A High Court Judge has placed the troubled insurance broker, Financial Investment Services (FIS), under provisional curatorship after an application by Namfisa.
As part of the ruling, Michael Leech has, with immediate effect, been appointed as the curator of FIS. He will immediately take control, manage and investigate the operations of the company. All powers previously vested in the board of directors of FIS have now been given to Leech until 16 January 2013 when the company will have to show cause to the court why it should not continue to be under curatorship.
FIS, a company that provides life insurance cover to the Namibian Police and the Namibian Defence Force, has been under the watch of the financial services industry watchdog for a number of years for failing to comply with a raft of regulations and directives.
Namfisa accused FIS of offering disability insurance cover without being registered to provide such a service. The composition of the FIS board, noted Namfisa, was in contravention of Section 16 of the Long Term Insurance Act as the majority of the board members were foreigners.
FIS had also failed to relocate its offices as directed by the Registrar [CEO of Namfisa).There was also the failure to furnish Namfisa with financial statements and quarterly reports, and the continued interference in operations by Indila Edward despite not being the principal officer. FIS had also failed to appoint a fit and proper principal officer.
Prior to Namfisa's successful court application to have FIS placed under curatorship, the financial services watchdog had on three separate occasions in 2005, 2010 and 2011 initiated three investigations carried out by auditing firm, PriceWaterhouseCoopers. Namfisa had also written 17 letters voicing its concerns on the non-compliance with legislation and with directives requiring remedial action and information.
On the strength of the contraventions of statutory provisions and Namfisa directives as well as instances of poor corporate governance, Namfisa applied to the High Court for a provisional curator to be appointed to take control of and manage the affairs of FIS so that the necessary remedial action could be taken with a view to establish a proper management system so that it can continue to operate in the insurance industry.
On the other hand, FIS had tried to persuade the High Court not to grant the order sought by Namfisa by highlighting that various internal disputes had been settled and addressed in early October and that advice was received on practical solutions and proposals being put in place in order to address the concerns of Namfisa.
FIS argued that a new board of directors had been appointed with the majority being Namibian citizens and none of them being shareholders. A certain Mr Carlson was appointed as the principal officer, subject to Namfisa's approval while former Namfisa CEO, Rainer Ritter was to be appointed as the operations manager.
The company also argued that no shareholders would be involved in the day-to-day operations of the FIS business and that all outstanding financial statements for 2012 would be provided to Namfisa as soon as practically possible.
FIS further argued that it would be highly-prejudicial for FIS to be placed under curatorship. It sought leave to file further affidavits to address issues raised by Namfisa and for a postponement of the curatorship application for the purposes of implementing Namfisa's concerns and for them to be verified.
This application to postpone proceeding was, however, opposed by Namfisa.
In handing down his judgement on Thursday, Judge Dave Smuts noted: "There is ample evidence that several of the notices and letters addressed to the first respondent (FIS) met with a hostile and at times obstructive attitude which included unsupported allegations of corruption levelled against Namfisa."
Judge Smuts further reasoned: "Had the only questions been the composition of the board and the appointment of a principal officer, the registrar's position to persist with the application in the absence of proof of resolutions and the like would not in my view be reasonable...but there were other aspects of non-compliance not properly addressed ...such as the continuing failure to apply for registration for disability insurance and yet continuing to do such business.... that is in my view a serious matter.
"This factor coupled with the cumulative effect of other issues where no time frames had been provided for compliance, would in my view further tend to show that there was a reasonable and rational basis to the opinion on the part of the registrar that it was desirable to place the first respondent under curatorship."