Act. DM

• This article has been edited after New Age Apha LLC advised that although it is a third-party vendor to Global and Local, it has not at any point suggested the inclusion of any BHI product in the collective investment schemes it advises.